DEMYSTIFYING THE CMHC UPDATES TO MULTI-UNIT MORTGAGE LOAN INSURANCE PROGRAM
On June 4, 2024, CMHC issued significant
updates to their Multi-Unit Mortgage Loan Insurance Programs. The major changes
are as follows:
1. Update to Refinance Criteria: Effective June 4, 2024, CMHC has removed the measures restricting the
use of refinance proceeds. This includes:
- Any lender can now be in place prior to refinance.
- There are no restrictions on the use of refinance proceeds,
allowing property owners more flexibility to improve properties, refinance
existing encumbrances, or convert equity into cash.
This change will enhance flexibility in
refinances, boost profit margins with renovations, and allow for more
free-flowing capital in the multifamily sector.
2. MLI Select Scoring for Energy Efficiency: Effective June 19, 2024, the points obtainable through energy
efficiency in the MLI Select program will be reduced, reserving maximum
benefits for projects that offer some level of affordability.
3. Amortizations Increasing for MLI Standard
(Market) Program: Effective June 19, 2024, CMHC is extending
the maximum amortization for new construction projects in the MLI Standard
(Market) Program to 50 years. This will allow for higher leverage and lower
mortgage payments, making the standard program more attractive.
4. Changes to the Approved Correspondent
Program: Effective September 3, 2024, only approved
lenders can submit CMHC multi-unit applications directly. This will result in
the submitting lender keeping more the approvals obtained. Regarding the
better terms and rates that lenders currently offer brokers as much of the work
is already done when the file reaches them. We expect this lower pricing
structure to continue especially for experienced brokerages with strong CMHC and
lender relationships. Experienced brokers will continue to provide
comprehensive loan packages, and seamless lender integration that will ensure
expedited processing of the borrowers’ transaction as all the due diligence to
determine borrowers’ best options are all mitigated and calculated prior to
submission.
The value proposition of mortgage brokerages
handling CMHC loans remains strong:
- Speed: Mortgage brokers will prepare loan
packages more quickly than lenders, who face increasing administrative
burdens.
- Knowledge of Lenders:
High-volume brokerage teams have detailed knowledge of each lender’s
terms, flexibilities, and processes, ensuring effective guidance for
borrowers.
- Loan Structuring & Guidance:
Experienced brokers ensure loans are tailored to meet borrower needs and
are set up for success.
- Reduced Time & Effort:
Brokers alleviate administrative burdens for both borrowers and lenders during
loan application preparation.
- Certainty of Execution:
Unbiased mortgage brokers focused on borrower interests ensure loans fund
as required.
- Provide Best options: The
broker will ensure that the best tools, terms and conditions from all the
most motivated lenders will be brought to you, so that the borrower
chooses the terms and condition that best meet their objectives.
5. Other Changes:
- Greater flexibility for the classification as new construction for projects
replacing fully demolished residential structures and in the case of
phased construction on a site containing an existing residential building
(effective June 4, 2024).
- Extension of mortgage re-amortization only as a default
management tool, up to 55 years for MLI Select, (effective
June 19, 2024).
- Acceptance of applications with known site contamination for
construction financing. MLI approvals will be conditional on confirmation
of site clean-up prior to the first advance. (effective June 4, 2024).
In Closing:
MCommercial, the most nominated brokerage in
Canada is here to answer any questions or concerns you may have.
We look forward to your call and helping you
navigate the current market opportunities.
As always, we remain committed to your success.
info@mcommercial.ca
