Canadian Lawyer

20 O C T O B E R 2 0 1 7 w w w . C A N A D I A N L a w y e r m a g . c o m verheated real estate mar- kets are seeing regulators tighten restrictions to ensure buyers can sus- tain interest rate fluc- tuations as well as the debt load they take on to buy a house. Much of the attention has been focused on the management and limitations on money borrowed to finance the purchase of homes. The Bank of Canada has expressed con- cerns over highly indebted households. And the bank regulator, the Office of the Superintendent of Financial Institu- tions, is further protecting banks from negative impacts that can result from lending in volatile market conditions. The intended result is that it has become more difficult for the average buyer to secure a mortgage from trad- itional institutions. And although the controls are aimed at the two major over- heated markets — Toronto and Vancou- ver — they do affect purchases across the country where some markets have been struggling. A perhaps unintended consequence is that more people are seeking out alterna- tive means to finance homes, such as pri- vate lenders, which are not subject to the federal banking regulations. The concern is that the risks the new guidelines are designed to reduce are now being trans- ferred to the shadow banking market — a vast network of non-bank lenders from credit unions to private investors that are not subject to the same tough regulations as the banks. "I think the government of Canada has a number of times expressed concerns with the state of Canada's mortgage mar- ket," observes Adam Jackson, a structured finance lawyer with Blake Cassels & Gray- don LLP in Toronto. "OSFI itself has said they are concerned with elevated finan- cial risks for Canadian banks in the cur- rent market; in particular, the losses that some Canadian banks might ultimately be exposed to if the Canadian housing market deteriorated." There is concern, however, that many of the new restrictions are responding to the activity in the Vancouver and Toronto areas, making it difficult for those in other areas coming out of an economic slump. Calgary, says Walsh LLP residential real estate lawyer Lou Pesta, sees itself as collat- eral damage to the increased restrictions. "The Alberta market has been quite subdued in contrast to Vancouver and Toronto over the last two or three years over the depressed energy prices and the feeling is we're just lost in the shuffle," says Pesta. "There's a concern R E A L E S TAT E MATTHEW BILLINGTON Collateral damage from mortgage rules New restrictions brought in to cool the real estate market are having unintended effects By Marg. Bruineman O

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