CMHC Policy Changes - June 4, 2024

CMHC Market MLI and MLI Select - Amortization

Effective June 19, 2024, CMHC is extending the maximum amortization period at initiation for new construction market projects from 40 years to 50 years. As a note, the main downside to this program versus MLI Select will be that proceeds/advances will be subject to a rental achievement holdback, in addition to more stringent DSC restrictions and higher premiums.

In addition, for the purposes of re-amortization as a default management tool, the maximum amortization period will be extended from 40 years to 50 years for loans approved under Market MLI and up to 55 years for loans approved under MLI Select. This will not apply to applications submitted before June 19, 2024, and limitations of the amortization will not be able to exceed the remaining economic life of the property.

CMHC MLI Select – Energy Efficiency Parameters

Effective June 19, 2024, CMHC will be changing their MLI Select Energy Efficiency criteria system. This change aims to (re)focus the Select qualifications around affordability. The maximum points that can now be achieved utilizing the Energy criteria is reduced from 100 to 50 points.

Under this new MLI Select energy efficiency criteria, 20 points will be allocated for Level 1,35 points for Level 2, and 50 points for Level 3 (from the current allocation of 30 points for Level 1, 50 points for Level 2, and 100 points for Level 3).

This new criteria will not apply to applications submitted before June 19, 2024.

In order to achieve maximum benefits (100 points) under the Select Program, a minimum affordability criteria may now need to implemented. The impacts of this program change are vast, those with plans to develop or refinance purely based on the energy criteria may now have to re-work their proformas and budget to include affordable units or accessible units.

Unless further updates are provided to address what is considered “affordable rents” for cities/locations (with the last update being in 2019), compared to the “older pre June 19, 2024 Select program”, this policy change may ultimately delay new purpose-built rental construction as developers waiting on the sidelines with energy efficiency aspirations may further delay their construction start, as the ultimate impact of having to include affordable units is more up-front equity.  

Allowable Use of Funds

Effective immediately and applied to all applications submitted prior to June 4, 2024, CMHC has removed its special interim measures originally implemented May 2020 limiting the use of refinance funds. It is now allowing in-place (previously) non-approved loans to be repaid with its insured financing proceeds.

This means that non-approved Lenders may now again (provide) bridge loans that are underwritten to a CMHC take-out.

Classifications for existing buildings and new residential structures

Effective immediately, CMHC is introducing greater flexibility in cases where a new construction project is built in the place of a previously existing residential structure, which has been fully demolished. Additionally, clarification has been included as to when existing projects are subject to the new construction energy efficiency qualifying criteria under MLI Select. Further details of this classifications have not yet been provided by CMHC.

Transitional Measures Regarding Environmental Site Contamination

Effective immediately and applied to all applications submitted prior to June 4, 2024, CMHC is currently undergoing a review of its Environment Site Contamination policy with the objective of improving alignment with standard industry practices and ensuring sufficient flexibility to facilitate new purpose-built rental housing supply.

As a transitional measure, CMHC will accept applications submitted by Approved Lenders for construction financing with known site contamination. Mortgage loan insurance approvals will be conditional on confirmation of a contamination-free site prior to first advance and in any event no later than six months from the date of the Certificate of Insurance.

Correspondent Status

Effective September 3, 2024, CMHC has removed the correspondence status to the Lenders, with only Approved Lenders, along with their internal relationships, having the ability to apply to CMHC. The implications of this change may hinder the Borrower’s options and reduces pricing transparency as previous correspondences were known brokerages that were able to canvas the Approved Lender market, collecting bids from several lenders at a time. We continue to work with our existing and trusted lending relationships to navigate CMHC for our clients without any impacts to current operations. If you are seeking information and direction to navigate these CMHC changes or have general questions on CMHC Financing for Multi-Unit properties, contact a member of the Oakbank team.