Minutes from a fall meeting between Canada’s prudential regulator and the chief risk officers of the country’s largest banks indicate officials raised concerns about a widespread mortgage underwriting practice known as blanket appraisals. The documents, obtained through an access to information request, show the Office of the Superintendent of Financial Institutions (OSFI) told bank executives in October that using purchase-date valuations instead of closing-date market values could produce uninsured mortgages that exceed the 80% loan-to-value ceiling set by federal law.
OSFI is the federal regulator charged with safeguarding the stability of Canada’s financial system. According to the meeting records, the regulator warned that blanket appraisal models - commonly used to approve multiple pre-construction condominium loans using the property value at the time the buyer signs the purchase agreement - perform less reliably when prices are declining.
In markets where values fall between contract signing and closing, the minutes say, the use of an earlier valuation raises the possibility that the amount lent could surpass 80% of the property's market value at origination or at closing, creating a potential breach of the Bank Act. The meeting notes caution that such a failure to meet the 80% loan-to-value expectation could result in uninsured mortgage loans exceeding that threshold.
OSFI told attendees that when regulatory expectations are not met it engages with the lender privately to discuss remediation and resolution, though the regulator did not detail what form those remediation steps would take. The documents do not list which specific banks were present at the quarterly roundtable.
Context in the housing market
Canada experienced one of the larger housing price declines among major economies in the prior year, with overall prices down about 2.7% as buyers deferred purchases amid trade uncertainty and slower immigration. The decline has been considerably more pronounced in pre-construction condominium segments, where prices have fallen in many cases between roughly 10% and 30% from their peaks.
That retreat in values has left a material inventory of unsold and unoccupied condo units in major city cores such as Toronto and Vancouver, the minutes note. The boom in construction between 2018 and 2022 to satisfy investor demand has produced thousands of units that remain vacant, increasing lender exposure if buyers default on or walk away from purchases that are now worth less than their contract price.
Marketing practices and timing concerns
OSFI raised concerns in a subsequent November meeting about how some banks were marketing mortgage approvals tied to blanket appraisals. The regulator highlighted the timing of those appraisals as a particular vulnerability once condo prices had declined roughly 10% to 20% from their 2022 peaks.
"We offer a firm approval to match the closing date provided by the builder. Once approved, you stay approved until your closing date."
The regulator showed examples of lender marketing that contained language similar to the passage above. According to archival records, that specific wording appeared on the pre-construction mortgage page of a major Canadian bank's website as of Nov. 18. Following the regulatory meetings, the bank revised its online wording, removing the promise that a borrower would "stay approved until your closing date" and instead stating in part: "At RBC, we offer mortgage approvals based on the closing date provided by the builder."
When asked for comment, the bank said it works closely with regulators to ensure its practices meet expectations.
The Canadian Bankers Association has said it is engaged with OSFI to clarify the regulator’s expectations for blanket appraisals used in the pre-construction stage, so that any potential financial implications are properly considered by the industry.
Regulatory interaction and next steps
The minutes make clear that OSFI has been intensifying its scrutiny of some mortgage approval practices as concern mounts over the wider economic implications of a housing market correction. The regulator indicated it will discuss remediation privately with any lender that does not meet expectations related to loan-to-value calculations under the Bank Act.
OSFI declined to comment publicly on meetings it holds with lenders. The documents indicate the regulator is focused on ensuring underwriting models reflect market realities and that publicly-facing marketing does not overstate the durability of approvals when valuations can change before closing.
What the records show and what remains unspecified
The released minutes provide a snapshot of OSFI's concerns and the themes covered in roundtable discussions with large banks' risk officers. They specify that the regulator warned about potential breaches of the 80% loan-to-value threshold tied to blanket appraisals, showed examples of marketing language it viewed as problematic, and noted subsequent changes to bank web content. The records do not provide a roster of attendees for the meetings, nor do they offer details on any specific remediation measures that may have been requested or applied to particular lenders.