CMHC announced changes to its mortgage insurance underwriting and acceptance criteria.
Effective July 1, these changes will take effect for new applications for homeowner transactional and portfolio mortgage insurance:
- The maximum gross debt service (GDS) ratio drops from 39 to 35
- The maximum total debt service (TDS) ratio drops from 44 to 42
- The minimum credit score rises from 600 to 680 for at least one borrower
- Non-traditional sources of downpayment that increase indebtedness will no longer be treated as equity for insurance purposes
You can read the full release here.
It is important to note that this is a CMHC announcement, and as the release states: “These decisions are within CMHC’s authorities under the National Housing Act.” This is not a directive from the Ministry of Finance. As such, as Canada’s private mortgage insurers, Genworth’s and Canada Guaranty’s criteria is not directly affected. Early indications seem to suggest that the private insurers will not follow in lockstep with these changes, but each are currently determining their specific response. More details are expected early next week, and I anticipate some differentiation in risk appetites will create additional competition and a shift in market share over time.
-Mortgage Professionals Canada