Clarification to CMHC

I’ve had a ton of calls this week looking for clarification on CMHC’s announcement. Here it is.

CMHC announced NEW changes this past Friday effective May 30, 2014 and they are as follows:

• CMHC BFS stated Income program- this program has been around for the past 9 years and will effective end on May 30. ALL self-employed borrowers will be required to prove income via traditional third party documentation.
• CMHC second home program- while we have enjoyed this program for the past 7 years, it too is ending. CMHC will no longer insure second homes for family or vacation property.
• CMHC will only allow one CMHC mortgage at one time. Cosigners who currently have a CMHC mortgage and are looking to help by cosigning another CMHC mortgage will be ineligible. Those who are looking to convert their existing CMHC insured property into a rental and obtain another CMHC mortgage will be ineligible.

CMHC tightened their policy as it related to BFS (business for self) stated income program on April 9, 2010 to having a maximum BFS tenure of 3 years and must not be commission based. Anyone outside of the 3 year mark or commission based no longer qualifies under the program.

As of May 30, 2014, the CMHC BFS stated income program will cease to exist. Not a big deal, in my opinion, as we see a good number of lenders using the other two insurers as a result of the 2010 tightening. CMHC’s announcement didn’t really surprise me, as I think it’s more about tax revenue collection than it is about risk, in my opinion. CMHC themselves said these changes will only impact about 3% of it’s overall book of business.

Anyway, I digress. Here is a more important fact you should know. CMHC has now said that a borrower can only hold one CMHC insured mortgage at a time. So imagine you bought a home 10 years ago and needed CMHC insurance. To date you have simply renewed your mortgage, paid it down and enjoyed the appreciation in value. Now you want to convert it to a rental and purchase a new home or you wish to help by cosigning for a family member. If you have never refinanced your home, it is still be considered ‘insured’ regardless of the loan to value (LTV). In this case, you would not qualify for another CMHC insured mortgage.

Solution:

Use a different insurer for the new purchase and/or refinance into a conventional mortgage.

I hope this information is helpful. Should you wish to discuss further or have other mortgage related questions, give me a shout at 403.242.5547.

Have a great week!

Jeremy

Renovating Your Home?

Buying A New Home?Selling Your Home?

Tags : BFS, Buying A New Home?, CMHC, Renovating Your Home?, Self-employed, Selling Your Home?