Eligible Mortgage Loan Regulations (SOR/2012-281)

Marginal note:Loan for the addition of housing units

• 6.1 (1) A loan for the addition of housing units may meet the following criteria instead of those set out in section 5 or 6:

  • (a) at the time the loan is approved, the borrower must be the owner of the eligible residential property against which the loan is secured;

  • (b) at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which the loan is secured, must be less than or equal to 90% of the estimated value of the eligible residential property after the completion of the improvement, conversion or development that will increase the number of housing units;

  • (c) the portion of the principal amount of the loan that exceeds the outstanding balance, at the time the loan is approved, of any prior loan against the eligible residential property must not exceed the estimated cost to the borrower of the improvement, conversion or development that will increase the number of housing units;

  • (d) the added housing units must not be rented for any period of less than 90 consecutive days;

  • (e) the loan must be scheduled to amortize over a period that does not exceed 30 years;

  • (f) the estimated value of the eligible residential property against which the loan is secured, after the completion of the improvement, conversion or development that will increase the number of housing units, must be less than $2,000,000;

  • (g) the eligible residential property against which the loan is secured must contain at least one housing unit that, at the time the loan is approved, is occupied by the borrower or by a person related to them by marriage, common-law partnership or any legal parent-child relationship and at least one housing unit that will be occupied as such after the completion of the improvement, conversion or development;

  • (h) if the loan agreement allows for fluctuations in the amortization period as a result of a variable rate of interest during the term of the loan, the loan payment must be recalculated at least once every five years to conform to the original amortization schedule;

  • (i) the loan agreement must establish scheduled principal and interest payments that will begin reducing the outstanding principal in accordance with the overall amortization schedule agreed to at the making of the loan, commencing on

    • (i) the day on which the loan is last funded, or

    • (ii) the day on which the improvement, conversion or development of the eligible residential property is completed;

  • (j) at the time the loan is approved, at least one of its borrowers or guarantors must have a credit score that is greater than or equal to 600;

  • (k) at the time the loan is approved, the gross debt service ratio and total debt service ratio must not exceed 39% and 44%, respectively;

  • (l) at the time the loan is approved, it must be reasonably likely to be repaid, having regard to the borrower’s capacity to make the loan payments while paying their other debts and meeting their other obligations over the term of the loan, based on reasonable assumptions as to what the highest loan payment over the term of the loan will be; and

  • (m) if the loan is part of a pool of loans on the direct basis of which marketable securities are issued, those securities must be guaranteed under subsection 14(1) of the National Housing Act.

• Marginal note:Credit score exception

  (2) The criterion set out in paragraph (1)(j) does not apply if no more than 3% of the lender’s high ratio loans and low ratio loans that were approved for insurance and funded during one of the following periods were loans in respect of which no borrower or guarantor had a credit score of at least 600:

  • (a) the first four quarters of the preceding five quarters;

  • (b) the first four quarters of the preceding six quarters; or

  • (c) the first four quarters of the preceding seven quarters.

• Marginal note:Debt service ratio calculations

  (3) For the purposes of paragraph (1)(k), the gross debt service ratio and total debt service ratio are to be calculated using the annual payments, in respect of the loan and any other loan with an equal or prior claim against the eligible residential property, that would be required to conform to the amortization schedule agreed to by the borrower and the lender if the interest rate were the greater of

  • (a) the interest rate set out in the loan agreement plus 2%, and

  • (b) 5.25%.

• Marginal note:Reasonable likelihood of repayment

  (4) A loan does not meet the criterion set out in paragraph (1)(l) unless the mortgage or hypothecary lender or mortgage insurer has made reasonable efforts to verify the borrower’s income and employment status or, if the borrower is self-employed, to assess the plausibility of the income reported by the borrower.

• Marginal note:Non-application — applications before January 15, 2025

  (5) This section applies only to loans in respect of which the mortgage or hypothecary insurance application is received on or after January 15, 2025.

Exceptions

Marginal note:High ratio loans — before October 15, 2008

• 7 (1) The criteria set out in paragraphs 5(1)(a) to (j) do not apply to a high ratio loan that meets the requirements of a mortgage or hypothecary loan insurance product that was offered by a mortgage insurer before October 15, 2008 if, before that date,

  • (a) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan;

  • (b) the lender made a legally binding commitment to make the loan to the borrower; or

  • (c) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

• Marginal note:High ratio loans — October 15, 2008 to April 18, 2010

  (2) The criteria set out in paragraphs 5(1)(a), (b), (c), (d), (h) and (i) do not apply to a high ratio loan if

  • (a) at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which it is secured, is less than or equal to 95% of the value of the eligible residential property;

  • (b) it is scheduled to amortize over a period that does not exceed 35 years; and

  • (c) during the period beginning on October 15, 2008 and ending on April 18, 2010

    • (i) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan,

    • (ii) the lender made a legally binding commitment to make the loan to the borrower, or

    • (iii) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

• Marginal note:High ratio loans — April 19, 2010 to March 17, 2011

  (3) The criteria set out in paragraphs 5(1)(a), (b), (c), (d) and (h) do not apply to a high ratio loan if

  • (a) at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which it is secured, is less than or equal to

    • (i) 95% of the value of the eligible residential property, if the purpose of the loan includes the purchase of that property, and

    • (ii) 90% of the value of the eligible residential property, if the purpose of the loan does not include the purchase of that property;

  • (b) the loan is scheduled to amortize over a period that does not exceed 35 years;

  • (c) the mortgage insurer has calculated the gross debt service ratio and total debt service ratio in accordance with the method set out in subsection 5(3); and

  • (d) during the period beginning on April 19, 2010 and ending on March 17, 2011,

    • (i) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan,

    • (ii) the lender made a legally binding commitment to make the loan to the borrower, or

    • (iii) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

• Marginal note:High ratio loans — March 18, 2011 to June 21, 2012

  (4) The criteria set out in paragraphs 5(1)(a), (b), (c), (d) and (h) do not apply to a high ratio loan if

  • (a) at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which it is secured, is less than or equal to

    • (i) 95% of the value of the eligible residential property, if the purpose of the loan includes the purchase of that property, and

    • (ii) 85% of the value of the eligible residential property, if the purpose of the loan does not include the purchase of that property;

  • (b) the loan is scheduled to amortize over a period that does not exceed 30 years;

  • (c) the mortgage insurer has calculated the gross debt service ratio and total debt service ratio in accordance with the method set out in subsection 5(3); and

  • (d) during the period beginning on March 18, 2011 and ending on June 21, 2012,

    • (i) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan,

    • (ii) the lender made a legally binding commitment to make the loan to the borrower, or

    • (iii) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

• Marginal note:High ratio loans — June 22, 2012 to July 8, 2012

  (5) The criteria set out in paragraphs 5(1)(a), (b), (c), (d) and (h) do not apply to a high ratio loan if

  • (a) the loan meets the criteria set out in paragraphs (4)(a) to (c); and

  • (b) during the period beginning on June 22, 2012 and ending on July 8, 2012, the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan and the loan is funded not later than

    • (i) December 31, 2012, or

    • (ii) June 30, 2013, if it is documented as being scheduled to be funded not later than December 31, 2012 but is delayed due to unforeseen circumstances beyond the borrower’s control.

• Marginal note:High ratio loans — June 22, 2012 to February 14, 2016

  (6) The criterion set out in paragraph 5(1)(a) does not apply to a high ratio loan if, at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which it is secured, is less than or equal to 95% of the value of the eligible residential property and

  • (a) during the period beginning on June 22, 2012 and ending on July 8, 2012, the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan and the loan was not funded in accordance with paragraph (5)(b);

  • (b) during the period beginning on July 9, 2012 and ending on December 10, 2015

    • (i) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan,

    • (ii) the lender made a legally binding commitment to make the loan to the borrower, or

    • (iii) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured; or

  • (c) during the period beginning on December 11, 2015 and ending on February 14, 2016, the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan and the loan is funded not later than

    • (i) July 1, 2016, or

    • (ii) December 31, 2016, if it is documented as being scheduled to be funded not later than July 1, 2016 but is delayed due to unforeseen circumstances beyond the borrower’s control.

Marginal note:Low ratio loans — before October 15, 2008

• 8 (1) The criterion set out in paragraph 6(1)(a) does not apply to a low ratio loan in respect of which the mortgage insurer received a mortgage or hypothecary insurance application before October 15, 2008 if it meets the requirements of a mortgage or hypothecary loan insurance product that was offered by the mortgage insurer before that date.

• Marginal note:Low ratio loans — October 15, 2008 to April 17, 2011

  (2) The criterion set out in paragraph 6(1)(a) does not apply to a low ratio loan in respect of which the mortgage insurer received a mortgage or hypothecary insurance application during the period beginning on October 15, 2008 and ending on April 17, 2011.

• Marginal note:Low ratio loans — before July 1, 2016

  (3) The criterion set out in paragraph 6(1)(d) does not apply to a low ratio loan if the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan — or in respect of the portfolio of loans to which the loan will belong for insurance purposes — before July 1, 2016, unless the application has been denied or the loan has ceased to be insured under insurance resulting from the application.

• Marginal note:Low ratio loans — March 24, 2020 to December 31, 2020

  (4) The criteria set out in paragraphs 6(1)(e) to (g) do not apply to a low ratio loan if

  • (a) the loan was funded before March 20, 2020;

  • (b) the purpose of the loan

    • (i) includes the purchase of the eligible residential property against which it is secured,

    • (ii) is the discharge of the outstanding balance of a prior low ratio loan, or

    • (iii) is the refinancing of a loan that is secured by an eligible residential property;

  • (c) the amortization schedule is not to exceed 30 years from the day on which the loan was funded; and

  • (d) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan – or in respect of the portfolio of loans to which the loan will belong for insurance purposes – during the period beginning on March 24, 2020 and ending on December 31, 2020.

Transitional Provisions

Marginal note:High ratio loans

• 9 (1) A high ratio loan is to be governed by these Regulations as they read on October 16, 2016 if, on any day before October 17, 2016,

  • (a) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan;

  • (b) the lender made a legally binding commitment to make the loan to the borrower; or

  • (c) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

• Marginal note:Low ratio loans

  (2) A low ratio loan is to be governed by these Regulations as they read on October 16, 2016

  • (a) if, on any day before November 29, 2016,

    • (i) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan,

    • (ii) the lender made a legally binding commitment to make the loan to the borrower, or

    • (iii) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured; and

  • (b) if the condition referred to in paragraph (a) was met on or after October 17, 2016, the loan is funded not later than

    • (i) April 30, 2017, or

    • (ii) October 31, 2017, if the loan is documented as being scheduled to be funded not later than April 30, 2017 but was delayed due to unforeseen circumstances beyond the borrower’s control.