Low-ratio Insured Loan Exemptions

Summary#

The final rule Regulations Amending the Insurable Housing Loan Regulations: SOR/2020-297 updates who is exempt from certain rules for “low ratio” insured housing loans. The changes are retroactive — the regulations are deemed to have come into force on March 20, 2020. The instrument was registered on December 22, 2020 and published in the Canada Gazette, Part II on January 6, 2021.

What it does#

• Replaces Section 8 of the Insurable Housing Loan Regulations to list several time-based exemptions for low ratio loans.
• Creates these specific exemptions:
  • Loans with an insurance application received before October 15, 2008 are exempt if they meet the insurance product terms that were offered before that date.
  • Loans with an insurance application received between October 15, 2008 and April 17, 2011 are exempt from a particular underwriting criterion (paragraph 6(1)(a)).
  • Loans with an insurance application received before July 1, 2016 are exempt from another underwriting requirement (paragraph 6(1)(d)), unless the application was denied or the loan stopped being insured.
  • For loans with an insurance application received between March 24, 2020 and December 31, 2020, several criteria (paragraphs 6(1)(e) to (g)) do not apply if all of these are true:
    • the loan was funded before March 20, 2020;
    • the loan’s purpose includes the purchase of the secured property, paying off a prior low ratio loan, or refinancing a loan secured by eligible residential property;
    • the amortization schedule does not exceed 30 years from the funding date;
    • the Corporation received the insurance application during March 24, 2020 to December 31, 2020.
• States the amendments are deemed to have come into force on March 20, 2020.

Who's affected#

• Mortgage lenders and brokers that submit housing loan insurance applications during the listed time windows.
• Borrowers whose mortgages are classified as “low ratio” and whose loans were funded around the dates above — especially loans funded before March 20, 2020.
• The insurer referenced in the regulations (the “Corporation”) and any parties that manage or insure portfolios of insured loans.
• If it is unclear whether a particular loan fits these categories, the source text should be consulted or the insurer contacted.

Why it matters#

• These amendments preserve older insurance rules for certain mortgages tied to specific application dates. That can let some loans qualify for mortgage insurance even if later rules would have excluded them.
• The retroactive start date (March 20, 2020) means the change affects decisions and loans made earlier in the COVID‑19 period. That could influence refinancing, payoff of prior low ratio loans, and lenders’ ability to get insurance on affected loans.
• For borrowers, the change could affect whether a lender is willing or able to insure a mortgage, which in turn can affect interest rates, loan availability, or the ability to refinance.