CMHC announces mortgage insurance changes
CMHC no longer offering mortgage insurance for luxury homes
www.preigCanada.com/membership | www.WorldWealthBuilders.com/live.html | June 2014
Canada Mortgage and Housing Corporation (CMHC) announced on June 6th,2014 two additional changes as it has completed the review of its homeowner and multi-unit mortgage loan insurance business
“Canada Mortgage and Housing Corp. (CMHC) have discontinued its mortgage loan insurance for the financing of multi-unit condominium construction” says Navtaj Chandhoke, founder of Professional Real Estate Investors Group (PREIG) Canada.
“Canada Mortgage and Housing Corp. says it will no longer offer mortgage insurance for homes that cost $1 million or more, starting July 31,2014 even if the buyer has made a deposit of 20 per cent or more. The goal of all these new changes is to minimize the risk.”
“Canada Mortgage and Housing Corp. (CMHC) 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, 2014”
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 access insured financing during the construction phase of condominium projects.
Financing needs for condominium construction are well served by the marketplace without CMHC’s involvement. 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.
The agency says its insurance for mortgage loans to home buyers 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.
Beginning on July 31, 2014 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 3% 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.
As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country.