Canada Mortgage and Housing
Corporation (CMHC) is Canada’s
national housing agency. Established
as a government-owned corporation in
1946 to address Canada’s post-war
housing shortage, the agency has
grown into a major national
institution. CMHC is Canada’s
premier provider of mortgage loan
insurance, mortgage-backed
securities, housing policy and
programs, and housing research.
CMHC has a mandate to
encourage:
Construction of new houses;
Repair and modernization of
existing houses; and
Improvement of living
conditions and housing for
Canadians throughout the
country.
CMHC provides a range of
publications and acts as a resource
centre for both private and public
organizations related to the housing
industry. CMHC advises the
government on housing matters and
designs, as well as overseeing
various federal housing programs.
Real estate practitioners are most
likely to encounter CMHC regarding
mortgage financing alternatives and,
in particular, insured high ratio
loans offered through approved
lenders.
Published Reports:
CMHC is a primary source of
housing market information and
statistical reports. Selected
reports may be of interest to real
estate practitioners within their
local market areas and they should
contact their local CMHC office for
market analysis information and
other publications.
Local Housing Market
Report:
Addresses monthly or quarterly
statistics on housing activity by
local area. The publication includes
information on housing starts, new
home sales, economic indicators, and
resale activity. Supplements are
provided concerning important trends
identified within a provincial
marketplace.
Rental Market Report:
Focuses on vacancy rates, rental
housing demand, and summary tables
for various occupancy types, e.g.,
private apartments, three units and
over, row, etc. The report is based
on a survey of both privately and
publicly initiated apartment and row
structures of three or more units
offered for rent.
Real Estate Forecast:
Designed to assist in assessing
local market conditions through a
review of key indicators affecting
the housing market. The report
reviews interest rates, sales, price
fluctuations, and listing inventory.
Builders’ Forecast:
Focuses on the new housing market
with particular attention paid to
economic trends, affordability,
housing starts, consumer patterns in
new home purchases, and issues
affecting builders within local
market areas. The report contains a
forecast summary with detailed
estimates concerning total housing
starts, existing housing market
activity, rental market vacancy
rates, and forecasting assumptions,
e.g., mortgage rates, employment,
and the number of household
formations.
Retirement Home Survey:
Summarizes the state of the
retirement home market within the
Toronto Branch territory. The Report
contains information regarding
vacancy rates in private retirement
homes, per diem rates for private
room retirement facilities,
distribution of retirement home
beds, and overall demographic trends
affecting the retirement market.
Condominium Study:
Acts as a supplement to the Rental
Market Report. Produced annually,
this publication provides an
analysis of the condominium rental
market, vacancy rates, occupancy
distribution within condominiums,
and new condominium construction.
CMHC
Contact Information:
For general enquiries regarding
subscriptions or report information,
contact the Canadian Housing
Information Centre, CMHC, 700
Montreal Road, Ottawa, ON K1A 0P7.
Reception/Main number:
613-748-2000
Mortgage Loan Insurance
Program
Canada Mortgage and Housing
Corporation, through provision of
mortgage loan insured products, is
instrumental in increasing access to
the housing market, financing rental
accommodation construction,
assisting in social housing
projects, and generally furthering
access of Canadians to a wide range
of housing choices.
Mortgage loan insurance
guarantees that the lender will be
repaid if the homeowner fails to
keep up the payments. In return for
that guarantee, lenders will provide
mortgages on housing purchases with
a 5% down payment, compared with 25%
normally required for conventional
mortgages. Basically, two types of
programs exist: regular owner
insurance and first home loan
insurance.
The National Housing Act (NHA)
and the National Housing Loan
Regulations set out CMHC
underwriting procedures and
operating guidelines. Part I of the
Regulations detail guidelines for
processing and approving residential
mortgages and defines the maximum
loans permissible as well as term
and amortization periods. Details
about construction loans,
inspections, progress advances, and
holdbacks are outlined. The
Regulations address procedures
regarding GDS and TDS ratios. Part I
provides extensive documentation on
internal procedures, overall loan
administration and claims procedures
for lenders using CMHC mortgage
facilities.
Lending Policies
The CMHC Mortgage Loan Insurance
Program is designed to ensure that
approved home buyers have an
acceptable credit history, equity
from personal resources, an ability
to cover closing costs, and the
income necessary to manage the
mortgage payments.
GDS and TDS Ratios
Lenders use two basic
measurements to determine if a
borrower can afford to carry
mortgage payments. The gross debt
service (GDS) ratio compares the
borrower’s gross income to the
expenses of carrying mortgage
payments, including costs such as
heat. The total debt service ratio
(TDS) considers all loan payments of
the borrower, not just those related
to the house. As a guideline, a
ratio of up to 30% is permitted
under GDS (32% if heating is
included), and 40% for TDS. In a
condominium, a further 50% of common
expenses is included. CMHC also
requires a credit report that
provides current file information
concerning the borrower,
specifically regarding credit
received and outstanding balances.
Equity
CMHC supports the general notion
that the greater the equity invested
from a borrower’s resources, the
less likelihood of default. As with
income, CMHC advances various
guidelines to assist underwriters on
such issues as gifts, use of
applicant’s savings, and borrowing
against assets. As a general rule,
first-time buyers must have at least
5% of the purchase price to qualify,
with other homeowners requiring 10%.
All or part of these amounts can
come from an immediate family
member, provided that the amount can
genuinely be classified as a
non-repayable gift.
Mortgage Terms
CMHC requires that first-time
buyers qualify for an initial
mortgage term of at least three
years with amortization of no more
than 25 years. Otherwise, the
minimum term is six months. CMHC
limits the mortgage amount and may
have other restrictions specific to
a particular jurisdiction. Contact
the local CMHC office for conditions
and requirements.
Fees and Premiums
Fees vary based on whether the
property is an existing or new
house. Insurance premiums are based
on the loan to value ratio and
whether one or more advances are
required (e.g., sequential advances
in the case of new home
construction).
Mortgage Amount
The
maximum mortgage loan is
100%,
therefore minimum borrower equity is
0% of
property value. The minimum term is
six months with amortization up to
40 years. GDS is based on 32%
(principal + interest + taxes +
heat), and 50% of condo fees if
applicable.
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