From Canada News Centre -



The Department of Finance today announced that it would change some of the
rules for high-ratio mortgages, and that “these requirements will apply to
all government-backed mortgage insurance policies (whether issued by CMHC or
private insurers) for high-ratio mortgages on residential properties with up
to four units.”

Here are some highlights of the changes:

1. Maximum amortization reduced to 35 years for new government-backed
mortgages.

2. Minimum 5% down payment for new government-backed mortgages. Borrowers
may borrow their 5% down payment, but it will not be insured under the new
guarantee framework.

3. New credit score floor of 620 for new government-backed mortgages. There
will also be limited exceptions to this rule, recognizing that there are
some borrowers with credit scores below 620 that otherwise represent a low
credit risk.

4. Minimum loan documentation standards “to ensure that there is evidence of
reasonableness of property value and of the borrower’s sources and level of
income.” The Department of Finance’s announcements today did not elaborate
on this point.

5. No government guarantee for high-ratio mortgages where no amortization is
required in the first few years. This includes high-ratio mortgages that
begin with “interest-only” payments and HELOCs.

6. Maximum of 45% on borrowers’ TDS ratio for new government-backed
mortgages.

These changes are slated to take effect on October 15, 2008. There is still
a limited time for you to put your clients into zero down or 40-year
products, if you so choose. Current 90-day pre-approvals would not be
affected. Exceptions would be allowed after October 15th where they are
needed to satisfy a binding purchase and sale, financing, or refinancing
agreement entered into before October 15, 2008. Canadians who already hold
mortgages will not be affected by these changes.

The Department of Finance stated that “today's announcement marks a
responsible and measured approach by the government to ensure Canada's
housing market remains strong and to reduce the risk of a U.S.-style housing
bubble developing in Canada.” It also noted that mortgage arrears in Canada
have remained low in recent years.

Here is the link to the Department of Finance announcement:
http://news.gc.ca/web/view/en/index.jsp?articleid=409769&categoryid=16