CHMC Pulled the Rug on MLI Select Investors
The latest trend in real estate investing in the last year has been the CHMC MLI Select program which allows you to qualify for up to 95% loan-to-value financing on purchases of 5 or more units. I researched this program heavily for my investors and I could never find a way to make it work that made sense; you could not get financing approval from CHMC until 6 months before closing AT MOST. This means that you had to buy the property without approved financing and pray that CHMC would approve your deal. There’s no other way of putting this - many investors have been lied to and now CHMC has significantly restricted this program which means many people are going to get screwed here. if you recently bought multiple single family houses or townhomes hoping that you would qualify for the CHMC MLI Select program, you need to be seriously worried.
Let’s take a look at what happened:
Background
The Canada Mortgage and Housing Corporation (CMHC) has offered the Mortgage Loan Insurance Select (MLI Select) program since March 7, 2022 to support the construction, purchase, and refinancing of purpose-built rental housing with five housing units or more. This approach was instrumental in insuring over 206,000 housing units, amounting to $47 billion in insured volume during the first 3 quarters of 2024 alone.
Benefits of the program include:
Up to 95% LTV financing when affordability, accessibility, and energy efficiency goals were met
Up to 50 year amortization
Loan qualification is based on rental income numbers, not personal qualification
What Just Changed?
Previously, investors could bundle adjacent single-family, semi-detached, and townhouse properties into a single application but at the end of February, CMHC issued a clarification that to qualify for the program, a property must contain at least five housing units in one connected building or on the same legal lot, effectively ended the ability to “bundle” multiple properties next to each other. There’s one brokerage in the GTA that has been heavily advertising the program with over $40M in deals that are no longer going to get financing.
Why Was This Changed?
CMHC claims this is not a policy change but rather a clarification, arguing that bundling smaller properties created complexities in project approvals and was not how the program was intended. While this may be true from an administrative perspective, many in the real estate industry feel blindsided by the sudden shift, as no warning or transition period was provided.
This was a loophole being taken advantage of and a risk that I always highlighted to my investors that asked about and that the program could change at any time. I’m not surprised by the change - I talked to multiple mortgage brokers about this and the submission, review, and approval of a 5 unit package, takes the same amount of time and effort as a 100 unit apartment building.
Why Does This Matter?
For investors, the change has had immediate and severe consequences and many are going to have their financing requests rejected because they are no longer eligible for MLI Select financing. Most deals I saw were never going to get the 95% financing required because they could not hit the affordability, accessibility, and energy efficiency goals required but this effectively ends a relatively new segment of real estate investing.
If you were thinking about buying one of these bundled deals, know that your purchase will not qualify for CHMC MLI Select Financing.
If you already bought one of these deals, I really hope that you made your purchase agreement conditional on receiving CHMC MLI Select financing.
If you’re one of these investors that is going to get screwed by this rule change, contact me and I can put your in touch with mortgage brokers that can package this for traditional mortgage financing, but you need to start now because it is not a slam dunk and is going to take a a lot of work to sort out.
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