Under the new rule, refinance proceeds must be used for a permitted purpose in relation to residential housing. This could include one or more of the following:
- capital repairs/improvements (including for increased energy efficiency and accessibility),
- securing permanent financing (including take-out financing to pay off a short-term construction loan).
- certain other uses permitted on a case-by-case basis (such as funding to deal with COVID-19 rent shortfalls).
The notice said that “in no event shall equity take-out or distributions to equity holders be permitted, pending industry consultations.” The notice referred to guaranteeing refinancing for equity take-out as an improper use of government resources, and urged CMHC clients to seek private sector solutions for these uses.