stated-income CMHC has felt for a while that too many people apply for stated income mortgages who shouldn’t.

Therefore, effective April 9, CMHC is adding more restrictions to its Self-Employed stated income product..

For one thing, it’s reducing the maximum allowable loan-to-value

Self-employed borrowers who choose to apply under this program, and not verify their income using traditional means, will have to put down 10% when purchasing a home (instead of 5% today).

Stated income applicants who wish to refinance will be limited to 85% loan-to-value (instead of 90% today).

CMHC says:

  • The Self-Employed program is intended for self-employed borrowers “who have difficulty providing documentation for their current income level.” These are often people who’ve recently begun to work for themselves.
  • Self-employed borrowers in the same business for over three years will no longer be eligible for approval without traditional proof of income.
  • A business license, GST license, or articles of incorporation will be required to validate the applicant’s length of self-employment.
  • Commissioned employees are no longer eligible for approval under the Self-Employed program.

As insurers pull back further from the stated income market, some expect uninsured lenders to eventually fill the void.  Self-employed borrowers, with hard-to document income, will then pay notably higher rates and fees as a result of using such programs.