27 Apr

Mortgage Insurance Policy Modifications


Posted by: Eileen Crosbie

Message from CMHC’s Steven Mennill Sr Vice-President, Insurance RE: Homeowner Policy Modifications Relating to B-21 Guidelines 

Homeowner Policy Modifications
In line with the industry focus on risk management, the OSFI B-21 Guidelines, and responsible diligent lending practices, Canadian Mortgage and Housing Corporation (CMHC) is implementing policy modifications for homeowner (including rental) 1-4 unit properties and providing greater clarification on the requirements surrounding the verification of the borrower’s income and employment. 

  • CMHC is harmonizing its policies with respect to the qualifying interest rates used for low ratio and high ratio loans submitted for mortgage loan insurance. Whether the loan is high or low ratio, qualifying interest rate for all variable rate mortgages regardless of the term, and fixed rate mortgages with a term less than five years, will be the greater of the contractual mortgage interest rate or the five-year benchmark interest rate. For fixed rate mortgages, where the term is 5 years or more, the qualifying interest rate is the contract interest rate. (CMHC is allowing for flexibility to implement this change as some lenders will have system impacts. This requirement is to be implemented as early as possible after June 30 and no later than December 31, 2015);
  • In line with industry efforts to encourage borrowers to save for homeownership, lender cash backs will no longer be considered as an eligible non-traditional source of down payment to satisfy minimum equity requirements. Where the prospective borrower satisfies the applicable minimum equity requirements with traditional sources, the prospective borrower may elect to supplement the down payment with money obtained from a lender cash back mortgage offer (effectiveJune 30, 2015); 
  • With respect to the verification of the borrower’s income and employment, lenders are required to obtain third party verification of the underlying income for all borrowers including substantiation of employment status and income history (effective June 30, 2015). 

CMHC is working with lenders to implement these policy modifications and clarifications. Attached you will find a document covering common operational questions and answers surrounding this announcement. For more information please contact your CMHC Regional Manager, Client Relations. 


Steven Mennill 
Senior Vice-President, Insurance 

So…what does this all mean?

Rich UlvidRich Ulvild, our Director of Lender and Franchise Relations breaks it down:

B-21 has been in the works for some time and the Office of the Superintendent of Financial Institutions (OSFI) has been sending out “trial balloons” over the past year to test the market.

Most of agents/brokers will be aware of these changes and may of the lenders have changed their policies in anticipation.
Qualifying – previously only high ratio mortgages were qualified at the Benchmark rate. Low ratio was qualified at the lender discounted rate. Now it is the same for terms less than five years. Regardless of variable or fixed, high ratio, or not, all mortgages less than five years will be qualified at the benchmark rate.
Cash back mortgages are history. The client may get one only if they don’t need one. Yes that is odd but… they can get cash back as long as they can come up with the down payment from traditional sources. Basically they qualify without it. The lenders charge a higher rate for cash back so I don’t think may clients would go for it. I can see clients doing this only if they are using the cash back money to pay off higher interest debt.
Employment income – more scrutiny here on income / employment verification. It is not optional now for lenders to only ask for pay stubs or T-4’s. They ALL will have to call the employer for verification of tenure, position, and income. Again, nothing new here as many lenders are already asking for this information for quite some time.

If you have any questions or comments, please let me know.

16 Apr

The Bank of Canada held the interest rate at 0.75%


Posted by: Eileen Crosbie

Our Chief Economist, Dr. Sherry Cooper was RIGHT! The Bank of Canada held the interest rate at 0.75%.

Here is the full press release below:

Dominion Lending Centres Chief Economist Dr. Sherry Cooper Cautiously Optimistic After Bank of Canada’s April Rate Policy Announcement

April 15th 2015

Vancouver, BC – Following today’s Bank of Canada’s announcement that it will hold overnight rates steady at 0.75%, Dominion Lending Centres’ Chief Economist, Dr. Sherry Cooper, says the outlook is unclear for the Canadian economy and the prospects for a potential rebound in the second half of 2015 are still uncertain.

The Canadian economy has experienced a substantial slowdown in recent months due to drops in the price of oil, and Dr. Cooper expects that any changes to the nation’s economic performance will likely be a result of an improvement in non-energy sectors emanating from the weakness in the Canadian dollar.

“While March employment in Canada improved substantially, business investment remains disappointing,” added Dr. Cooper. “The Bank of Canada has suggested that we will see a transition towards positive growth in exports and capital spending by non-energy producers—both boosted by the depreciating Canadian dollar, but in the near-term, incoming data will likely confirm continued weakness in the manufacturing sector, particularly in autos, and only modest growth in retail sales.”

Dr. Cooper reiterated her confidence in the Bank of Canada’s monetary policy strategy for 2015, despite the current weakened status of the Canadian economy: “I am cautiously optimistic that the Bank has got it right, but I continue to believe that the risks are on the downside for the economy and inflation. My forecast for Canadian growth this year is 1.5 percent–below the Bank’s 1.9 percent forecast. Much hinges on the U.S. economy.”

8 Apr