TORONTO (Reuters) – The financial services regulator in Canada’s biggest province failed to make planned checks on mortgage brokers it had identified as risky because its resources were stretched, according to documents obtained by Reuters under freedom of information laws and information provided by the regulator.
The Financial Services Commission of Ontario (FSCO) planned to complete five on-site examinations of mortgage brokerages identified as risky this fiscal year, which ends March 31. But as of Dec. 31, 2018, nine months into the year, it had not finished any of them, according to data provided to Reuters.
Period - FSCO - Staff - Desk - Reviews
During the same period, FSCO staff carried out only four of 50 planned “desk reviews,” which are similar to on-site examinations but less detailed.
The findings call into question whether mortgage brokers, which originate 30 percent to 40 percent of new loans in Canada’s C$1.5 trillion ($1.1 trillion) mortgage market, are being adequately supervised as record household debt and rising interest rates make it harder for borrowers to make repayments.
Mortgage - Standards - Scrutiny - Canada - Country
Mortgage underwriting standards came under scrutiny in Canada after the country’s biggest nonbank lender, Home Capital Group Inc, accepted responsibility for misleading investors about problems with its procedures in 2017.
The FSCO plays a particularly important role because it supervises brokerages in Toronto, Canada’s biggest housing market. It is due to be replaced by a new regulatory body, the Financial Services Regulatory Authority (FSRA), in the spring of this year but it is currently unclear whether FSRA will have significantly more resources than its predecessor.
Statement - FSCO - Investigation - Individuals - Entities
In a statement, FSCO said it conducts a thorough investigation where individuals or entities are identified as presenting an elevated risk.
“This investigative process, which makes the best use of finite resources to address the most significant risks, may include, but does not require, a site visit,” it said. “As a result, planned examinations may not...
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