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An underwriting exception is a lender’s decision to approve a mortgage file that falls outside its standard credit policy, based on compensating factors elsewhere in the application, rather than a change to the lender’s published guidelines.
A larger down payment, a lower loan-to-value, a strong credit history despite a slightly elevated TDS, or significant liquid reserves are common reasons an underwriter might grant an exception rather than declining a file for missing one metric.
Exceptions still operate within the lender’s overall risk framework, and for federally regulated institutions, within the broader expectations OSFI sets out in Guideline B-20. A file approved by exception is typically documented and may still carry additional conditions of approval beyond a standard file.
Case-by-case, not automatic: exceptions are decided file by file by an underwriter, not something a borrower or broker can assume will be granted.
Compensating factors matter: a larger down payment, strong credit history, or significant liquid reserves are common reasons an underwriter may grant an exception.
Still within B-20 principles: for federally regulated lenders, exceptions are made within the broader risk-management expectations OSFI sets out in Guideline B-20, not outside them.
Often paired with extra conditions: a file approved by exception may still carry additional conditions of approval beyond a standard file.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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