CMHC insurance rules to change.
November 25, 2004 - The federal government has announced changes to Canada Mortgage and Housing (CMHC) mortgage product packages to make it easier for Canadians to finance the purchase of a home. The changes will go into effect January 14, 2005.
"The Government of Canada understands
that changing demographics, evolving lifestyles and market conditions affect the housing choices of Canadians," Joe Fontana, the Minister of Labour and Housing said in announcing the changes on November 17th. "These enhancements are part of the government's long term strategy to help Canadians meet their housing needs, and contribute to the social economic life of Canada."
The changes include streamlined income verification for self-employed Canadians. This means CMHC will provide fast and consistent decisions on all mortgage insurance requests with no increase to mortgage insurance premiums, surcharges or borrower qualifications.
Another change will allow for homeowner mortgage loan insurance for a second, year-round home without additional premiums, surcharges or borrower qualifications. Qualified borrowers will be able to use any of the existing CMHC services – including Flex Down, Line of Credit (LOC), Refinance and 95 per cent financing – when they purchase or refinance a second home.
Effective January 2005, CMHC will also be eliminating the existing 0.5 per cent premium surcharge on Progress Advance applications and will offer lenders a fully-automated application process. CMHC says this is an enhancement for builders and those planning home renovations. With this new approach, CMHC will validate the work in place for mortgage loan insurance purposes and will provide electronic advance approval. CMHC says this will ensure fast and efficient cash flow, which is particularly important for the small builders.
The announcement comes as controversy develops over a surplus has grown from mortgage insurance premiums collected by the Corporation. In the House of Commons on November 16th, Bloc Quebecois MP Christian Simard (Beauport-Limoilou) noted the CMHC surplus stood at $2.5 billion, and could grow to $6 billion by 2008. He asked Housing Minister Joe Fontana if he would commit to investing the surplus in the building or renovating of affordable social housing.
“There is no doubt that the premiums from the mortgage insurance fund make it possible to fund social housing and affordable housing initiatives across the country, including Quebec,” Fontana responded. “And yes, we are reviewing the options available to the government with regard to the surpluses in CMHC to provide more housing.”
CMHC also announced two new federal energy efficiency initiatives on November 18, to take effect immediately. CMHC will now offer a 10 per cent refund on its mortgage loan insurance premium when a borrower buys or builds an energy-efficient home or makes energy-efficient renovations to existing homes. To qualify, a home's energy efficiency must be rated using the EnerGuide for Houses rating system and meet certain requirements.
Starting January 1, 2005, qualifying homebuyers can also extend the amount of time required to pay their mortgage to a maximum of 35 years. This is an increase of 10 years over the previous limit.
Developers and owners of multi-unit residential properties can also take advantage of the 10 per cent refund on mortgage loan insurance premiums to build energy-efficient units, or retrofit existing buildings to make them more energy efficient. CMHC says this program extension to rental units is a two year pilot project. To qualify, a multi-unit residential building must be at least 4 storeys high or occupy a footprint of more than 600 sq. meters with a common entrance.
New standards for the Residential Rehabilitation Assistance Program (RRAP) were also introduced. The change will allow repair work to include renovations and retrofits that will improve the energy performance of units assisted through the program.
© Copyright 2004 The Canadian Real Estate Association