CMHC changes its selection criteria

Covid’s impact on the economy

Covid-19 exposed the fragility of Canadian financial markets. In response, Canada Mortgage and Housing Corporation is tightening its underwriting criteria as of July 1, 2020. This measure is designed to protect property buyers. But also to reduce risks for the government and taxpayers. What’s more, according to Evan Siddall, President and CEO of CMHC, this will promote stability in real estate markets. The intention is to reduce the exceptional growth in house prices.

Indeed, CMHC forecasts a 9-18% fall in house prices over the next 12 months.

What are the new CMHC rules?

From now on, all new applications for unit-linked mortgage insurance and homeowner portfolio insurance will be governed by these standards:

• the borrower will now have to have a rating of 680 for 600 before July 1.
• non-traditional sources of down payment will no longer be accepted.
• gross and total debt amortization ratios will be limited to the standard requirements of 35/42.

In addition, insurance on refinancing mortgages for apartment buildings is suspended until further notice, except when the funds are used for repairs or reinvestment in the home.