More Changes from CMHC

[TimLacroix]

CMHC has announced some more changes... More CMHC Changes

Effective July 31 CMHC will:

1- not be providing mortgage insurance for homes that are worth $1 million or more.

2- implemented a maximum amortization period of 25 years on all mortgages (including conventional mortgage - more than 20% down payment/ equity)

3- no longer offer mortgage insurance to condo developers.
NOTE: This change will not affect homebuyers wanting to purchase a condo.

More CMHC Changes

[BerserkerCatSplat]

Originally posted by TimLacroix

2- implemented a maximum amortization period of 25 years on all mortgages (including conventional mortgage - more than 20% down payment/ equity)

Wasn't this already the case for CMHC-backed mortgages?

[dr_jared88]

I have to say I support all of this. The whole point of CMHC is to help people get into the housing market. As a tax payer I don't believe I should be supporting insurance on condo builders or people buying million dollar houses.

[Disoblige]

^^word.
Makes sense on all of these changes.
I support.

[TimLacroix]

Originally posted by BerserkerCatSplat


Wasn't this already the case for CMHC-backed mortgages?

Correct, the maximum amortization for insured mortgages (less than 20%) is 25 years. They have not changed this to 25 years for all mortgages with CMHC.

Genworth and Canada Guaranty have not made these changes and have no plans to do so in the near future.

[flipstah]

I didn't even think million $ houses were eligible for CMHC haha. I thought there was a price ceiling for the 5% down option.

[dirtsniffer]

Originally posted by dr_jared88
I have to say I support all of this. The whole point of CMHC is to help people get into the housing market. As a tax payer I don't believe I should be supporting insurance on condo builders or people buying million dollar houses.

you think you support CMHC? you are crazy

[TimLacroix]

Originally posted by flipstah
I didn't even think million $ houses were eligible for CMHC haha. I thought there was a price ceiling for the 5% down option.

There was a maximums or restrictions for mortgages over a $1M... each lender is different

But in general there is a sliding scale for Home Purchases over $1M. The better of the scales is 80% on the first $1M and 50% on the balance.

Example: $2M purchase would be $800,000 + $500,000 = $1.3M mortgage.
NOTE: There are exceptions to this rule but it is a general guideline. The exceptions come depending on the overall strength of the clients income, networth, etc.

[Xtrema]

1 is still too high. Knock another 30% off that is where CMHC should play.

Originally posted by dirtsniffer

you think you support CMHC? you are crazy

Until CMHC stop being a government corporation, we support it and has to bail it out when it fails.

[BerserkerCatSplat]

Originally posted by Xtrema

Until CMHC stop being a government corporation, we support it and has to bail it out when it fails.

Hasn't CMHC been consistently profitable? It seems to be generating money for the country, not sucking up taxpayer dollars.

I agree that $1M is still too high, $750K max IMO.

[dirtsniffer]

Originally posted by Xtrema


Until CMHC stop being a government corporation, we support it and has to bail it out when it fails.

Uhh, pretty sure CMCH generates about 1 billion a year for the country.

[Xtrema]

Originally posted by BerserkerCatSplat


Hasn't CMHC been consistently profitable? It seems to be generating money for the country, not sucking up taxpayer dollars.

I agree that $1M is still too high, $750K max IMO.

So a profitable organization will never, ever go bankrupt in human history?

Originally posted by dirtsniffer


Uhh, pretty sure CMCH generates about 1 billion a year for the country.

Off $562B of coverage.

I don't think I have to tell you what happen if we go thru a US style adjustment.

[CapnCrunch]

Originally posted by Xtrema


So a profitable organization will never, ever go bankrupt in human history?



Off $562B of coverage.

A 15% adjustment of the market will wipe out 84 years of profit from CMHC.

A 15% adjustment won't do a thing to CMHC unless you assume that every single insured mortgage will suddenly default.

The US market dropped 30% and didn't even hit a 3% default rate.

Take your head out of your ass.

[Xtrema]

Originally posted by CapnCrunch


A 15% adjustment won't do a thing to CMHC unless you assume that every single insured mortgage will suddenly default.

The US market dropped 30% and didn't even hit a 3% default rate.

Take your head out of your ass.

So 17 years?

Don't get me wrong, I think CMHC should exist. And it's a great organization to have when interest was in 7-8% and help people build equity starting out.

Now, in this heated market, we should scale back it's exposure. It doesn't directly contribute to the bubble but it's not stopping it either.

If a house averages @ $500K, $700K is still 40% above average and reasonable. Not $1M.

[ercchry]

i also want to say if you default, cmhc will still try and collect from you

[BerserkerCatSplat]

Originally posted by ercchry
i also want to say if you default, cmhc will still try and collect from you

Exactly, CMHC isn't some get-out-of-jail-free card. It does essentially nothing for the buyer but allow them to qualify for a mortgage earlier than usual - it insures the bank, not the homeowner.

[CapnCrunch]

Originally posted by Xtrema


So 17 years?

I'd prefer it if you took it out of your ass now, but I'll accept 17 years.

[Xtrema]

Originally posted by BerserkerCatSplat


Exactly, CMHC isn't some get-out-of-jail-free card. It does essentially nothing for the buyer but allow them to qualify for a mortgage earlier than usual - it insures the bank, not the homeowner.

You can't squeeze blood out of stone. If someone defaults, he's on the streets and living off other social programs. CMHC will never see a dime.

[BerserkerCatSplat]

Originally posted by Xtrema


You can't squeeze blood out of stone. If someone defaults, he's on the streets and living off other social programs. CMHC will never see a dime.

CMHC would only try to recover the difference between sale price and outstanding loan, they're not out the entire mortgage value. That's no different than how it works with a mortgage where the CMHC is uninvolved.

[Xtrema]

Originally posted by BerserkerCatSplat


CMHC would only try to recover the difference between sale price and outstanding loan, they're not out the entire mortgage value. That's no different than how it works with a mortgage where the CMHC is uninvolved.

I think we went down this road many times before and in many threads. The risk isn't a random Joe lost their jobs and defaults. The risk is a huge 2008 style recession and we have no more tools to get of it and have European style unemployment rate which lead to massive amount of defaults.

The sale price and the outstanding loans gap will widen as problem cascades. Pushing CMHC and Canadian government further into debt, loan rating degraded, interests increases.