Changes to CMHC Mortgage Insurance Products

By Andrew Rickard | June 16 2014 02:42AM

The Canada Mortgage and Housing Corporation (CMHC) is discontinuing its mortgage loan insurance program for multi-unit condominium construction projects and tightening its low-ratio mortgage loan insurance product.

On June 6, the CMHC announced that the multi-unit condominium construction product it had introduced in 2010 to help real-estate developers access funding would be discontinued immediately. "Despite the availability of this product, demand has been low," reads the statement. "CMHC has not provided any insurance for multi-unit condominium construction since 2011 and CMHC’s total outstanding insurance-in-force for condominium construction was approximately $378 million as at March 31, 2014."

Effective July 31, CMHC is also establishing new maximum house prices, amortization periods, and debt servicing ratios for its low-ratio transactional mortgage loan insurance product. The new maximum price is $1 million, with a maximum amortization period of 25 years and maximum Gross Debt and Total Debt Service ratios of 39% and 44% respectively.

The changes are designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector, says the CMHC.  “They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance, as noted in Economic Action Plan 2014.”