CMHC changes its mortgage loan insurance underwriting practices – Business News – .

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CMHC changes its mortgage loan insurance underwriting practices – Business News – .


The Canadian Press – | History: 339023

Canada Mortgage and Housing Corporation says it is restoring last summer’s underwriting practices for mortgage default insurance because some changes it made were not effective and caused it to lose shares Steps.

The Federal Housing Agency says that as of today it has reverted to reviewing a gross debt service ratio of up to 39% and a total debt service ratio of up to 44%. % for borrowers with a strong history of managing payment obligations.

Gross debt service refers to the maximum amount of gross annual income that can be used for house-related expenses like mortgages, heating, or condominium fees, while total debt service is calculated when these expenses are combined with monthly debt payments owed on items such as credit cards or cars.

The agency says it will now also require at least one borrower or guarantor seeking insurance to have a credit score of 600 or more.

Last July, CMHC demanded a minimum credit score of at least 680 and limited the gross and total debt service ratios to 35 and 42 percent respectively, which it said would reduce purchasing power by as much as at 11%.

These measures were intended to protect homebuyers, reduce risk to government and taxpayers, and support stable housing markets while reducing excess demand and unsustainable price growth during the COVID-19 pandemic.

However, CMHC now says the changes were not as effective as they had expected and that it has experienced a decline in its market share, prompting it to revert to pre-pandemic policies.

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