CMHC has announced a number of changes to their products and guidelines over the last several weeks, including increases to their fees and the discontinuation of their Second Home and Self-Employed Stated Income products.
Discontinuation of Insurance for Second Homes:
After this week, CMHC will stop offering mortgage insurance on second homes. Currently, borrowers can obtain mortgage insurance on a second home provided that the property is "intended for occupancy at some point during the year by a borrower; or a relative of the borrower on a rent-free basis." This product was often used by borrowers to purchase a vacation property or a property for a family member. Starting next month this product will no longer be available.
Although Genworth and Canada Guaranty have not followed CMHC in discontinuing their coverage for second homes, they have tweaked their second home offerings to apply to one unit properties only. Previously Genworth and Canada Guaranty were willing to insure second homes with up to two units, as long as one of the units was occupied by the Borrower or one of their immediate family members.
Self-Employed Borrowers without Income Validation:
Effective May 30, CMHC will also discontinue its mortgage insurance coverage for self-employed borrowers who cannot provide independent proof of income. Until now, self-employed borrowers with less than 3 years in business could obtain mortgage insurance with a down payment of at least 10%, without showing documentation to support the income. Provided the credit score was high enough, these borrowers could proceed by way of "stated income" and would only need to show proof of business, such as a business or GST licence, or Articles of Incorporation. The income claimed would, however, have to be reasonable, and would be examined by CMHC based on the nature of the employment and the industry.
Self-employed borrowers wishing to obtain CMHC mortgage insurance will now have to provide the usual two year track record of income, supported by documentation such as Notices of Assessment from CRA or audited financial statements.
So far Genworth and Canada Guaranty have not discontinued or announced any changes to their stated income programs.
For further commentary on these changes, please see the following:
Was CMHC’s move another step towards privatization? Financial Post
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John Freeland Smith