Effective May 30th, 2014 CMHC will be discontinuing 2 existing mortgage programs and further tighten Canada’s mortgage market. Self-employed borrowers will no longer be eligible for CMHC insurance unless they are able to verify sufficient income through traditional sources. Also being cut, is the the 2nd home mortgage program.
CMHC’s rationale for this move is that these programs are no longer core to the insurer’s objectives, and only represent a small percentage of their overall business.
As a result of these changes, home ownership prospects for self employed individuals will be greatly reduced. The impact of this change is not limited to low downpayment mortgages as many mortgage companies insure these loans with CMHC after the transaction has completed.
Although CMHC is only 1 of 3 insurers they dominate the market in terms of volume and have traditionally set the tone for pricing and programs. This move could represent an opportunity for the other 2 insurers to focus on these niche products but it’s likelier that they will follow suit and axe the programs.
The environment of mortgage rule tightening isn’t over yet and in CMHC’s announcement they indicate that this is just the first set of changes resulting from a review of its mortgage loan insurance business.
Dr. Freddie So
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