CMHC’S NEW USE OF FUNDS RULE FOR INSURED BORROWING
On May 28, CMHC issued a notice to rental owners who have pending applications for CMHC mortgage insurance for re-financings under CMHC’s Multi-Unit Mortgage Loan Insurance (5+ units). Prompted by an acceleration in applications for refinancing, CMHC imposed a new restriction prohibiting the use of upward re-financings for equity take out. Under these new rules, upward refinancing proceeds can only be used for a permitted purpose which supports the provision of housing in Canada.
See https://cfaa-fcapi.org/cmhcs-may-28-announcement/ for more details.
On June 5, 12 and 15, CFAA met with senior CMHC officials, as well as the working group responsible for implementing the new rule. For rental housing providers, the key take-aways from those meetings are the following. At this time, subject to the usual underwriting tests, CMHC is saying the following:
CMHC is holding consultations about the new rules, and about possible other revisions to their insurance products. If the new rules concern you, you should participate in those consultations, or communicate with your CMHC representative. You can also communicate your concerns to your usual lender, and ask them who to contact at CMHC. Or you can reach out to a CMHC representative who will ensure that your input is shared with the appropriate teams within CMHC.
Steps from here
CFAA has always had a strong, positive relationship with CMHC. CFAA is communicating our concerns to CMHC on an on-going basis, to seek to avoid unintended negative consequences for rental housing providers, investors, renters and the community. CFAA wants to encourage a continuation of the strong investment climate which has been instrumental in drawing out more much-needed purpose-built rental supply.
CFAA will advise further as more information becomes available and can be disclosed.