CMHC announces more mortgage insurance changes

Canada Mortgage and Housing Corp. (CMHC) has discontinued its mortgage loan insurance for the financing of multi-unit condominium construction.

The federal housing agency also announced that it has established maximum house prices, amortization periods and debt servicing ratios for its low-ratio transactional mortgage loan insurance product, effective July 31.
CMHC says, “The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC. They are not changes to the government’s mortgage loan insurance parameters and do not apply to private mortgage insurers’ products and services.”
CMHC introduced its multi-unit condominium construction product in 2010 to assist developers to access insured financing during the construction phase of condominium projects. It says that demand for the product has been low and that CMHC has not provided any insurance for multi-unit condominium construction since 2011.
The agency says its insurance for mortgage loans to homebuyers wishing to purchase a condominium is unaffected by this change and will remain available throughout Canada.
“The changes to CMHC’s low-ratio insurance align this product with our objective to help Canadians meet their housing needs as well as government parameters for high ratio mortgage loan insurance,” says the agency.
Beginning on July 31 the maximum purchase price for low-ratio mortgage loan insurance will be $1 million. The maximum amortization will be 25 years. The maximum gross debt service (GDS) is set at 39 per cent and the maximum total debt services (TDS) will be 44 per cent.
“Loans outside the revised parameters accounted for approximately three per cent of CMHC’s total homeowner business volumes in 2013. Consequently, the changes are not expected to have a material impact on the housing market or on CMHC’s future performance,” says the agency.