First National Financial LP

First National comments on key CMHC policy enhancements

  • First National Financial LP

This week, CMHC advised the market of several important policy updates and refinements designed to support multi-unit housing development across Canada. 

These updates may affect your plans as some are retroactive, some come into force this month and one will be implemented in September. Accordingly, it’s best if we connect quickly to assess the impact and plot the best approach for you. 

A high-level view and endorsement

As your advocate, First National shares its views with CMHC. I’m pleased to say that many of these changes are reflective of our recommendations and we believe they offer significant benefits. We summarize the key items below.

Ending equity takeout restrictions on refinancings: Effective June 4th (including for previously submitted but not-yet approved applications), CMHC eliminated a special measure it introduced four years ago (at the height of the pandemic) that limited the use of refinance proceeds. Removing this restriction supports rental housing creation/preservation.

Construction loan underwriting improvements: Effective June 4th (including for previously submitted but not-yet approved applications), CMHC enhanced its definition of what constitutes the term “new construction.” Under a variety of scenarios, sites with existing structures now fit into the new construction classification for underwriting purposes.   

Also effective on June 4th, CMHC began accepting applications for construction financing with known site contamination that can be remediated within six months. This is a transitional measure as CMHC reviews its related policies to ensure sufficient flexibility to support new purpose-built housing supply.

Amortization extension for new construction: Effective June 19, 2024, the maximum amortization period available for new construction projects that qualify for CMHC Market loans is increasing to 50 years from 40 years. We are very supportive of this change as it provides an attractive alternative to MLI Select. Only CMHC Market submissions received from June 19th on can qualify for 50-year amortizations (i.e. this change is not retroactive).

MLI Select scoring system: Effective June 19th, the MLI Select new construction program will award 20, 35 or 50 points for meeting various energy efficiency performance guidelines, versus 30, 50 or 100 previously. This change is intended to encourage greater reliance on MLI Select’s two other categories – affordability and accessibility. 

Use of Lender Correspondents: Effective September 3rd, lender correspondents will no longer have the ability to submit multi-unit MLI Select applications directly to CMHC. This change is intended to reinforce the responsibilities and accountabilities of CMHC Approved Lenders, of which First National is the largest in the Canadian multi-unit property sector. 

How do CMHC’s policy updates affect you?

As is evident, these updates and refinements are extensive. Beyond what I’ve outlined here, our Advisors would be pleased to explain them in more detail and explore how they may affect you going forward.