OTTAWA, ONTARIO--(Marketwired - Jun 6, 2014) - Canada Mortgage and Housing Corporation (CMHC) announced today two additional changes as it has completed the review of its homeowner and multi-unit mortgage loan insurance business. These are:
- CMHC mortgage loan insurance for the financing of multi-unit condominium construction will be discontinued effective immediately. CMHC's mortgage loan insurance for the homebuyers wishing to purchase a condominium is unaffected by this change; and
- CMHC will align its low-ratio transactional mortgage loan insurance product with its high-ratio product by establishing maximum house prices, amortization periods and debt servicing ratios effective July 31st.
"CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system," said Steven Mennill, Senior Vice-President, Insurance. "The changes announced as part of the review ensure that CMHC's products and services are aligned with these objectives."
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 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. They are not changes to the government's mortgage loan insurance parameters and do not apply to private mortgage insurers' products and services.
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.
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- CMHC contributes to the stability of Canada's housing finance system, including housing markets, by providing qualified Canadians in all parts of the country with access to a range of housing finance options in both good and bad economic times.
- CMHC's mortgage loan insurance activities are comprised of transactional homeowner insurance, portfolio insurance and multi-unit residential insurance. Transactional homeowner insurance includes high ratio and low ratio homeowner mortgage loans.
Multi-Unit Condominium Construction
- 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. Despite the availability of this product, demand has been low. 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.
- CMHC's insurance for mortgage loans to homebuyers wishing to purchase a condominium is unaffected by this change and will remain available throughout Canada.
Low-Ratio Mortgage Loan Insurance
- Mortgage loan insurance is not a legislative requirement on loans with a 20 per cent or more down payment at origination. However lenders may purchase mortgage loan insurance as part of approving a loan.
- 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.
- 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.
|Maximum Effective July 31, 2014|
|Purchase Price / Lending Value||$1,000,000|
|Gross Debt Service (GDS)||39%|
|Total Debt Services (TDS)||44%|
- These changes do not apply to CMHC's portfolio insurance product.
- homeowner insurance
- mortgage loan