As the COVID-19 pandemic continues to significantly impact and present new risks and concerns, CMHC has announced changes to its insurance underwriting relating to multi-unit residential properties. Starting on Thursday, May 28th Canada Mortgage and Housing Corporation (CMHC) announced that they have implemented a new restriction on the use of funds as a condition of insurance for market refinance loans.
Meaning that the use of refinance proceeds are now limited to one or more of the following purposes as it relates to residential housing:
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Purchases
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Construction
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Capital repairs/improvements, including for increased energy efficiency and accessibility; or,
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Securing permanent financing (take-out financing to pay off a short-term construction loan)
There may be other uses that can be permitted but they’ll be assessed on a case- by-case basis. However, under no circumstance will equity take-out or distributions to shareholders be permitted.
According to CMHC, this new restriction is being implemented to “address specific concerns surrounding the pandemic and the uncertainty and risks that this brings. The immediate suspension of refinancing for equity take-out was necessary to prevent front running of this policy change in the context of already increased volumes.”
Following the new guidelines, all new applications and ones that been submitted but haven’t been assigned to an underwriter for review will be subject to this new restriction.