Questions and Answers about the October 17 Mortgage Rule Changes.

Applying Mortgage Rate Stress Tests to Insured Mortgages

The information in this article applies to all mortgage applications involving high ratio insurance on or after October 17, 2016. Grandfathered loans are not included in this requirement.

Does the Mortgage Rate Stress Test requirement also apply to low ratio insured mortgages?

This article discusses the new requirement for a mortgage stress test that applies only to high ratio insured loans. A document about requirements for low ratio mortgage insurance eligibility is forthcoming, but those rules remain unchanged for now.

What if I have an approved insurance application but have to resubmit it after October 17 with changes?

CHMC will honor the original date of receipt for the application, so long as the borrower and the property remain the same. In that case, the pre-October 17, 2016 rules and risking protocols will still apply.

Do the Mortgage Rate Stress Test requirements apply to loans that take their funding from progress advances, such as purchase plus improvement or construction loans?

As long as the application for insurance comes in before October 17, 2016, the new requirements will not govern the loan even if the advance comes after that date.

Will the new parameters for government guarantees govern mortgage assumption applications?

If a new borrower assumes the same insured mortgage on the same piece of property, then the existing mortgage loan insurance will not change. However, if the original borrower’s covenant will be released as well, the new borrower must show at least as much financial strength as the original borrower showed at approval.

When it comes to grandfathering applications, what constitutes a legally binding commitment?

There are several different documents or agreements that qualify here. If the lender believes that it has a legal commitment to fund a loan, or if the borrower entered into an agreement for purchase and sale that is legally binding, then the application may gain consideration for insurance. The exact determination is only made after the insurer checks the specifics of the agreement or document.

There may will likely be some pushback, to some of these sudden changes. Contact Amansad Financial to get an update on the potential changes or deferrals that may apply. Let us know about your specific situation, and the appropriate recommendation will be provided as to the best course for you. We’ve worked with hundreds of customers across Canada and look forward to helping you as well.

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