CMHC New Guidelines Impacting Calgary Buyers & Sellers

CMHC announced yesterday afternoon changes to its mortgage insurance underwriting and acceptance criteria.

Effective July 1^st, the following changes will apply for new applications for homeowner transactional and portfolio insurance:

• The maximum gross debt service (GDS) – Principal, interest, tax, heat & ½ condo fees – ratio drops from 39% to 35%
• The maximum total debt service ratio (TDS) - Principal, interest, tax, heat & ½ condo fees + credit bureau payments – ratio drops from 44% to 42%
• The minimum credit score rises from 600 to 680 for at least one borrower
• Non-traditional sources of down payment that increases indebtedness will no longer be treated as equity for insurance purposes (no more borrowed down payment)

It is important to note that this is a CMHC announcement, and as the release states: “These decisions are within CMHC’s authorities under the National Housing Act.” This is not a directive from the Ministry of Finance. As such, as Canada’s private mortgage insurers, Genworth’s and Canada Guaranty’s criteria are not directly affected.

Early indications seem to suggest that the private insurers will not follow in lockstep with these changes, but each is currently determining their specific response.

More details are expected next week, it will take a few weeks for lenders to respond and update their policies based on CMHC’s changes effective July 1^st. Once more details become available from Genworth and Canada Guaranty as well as lender policy changes, I will send an update.

If the CMHC’s changes are adopted amongst the private insurers it will impact buyers purchasing power by approx. $50,000