Since 1996, the use of automated computer systems by banks to determine how much should be lent in a mortgage or home refinancing has flourished in Canada. For banks these computer models were cheaper and faster than conducting a full appraisal. However documents showing discussions between Canada’s banking regulator and the financial and real estate sectors show serious concerns about the accuracy of these automated systems, and an over-reliance on them by banks. This adds risk to the housing market.
The documents, marked Protected – For Internal Purposes Only, were obtained by The Globe and Mail through Access to Information during an investigation into lending practices in the housing sector over the past decade. Below are excerpts, along with an explanation of what is being said. All names of the parties speaking have been blacked out by the federal government. Only comments from Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), are identified.