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CMHC’s HMA. Why Lenders Care

Last week, CMHC’s Housing Market Assessment (HMA) cited “strong evidence” of increased housing risk in Toronto, Calgary, Saskatoon and Regina.

Here’s a visual summary of the insurer’s findings:

Source: CMHC
Source: CMHC


Many don’t realize it, but mortgage lenders take these assessments seriously, and for multiple reasons. For example:

  1. CMHC factors in HMA risk when deciding whether to approve an insured mortgage. While CMHC says its loan eligibility criteria is the same in all markets throughout Canada, it adds: “HMA is considered in emili as a factor which influences the risk of an application…CMHC’s decision to insure a loan is based on an overall risk assessment of the mortgage application. Local market conditions, alongside borrower, property, and loan characteristics influence this overall risk assessment. Applications considered high risk based on a combination of these characteristics may be subject to additional mitigations.” In turn, when CMHC underwrites an application in a higher-risk market, it’s more likely to ask for a physical appraisal, or ask the borrower to put down more money, reduce the loan amount, add a co-borrower, or so on.Housing market FB
  1. Lenders all get their money from someplace, and to the extent they use investor funds, those investors sometimes get edgier about lending in higher-risk markets. This, in turn, leads to incremental guideline tightening and less flow of credit to those areas.
  1. Federal policy-makers are eternally vigilant when it comes to risk warnings, and they rely heavily on CMHC’s research. That, again, can lead to policy tightening, including measures the public doesn’t see. OSFI, for example, can, and has, issued guidance to banks to encourage more conservative lending in high-risk markets.


All this said, if you’re a strong borrower in a higher-risk city, don’t get too worried. The consumers who are most affected are those who are riskier to begin with. That means people whose credit scores are below average, whose debt ratios are above average and who are only putting down the bare minimum. For those folks, good luck with getting those 5% down high-TDS condo purchases financed in Toronto.

TDS refers to “total debt service” ratio.