MNI POLICY: Canada Housing Agency Tightens Mortgage Insurance

By Greg Quinn

     OTTAWA (MNI) - Canada Mortgage and Housing Corp. issued this statement

Thursday about mortgage insurance, of which it's the dominant provider in the

country:

     The COVID-19 pandemic is affecting all sectors of Canada's economy,

including housing. Job losses, business closures and a drop in immigration are

adversely impacting Canada's housing markets, and CMHC foresees a 9% to 18%

decrease in house prices over the next 12 months. In order to protect future

home buyers and reduce risk, CMHC is changing its underwriting policies for

insured mortgages.

     Effective July 1, the following changes will apply for new applications for

homeowner transactional and portfolio mortgage insurance:

     Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to our standard

requirements of 35/42; Establish minimum credit score of 680 for at least one

borrower; and Non-traditional sources of down payment that increase indebtedness

will no longer be treated as equity for insurance purposes. To further manage

the risk to our insurance business, and ultimately taxpayers, during this

uncertain time, we have also suspended refinancing for multi-unit mortgage

insurance except when the funds are used for repairs or reinvestment in housing.

Consultations have begun on the repositioning of our multi-unit mortgage

insurance products.

     "COVID-19 has exposed long-standing vulnerabilities in our financial

markets, and we must act now to protect the economic futures of Canadians," said

Evan Siddall, CMHC's President and CEO. "These actions will protect home buyers,

reduce government and taxpayer risk and support the stability of housing markets

while curtailing excessive demand and unsustainable house price growth."

     These decisions are within CMHC's authorities under the National Housing

Act and are in anticipation of potential house price adjustment. We will

continue to monitor market conditions and work with our federal colleagues on

potential macro-prudential policy options.

     CMHC supports the housing market and financial system stability by

providing support for Canadians in housing need, and by offering housing

research and advice to all levels of Canadian government, consumers and the

housing industry.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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