The four questions to be answered here are:
1: Does getting pre-approved before December 31st protect me or “grandfather” me into the old rules?
2: If I get a deal approved before the Dec 31st deadline, when does the client need to complete in order to still use the old rules?
3: If I signed the purchase agreement before the December 31st deadline (i.e. pre-sale from earlier this year), which rules will apply?
4. Will any banks being implementing these rules before the deadline?
The answers to these questions are as follows:
Q: Does getting pre-approved before December 31st protect me or “grandfather” me into the old rules?
A: OSFI has said that banks should honour existing pre-approvals issued under the old rules until those pre-approvals expire. For pre-approvals issued between Oct. 17 and Dec. 31, 2017, the lender can choose which rules to apply (unless they’ve implemented the new stress test prior to the deadline). I suggest confirming the conditions of your clients’ pre-approval with your specific lender, just to be safe.
In other words, “it depends on the bank.”
For example, most banks do 120 day pre-approvals (credit unions 90 days). So technically, any pre-approvals issued under the old rules on December 31st will be good for 120 days. The client will need to complete on a transaction within that 120 days (not just write an offer and get it accepted). This may vary from bank to bank, and as of today’s date, no bank has announced their plans in this regard.
Q: If I get a deal approved before the Dec 31st deadline, when does the client need to complete in order to still use the old rules?
A: There is no deadline. So long as you get an approval in place prior to the deadline, the property can complete any time. 1 month. 1 year. It doesn’t matter. Clearly, this will also be a bank-by-bank decision, so confirm with your clients’ particular lender for their specific policy. Again, at this time, no bank has indicated if they will be implementing a specific rule.
For pre-sales, this is particularly important as lazy brokers or bank employees usually don’t get a full commitment on a pre-sale until closer to completion. By getting an approval, even 1-2 years in advance, your client will be cementing their ability to use the old rules on their application. Make sure the broker or lender you’re using has issued a formal approval before the deadline and clarify their policy on limitations on the completion date.
Q: If I signed the purchase agreement before the December 31st deadline (i.e. pre-sale from earlier this year), which rules will apply?
A: The date the contract is signed has no bearing on the rules. It doesn’t matter if the contract was signed before the deadline or before the rules were announced. What matters is the date of full approval. You need to have a full approval in place prior to the deadline to still use the old rules.
Q: Will any banks being implementing these rules before the deadline?
A: While no bank has announced any plans to implement the rules early, it is very likely that some will do so. OSFI has, foolishly, set the deadline to December 31st forcing clients and brokers to try and get deals done at a time of year when many lenders are operating on reduced staff, in holiday deadlock, or are shut down altogether. I suspect many will enforce a December 15th (just an example) deadline to prevent the holidays from affecting the implementation of the rules from creating a horrible backlog over the holidays.
There are also some rumours that some lenders may implement the new rules much much earlier. I will keep you updated if this happens.
Any other questions? - Feel free to contact me.
reza@citywidemortgage.ca
1: Does getting pre-approved before December 31st protect me or “grandfather” me into the old rules?
2: If I get a deal approved before the Dec 31st deadline, when does the client need to complete in order to still use the old rules?
3: If I signed the purchase agreement before the December 31st deadline (i.e. pre-sale from earlier this year), which rules will apply?
4. Will any banks being implementing these rules before the deadline?
The answers to these questions are as follows:
Q: Does getting pre-approved before December 31st protect me or “grandfather” me into the old rules?
A: OSFI has said that banks should honour existing pre-approvals issued under the old rules until those pre-approvals expire. For pre-approvals issued between Oct. 17 and Dec. 31, 2017, the lender can choose which rules to apply (unless they’ve implemented the new stress test prior to the deadline). I suggest confirming the conditions of your clients’ pre-approval with your specific lender, just to be safe.
In other words, “it depends on the bank.”
For example, most banks do 120 day pre-approvals (credit unions 90 days). So technically, any pre-approvals issued under the old rules on December 31st will be good for 120 days. The client will need to complete on a transaction within that 120 days (not just write an offer and get it accepted). This may vary from bank to bank, and as of today’s date, no bank has announced their plans in this regard.
Q: If I get a deal approved before the Dec 31st deadline, when does the client need to complete in order to still use the old rules?
A: There is no deadline. So long as you get an approval in place prior to the deadline, the property can complete any time. 1 month. 1 year. It doesn’t matter. Clearly, this will also be a bank-by-bank decision, so confirm with your clients’ particular lender for their specific policy. Again, at this time, no bank has indicated if they will be implementing a specific rule.
For pre-sales, this is particularly important as lazy brokers or bank employees usually don’t get a full commitment on a pre-sale until closer to completion. By getting an approval, even 1-2 years in advance, your client will be cementing their ability to use the old rules on their application. Make sure the broker or lender you’re using has issued a formal approval before the deadline and clarify their policy on limitations on the completion date.
Q: If I signed the purchase agreement before the December 31st deadline (i.e. pre-sale from earlier this year), which rules will apply?
A: The date the contract is signed has no bearing on the rules. It doesn’t matter if the contract was signed before the deadline or before the rules were announced. What matters is the date of full approval. You need to have a full approval in place prior to the deadline to still use the old rules.
Q: Will any banks being implementing these rules before the deadline?
A: While no bank has announced any plans to implement the rules early, it is very likely that some will do so. OSFI has, foolishly, set the deadline to December 31st forcing clients and brokers to try and get deals done at a time of year when many lenders are operating on reduced staff, in holiday deadlock, or are shut down altogether. I suspect many will enforce a December 15th (just an example) deadline to prevent the holidays from affecting the implementation of the rules from creating a horrible backlog over the holidays.
There are also some rumours that some lenders may implement the new rules much much earlier. I will keep you updated if this happens.
Any other questions? - Feel free to contact me.
reza@citywidemortgage.ca
