CMHC changes - 03-10

There was some confusion voiced by mortgage professionals over a communication we sent out on Wednesday based on information received directly from CMHC. It appears that CMHC may not have communicated the latest qualification rules to its front-line staff members, who seem to still be going by older information provided on February 16th, 2010.

You can be confident that the information on qualification requirements we sent out on Wednesday (and also included below) has been taken directly from a CMHC publication called Advice No 146, dated March 5th, 2010.

Clarification on Qualifying Interest Rate

On February 16th, the government announced new parameters regarding the application of the government guarantee supporting the mortgage insurance industry, but did not stipulate the rules around qualifying interest rates. Effective April 19th, 2010, the qualifying interest rate used to assess borrower eligibility will change only for loans with an LTV greater than 80% as follows.

Fixed-Rate & Variable-Rate Mortgages

For loans with a fixed-rate term of less than five years and for all variable-rate mortgages, regardless of the term, the qualifying interest rate is the greater of:

• The benchmark rate
• The contract interest rate

For loans with a fixed-rate term of five years or more, the qualifying interest rate is:

• The contract interest rate

Mortgages with Multiple Interest Rates (eg, Multi-Component Mortgages)

Each component must be qualified using the applicable criteria defined above.

CMHC defines the benchmark rate as the Chartered Bank – Conventional Mortgage Five-Year rate that is the most recent interest rate published by the Bank of Canada in the series V121764 as of 12:01am (ET) each Monday, which can be found at: www.bankofcanada.ca/en/rates/interest-look.html