Game-Changing CMHC Updates + Rate Cut

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CMHC made several BIG policy announcements on yesterday. Let's dive in.

June 5, 2024

Read Time: 3 minutes

Huge week for multifamily news - and it's mostly positive.

Yesterday, CMHC announced sweeping policy changes that will have a material affect on the multifamily business model.

Then today at 10:30 - rate cut!

It's about time.

Let's dive in, but first...

(did someone forward you this email? Sign up [here](http://www.onmultifamily.com)).

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CMHC Policy Announcements

Yesterday - CMHC unveiled a set of sweeping policy changes. Here's a brief synopsis of each.

1/ MLI for Efficiency is Dead

So if you don't know - MLI Select financing has become option of choice for many in multifamily.

50 year amortizations

95% LTVs

1.1 DSCRs

No brainer.

You get this by agreeing to hold below market rents, making your property accessible, and/or making your building more energy efficient.

99% of owners go for energy efficiency.

Now, efficiency is no longer a (strong) option.

(won't get you max points)

2/ No More Equity Takeout Provisions

Since May 2020 - CMHC has mandated that when you refinance - any equity takeout must be used exclusively to reinvestment in the subject building, or in another multifamily project.

This is silly, and almost impossible to enforce.

This is gone.

More importantly - there was a provision that restricted CMHC being used to takeout bridge loans (i.e. things like VTBs). Now CMHC is happy to take out your bridge loan (even if not from a CMHC approved lender).

Excellent.

3/ Non-CMHC Approved Lenders are Cut

Brokers who are not "CMHC approved" will no longer be able to liaise directly with CMHC.

AKA you can no longer use smaller shops. You now have to go through Kingsett, Peakhill, FN, ICI etc.

Unfortunate for the smaller brokers.

Final comment - CMHC only sends these updates to approved lenders... But they're a gov't organization. Makes absolutely no sense.

They should be transparent about policy changes.

Rate Cut

Bank of Canada cuts to 4.75%, and confirms that should inflation stay low, more cuts will follow - implying first of more cuts to come.

How will this impact our Ontario multifamily market?

Technically - this announcement was priced in. The Canada Mortgage Bond (CMB) - which forms the basis for CMHC financing - is based on forward looking projections rather than the actually bank rate itself.

That said - our impression is that many buyers have been waiting for a rate cut before taking action. Now - with clear evidence that we're moving in the right direction - we think purchasers will be more invigorated.

Time will tell.

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