Canadian government opens consultation re: risk-sharing

Canadian individuals and financial organizations will have 4 months to submit feedback on new federal regulations

Canadian government opens consultation re: risk-sharing
A week after the latest federal mortgage rules took effect, the Canadian government has opened the regulatory changes to feedback from consumers and lenders.
The 4-month consultation will collate Canadians’ views on the new requirements on mortgage lenders “to manage a modest portion of loan losses on insured mortgages that default, would enhance the current system.”
“The government guarantee of mortgage insurance is intended to protect against severe risks that could threaten financial stability,” the Finance Department stated in its consultation document, as quoted by the Financial Post.
“Lender risk sharing would aim to rebalance risk in the housing finance system by requiring lenders to bear a modest portion of loan losses on any insured mortgage that defaults, while maintaining sufficient government backing to support financial stability in a severe stress scenario and borrower access to mortgage financing.”
The new rules, which accompanied a slew of far-reaching changes to the Canadian financial system, were meant to ensure greater stability by transferring the burden of risk from the taxpayers to private organizations.
Canadian individuals and financial institutions can submit their written opinions to the federal government until February 28, 2017.

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