History of Mortgage Rules Changes
By RateSpy Staff on March 25, 2018
The most extraordinary thing about Canadian real estate is how it has shrugged off rule change after rule change in the mortgage market.
We’ve seen governments impose over 60 housing finance restrictions since 2008, the height of the global credit crisis. These policies shrank the number of qualified borrowers and inflated mortgage costs. And yet, far from collapse, the market is up 64% since the changes began.
Here is some of what the government has thrown at the mortgage market over the last decade. We’ll add major new mortgage rules to this list as they’re announced.
History of Mortgage Rule Changes in Canada from 2008 to 2019
|Year||Month||Entity||Rule Change||The Details|
|2008||July||Department of Finance||Amortization reduction||The maximum amortization period is shortened from 40 years to 35 years.|
|2008||July||Department of Finance||Minimum down payment||The requirement for a 5% minimum down payment is established.|
|2008||July||Department of Finance||New loan documentation standards||New minimum documentation requirements are introduced. Lenders are required to ensure sufficient evidence of a property’s value and the borrower’s sources and level of income.|
|2008||July||Department of Finance||Establishment of minimum credit score||The new rules establish a credit score floor of 620, but allow for some limited exceptions.|
|2010||February||Department of Finance||Qualification change for terms under 5 years||Variable and fixed rate mortgages with terms less than five years are required to be qualified using the 5-year posted rate (qualifying rate).|
|2010||February||Department of Finance||Reduction of insured refinancing||The maximum amount for insured refinances is reduced to 90% from 95%.|
|2010||February||Department of Finance||Rental property down payments||A 20% down payment is implemented for small rental properties.|
|2011||January||Department of Finance||Amortization reduction||The maximum amortization period is shortened to 30 years from 35 years on insured mortgages.|
|2011||January||Department of Finance||Reduction of insured refinancing||The maximum amount for insured refinances is reduced to 85% from 90%.|
|2011||January||Department of Finance||HELOC insurance removal||Home Equity Lines of Credit (HELOCs) no longer qualify for government mortgage insurance.
This rule took effect on April 18, 2011.
|2012||June||OSFI||Reduction of insured refinancing||The maximum amount for insured refinances is reduced to 80% from 85%.|
|2012||June||OSFI||Mortgage insurance restriction||The government announces mortgages of more than $1 million are no longer eligible to be default-insured.|
|2012||June||OSFI||Amortization reduction||The maximum amortization period is shortened to 25 years from 30 years on insured mortgages.|
|2012||June||OSFI||Minimum credit scores||New gross debt service (GDS) and total debt service (TDS) limits of 39% and 44%, respectively, are implemented for borrowers with a credit score of 680+.|
|2013||August||CMHC||Securitization changes||CMHC introduces a new allocation procedure for market NHA-MBS. Issuers are required to file quarterly allocation requests as the new procedure is determined quarterly based on available capacity for new guarantees.|
|2013||August||OSFI||Securitization changes||OSFI announces that federally regulated lenders who securitize mortgages to third-party investors will be granted off-balance sheet treatment.
This allows OSFI-regulated lenders to increase their origination capacity.
|2013||November||CMHC||Insurance changes||CMHC announces it will start paying a risk fee of 3.25% of all insurance premiums written, as well as 0.10% of bulk, portfolio, and low-LTV insurance premiums.
The change took effect January 1, 2014.
|2015||December||CMHC||CMHC changes to securitization program||CMHC announces changes to its securitization programs (NHA-MBS and Canada Mortgage Bond):
|2015||December||Department of Finance||Minimum down payment changes||The government announces that for homes priced above $500,000, a 10% down payment is required for the portion of the mortgage above the half-million mark.
The rule took effect February 15, 2016.
|2016||April||OSFI||OSFI capital requirement changes||OSFI releases proposed changes to its regulatory capital requirements for mortgages. The new requirements introduce risk-sensitive floors on capital for mortgages and apply to new originations, renewals and refinances.|
|2016||July||B.C. Government||B.C. Foreign Buyers Tax||The British Columbia government announces new housing measures, the most notable being the introduction of a 15% foreign buyers tax.
The tax is applicable on real estate purchases by foreign nationals or foreign-controlled corporations within the Greater Vancouver Area.
|2016||September||OSFI||OSFI capital requirement changes||OSFI releases its draft advisory regarding revised capital requirements for mortgage insurers, which came into effect January 1, 2017.
The new requirements increased the amount
of capital required to be held by mortgage insurers due to more drivers involved in the required capital formula. Some of the key determinants of the new capital requirements are:
|2016||October||Department of Finance||Mortgage qualification change||All high-ratio insured mortgages must now be stress tested using the 5-year posted rate (qualification rate).
This came into effect October 17, 2016.
|2016||October||Department of Finance||Elimination of low-LTV insurance for certain mortgages||The Government of Canada eliminates the availability of low-LTV insurance for certain types of mortgages (e.g., borrowers taking equity out of their home; mortgages with amortization periods over 25 years; home purchase prices over $1 million; borrowers with credit scores under 600; investment properties, etc.).
Low-LTV mortgages must also meet the same eligibility requirements as high-LTV mortgages.
This took effect November 30, 2016.
|2016||October||Department of Finance||Capital gains exemptions||The government introduces a principal residence capital gains exemption. Any individual who was not a resident in Canada in the year the property was acquired will no longer be able to claim the exemption. Effective October 2, 2016, taxpayers claiming the exemption must also file the claim through the CRA (previously documents were only produced if audited).|
|2016||October||Department of Finance||Mortgage insurer-lender risk sharing exploration||The government launches a public consultation on the potential to introduce some form of mortgage insurer-lender risk sharing. A consultation paper was released in late October 2016.|
|2016||November||Ontario Government||Ontario government’s land tax rebate changes||The Ontario government proposes to double the maximum Land Transfer Tax refund for eligible first-time homebuyers to $4,000, effective January 1, 2017.|
|2016||November||City of Vancouver||Vancouver vacant homes tax||Vancouver city council approves a 1% tax on vacant homes that are not principal residences or are not rented for at least six months of the year. The tax was implemented in 2017 with the first payments due in 2018. Home owners are required to self-report vacant homes.|
|2016||December||B.C. Government||Vancouver first-time homebuyers assistance||The B.C. government announces the B.C. Home Owner Mortgage and Equity (HOME) Partnership program. The program aims to assist first-time homebuyers by matching the buyer’s down payment contribution to an amount up to 5% of the home’s purchase price (maximum purchase price of $750k). The matching contribution comes in the form of a 25-year second mortgage, which is interest-free and payment-free for the first five years.|
|2017||January||CMHC||CMHC fee increases||New OSFI Capital Requirements for Federally Regulated Mortgage Insurers takes effect January 1. Soon after, CMHC announces premium price increases for borrowers with down payments between 5% and 25%, effective March 17, 2017. These mortgage insurance price increases reflect OSFI’s significantly higher capital requirements for mortgage insurers. The price changes represented an approximate 12%–15% increase to high-LTV mortgage insurance. Genworth MI Canada and Canada Guaranty followed suit and matched CMHC’s price increases.|
|2017||April||CMHC||CMHC introduces new fee||CMHC introduces a 0.01% administration fee that will be assessed against a portion of an issuer’s unused NHA-MBS guarantee allocations beyond a specified threshold.|
|2017||April||Ontario Government||Ontario announced Fair Housing Plan||The Ontario government announces the “Fair Housing Plan” that includes measures to cool the housing market, contain rent increases, curb speculative practices and increase housing supply. The two key changes implemented included a 15% foreign buyer’s tax and an expansion rent controls.
The measures took effect immediately.
|2017||October/td>||OSFI||OSFI announces final B-20 guidelines||OSFI unveils its final B-20 guidelines regarding residential mortgage underwriting practices and procedures for federally regulated financial institutions. It includes a new stress test that would require potential borrowers to qualify for underwriting using the higher of their contracted mortgage rate + 200 bps or the 5-year benchmark fixed rate published by the Bank of Canada.|
|2017||October/td>||OSFI||OSFI announces final B-20 guidelines||As part of OSFI’s final B-20 guidelines, federally regulated financial institutions are disallowed from arranging (or appearing to arrange) a mortgage or combination of mortgages secured by the same property that would circumvent the maximum LTV ratio as defined in a lender’s underwriting policies or legal requirements.|
|2017||October/td>||OSFI||OSFI announces final B-20 guidelines||Finally, OSFI’s new B-20 guidelines introduce greater due diligence, including: intended use of loan (e.g., purchase, refinancing), type of purchase (owner-occupied, recreational, investment,
etc.), and type of refinancing (if applicable).
|2017||November/td>||B.C. Government||Vancouver unveils 10-year housing strategy||Vancouver releases its 10-year Vancouver Housing Strategy and three-year action plan in November 2017, which includes references to a desire to introduce and/or work with other levels of government to potentially introduce more changes to the housing market (e.g., tax reform relating to real estate, restrict property ownership by non-permanent residents, etc.).|
|2018||January/td>||OSFI||New Stress Test Begins||OSFI’s uninsured mortgage stress test begins January 1.|
Sources: Department of Finance, CMHC, RBC, BMO, National Bank