Home For Sale Real Estate Sign in Front of Beautiful New House.
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Federal financial regulators issued guidance today that sets out how mortgage insurers will be expected to calculate capital requirements for mortgages provided under a new incentive program for first-time homebuyers that kicks in this fall.

The Office of the Superintendent of Financial Institutions (OSFI) issued guidance on Tuesday that aims to define the capital requirements for insured mortgages under the first-time homebuyer incentive (FTHBI mortgages).

OSFI says that the existing capital rules aren’t set up to capture the mortgage insurance risk associated with these new mortgage arrangements, which allow eligible buyers to apply to finance 5% or 10% of their home purchases through a shared equity mortgage with CMHC.

The regulator says that, all else being equal, these new mortgages will have different default probabilities compared to traditional mortgages, because they will have different loan-to-value ratios.

The guidance sets out OSFI’s approach to accounting for these new mortgages, which will take effect on Nov. 1.

It also said that OSFI will “monitor the effectiveness of the new advisory and make any necessary modifications.”