UPDATE 3-Canada watchdog gets tough on mortgages, urges better income checks

Thu Jul 7, 2016 12:53pm EDT
 
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* OSFI calls for "sound mortgage underwriting procedures"

* Says enhancing supervisory oversight of mortgage lending

* Urges "good diligence" by banks on foreign buyers

* Finance ministry welcomes move (Adds interview with banking regulator)

By Matt Scuffham

TORONTO, July 7 (Reuters) - Canada's banking regulator is tightening oversight of mortgage lending, citing concerns about record household debt and a sharp jump in house prices, and says income verification for borrowers outside Canada has become a particular challenge.

In the latest sign of the concerns of Canadian authorities about soaring home prices in markets like Vancouver and Toronto, the Office of the Superintendent of Financial Institutions (OSFI) said on Thursday that price gains, debt levels and persistently low interest rates had all helped increase threats to the stability of financial institutions.

Foreign buying has been cited as factor driving prices in the two largest markets, Toronto and Vancouver. OSFI's concerns include the quality of credit checks on borrowers with income from abroad, Superintendent Jeremy Rudin said in an interview.

Income verification checks should not be viewed by banks as being less important in a period of rising prices, he warned.   Continued...