Expanded low-ratio mortgage insurance eligibility

Summary#

These are the final Regulations Amending the Eligible Mortgage Loan Regulations (SOR/2020-296). They temporarily relaxed some rules so more low‑loan‑to‑value mortgages could get government‑guaranteed insurance, effective retroactively from March 20, 2020 through December 31, 2020.

What it does#

• Temporarily loosens eligibility rules for low‑ratio mortgages (those with loan‑to‑value at or below 80%) so they could qualify for government‑backed insurance.
• Specifically allows, for eligible loans funded before March 20, 2020 and with insurance applications received between March 24, 2020 and December 31, 2020:
  • amortization schedules up to 30 years from funding,
  • insurance where the loan’s purpose is purchase, renewal (discharge/renewal), or refinancing.
• Keeps all other normal eligibility rules in place.
• Also restates older grandfathering rules for low‑ratio loans tied to earlier dates: before October 15, 2008, between October 15, 2008 and April 17, 2011, and before July 1, 2016.
• The amendments were made retroactive to March 20, 2020.

Who's affected#

• Banks and mortgage lenders who wanted to buy insurance for existing low‑ratio mortgage pools so they could sell or securitize those loans.
• Canada Mortgage and Housing Corporation (CMHC) and private mortgage insurers, because more loans became eligible for government‑guaranteed insurance and securitization programs.
• Investors who buy mortgage‑backed securities, since these rules supported the creation and sale of insured mortgage pools.
• Homeowners with low‑ratio mortgages funded before March 20, 2020 who sought refinancing, renewal, or insurance during the March 24–December 31, 2020 window.
• Office of the Superintendent of Financial Institutions (OSFI) and other regulators overseeing compliance.
  If it’s unclear whether a specific mortgage qualifies, lenders or insurers would need to check the exact dates and conditions in the rules.

Why it matters#

• The changes were a short‑term, targeted step to keep mortgage funding flowing during the COVID‑19 market shock. They let lenders get government‑guaranteed insurance on more loans so those loans could be packaged or sold, supporting liquidity.
• That in turn helped lenders continue to offer mortgages and refinancing options to consumers during the crisis.
• The government’s backing reduces funding risk: CMHC obligations are backed 100% by the government, and the government also backs private insurers subject to a 10% deductible charged to the lender. This is why expanding eligibility matters for market stability.
• These were temporary emergency measures that expired on December 31, 2020, returning eligibility to the pre‑change rules.