On November 15, 2024, First National was notified of updates to CMHC’s multi-unit insured mortgage programs. All eight updates come into effect immediately. First National is pleased to provide a detailed description of the changes.
Third-party appraisals are now required for all CMHC submissions. All new loan applications must include appraisals from a qualified appraiser using all three valuation approaches (direct comparison, income, and cost). If you have an active application that has yet to be submitted to CMHC, please contact your First National Advisor and we will work to acquire an Appraisal for you as quickly as possible.
Performance Bonding – or an alternative to bonding – are generally required as a pre-condition to making advances during construction. CMHC has emphasized the importance of bonding requirements for construction projects. With this increased emphasis, however, CMHC has also added some flexibility where alternatives to bonding may be acceptable including letters of credit, collateral security or a reduction of the construction loan amount.
The language for MLI Select applications relating to the potential requirement of Rental Achievement has been refined. When MLI Select was launched, it enabled rental achievement holdbacks to be waived for new construction financing loans. As economic conditions continue to evolve, CMHC has now determined that where rent-up risk is elevated, it should be effectively mitigated. This change implies that rental achievement requirements may become more likely in the event the perception of rent-up risk is elevated.
It is no longer possible for Approved Lenders to also hold an Approved Lender Correspondence Designation. The change further clarifies CMHC’s expectations set out on September 3, 2024 and supports policy compliance. In effect, it means CMHC expects that the originating Approved Lender intends to fund each submitted loan application and clarifies that any brokering of a Certificate of Insurance will require explicit CMHC approval. First National is an Approved Lender and does not hold this secondary status.
In addition to those updates, CMHC:
- Clarified its environmental site contamination policy for construction loans, reiterating that it will accept applications submitted by Approved Lenders for construction financing with known site contamination. Mortgage loan insurance will be conditional on confirmation of a contamination-free site prior to first advance and, in any event, no later than the date set out in the Special Conditions section of the Certificate of Insurance.
- Harmonized how it qualifies interest rates for 10-year term loans with 5-year term loans to ensure consistency in the loan qualification process.
- Shifted accessibility criteria for MLI Select applications to match new industry standards, specifically Canadian Standards Association B651:23 and the Rick Hansen Foundation Accessibility Certification version 4.0.
- Reinforced its expectations of Approved Lenders regarding the commitment to insure/Certificate of Insurance process.
Some key reminders
These updates do not in any way alter the underlying value of using CMHC insured programs and related incentives to achieve your financing goals.
However, they do serve as a reminder of the importance of preparing sound underwriting packages, which has long been a First National specialty as a CMHC Approved Lender.
Also of note, First National does not just rely solely on securitization vehicles to fund multi-unit mortgages. Our diversified funding stack makes us a more useful and we believe Better Lending partner for you.
For more information on this announcement, to discuss a future financing, or to learn more about First National bridge loans that provide breathing room for you to adapt to these recent changes, please contact me.