OSFI may, indeed, be worried about increasingly loosey-goosey underwriting practices at the country's big banks, according to internal documents accessed by Bloomberg News under the Freedom of Information Act.

Mortgages often granted to the self-employed and recent immigrants "have some similarities to non-prime loans in the U.S. retail lending market," and banks and other lenders are becoming "increasingly liberal" with mortgages and home-equity credit lines that don't require individuals to prove income, according to a 152-page document from the Office of the Superintendent of Financial Institutions and obtained by Bloomberg.

The concerns echo those voiced by the superintendent late last year, in moving to more closely monitor the banks.

“What we are doing is stepping in to increase the monitoring of that portfolio,” OSFI head Julie Dickson told reporters in September. “I think the concern is that the conditions are such that there would be tremendous pressure on banks to loosen those standards.”

Brokers are now voicing the same concerns as the rate wars press on, charging that RBC and other big banks are actively undercutting broker channel rates, most often at the branch level and as a way of retaining and growing clientele in a slower market.

Ostensibly, thin margins and fierce competition have exacerbated the need to grow volumes, a strategy focused on making up for the dwindling profit on individual mortgage deals, suggested Dickson, echoing the analysis of industry veterans.

Despite those narrower margins, the banks largely met earnings expectations in the last quarter, in large part because of that growth in deals.


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