CMHC said No - What Now?

[selewis]

Hey all.

We just ran into our first refusal by CMHC.

We currently own 10 income properties (all duplexes, triplexes, or fourplexes), plus our personal residence.

For the first time, even though the lender we normally use was positive toward the deal, CMHC said no. Current property is a duplex, was working on 5% down, 95% financed.

Any help would be appreciated.

What are CMHC`s guidelines for turning down a deal? Our mortgage broker is trying to get more details. So far we have been told something about "high risk." Does that mean that we have too many mortgages where the value of the property does not exceeed the mortgage by enough of an amount? Is my salary too low? (We did have one lender refuse to lend to us recently because they were concerned that my annual salary "was not enough to cover all of the properties if they were all empty at the same time." geesh!) Wondering what CMHC`s criteria is. Have they tightened the reins since the economic downturn?

Our mortgage broker is going to submit our current deal to a couple of lenders that use Genworth. But this "no" from CMHC was a surprise to us.

If we have to go back to 20% down it will mean a significant slow-down in the number of properties we can purchase. Last year we bought four. We were hoping to have two or three before April this year. Have two in the works, as well as a third one we were just about to put an offer on. But with this refusal, we`re not sure how to proceed.

Where do we go next?

Any ideas would be much appreciated.

Signed,
Needing Help In Ontario!!

 

[Noel]

QUOTE (selewis @ Feb 20 2009, 12:05 PM) Hey all.

We just ran into our first refusal by CMHC.

We currently own 10 income properties (all duplexes, triplexes, or fourplexes), plus our personal residence.

For the first time, even though the lender we normally use was positive toward the deal, CMHC said no. Current property is a duplex, was working on 5% down, 95% financed.

Any help would be appreciated.

What are CMHC`s guidelines for turning down a deal? Our mortgage broker is trying to get more details. So far we have been told something aout "high risk." Does that mean that we have too many mortgages where the value of the property does not exceeed the mortgage by enough of an amount? Is my salary too low? (We did have one lender refuse to lend to us recently because they were concerned that my annual salary "was not enough to cover all of the properties if they were all empty at the same time." geesh!) Wondering what CMHC`s criteria is. Have they tightened the reins since the economic downturn?

Our mortgage broker is going to submit our current deal to a couple of lenders that use Genworth. But this "no" from CMHC was a surprise to us.

If we have to go back to 20% down it will mean a significant slow-down in the number of properties we can purchase. Last year we bought four. We were hoping to have two or three before April this year. Have two in the works, as well as a third one we were just about to put an offer on. But with this refusal, we`re not sure how to proceed.

Where do we go next?

Any ideas would be much appreciated.

Signed,
Needing Help In Ontario!!

Try calling them directly 1-888-go-emili. You may have reached a ceiling on their products.

How many properties do you have a high ratio mortgage on?

 

[Cargren]

We ran into the same obstacle recently, and were told that CMHC has a cap on how much they will insure with any one person. Apparently its around the $1,500,000. They insured our last purchase (we were doing 10% on our deals) but told us that they would not do any more and that if the deal we were presenting to them was any higher in value they would not have approved it.

 

[selewis]

Currently of our 11 properties, only 6 are CMHC insured. The rest are conventional. The present value of the six loans with CMHC is about 730k.

 

[David90]

It could be that they are scared of the 95% LTV with house prices falling slightly, you could end up in a negative equity situation. Maybe try financing at 85% LTV. Will your property even cashflow at 95% LTV?

 

[selewis]

Cashflow is excellent on this property (and all my properties). This deal is a duplex for only $105,000, with two 3-bedroom units in it. It will cashflow at whatever ratio I use.

I am simply trying to spread my down payment money out over more properties, thus using the smallest down payment possible. Otherwise I will need to slow down my purchases - which I didn`t want to do.

 

[selewis]

actually... my mistake.... only 5 are CMHC insured for a total of about 590k. this isn`t making sense to me.

 

[PeterKinchMortgageTeam]

QUOTE (selewis @ Feb 20 2009, 01:12 PM) actually... my mistake.... only 5 are CMHC insured for a total of about 590k. this isn`y making sense to me.

There isn`t really a dollar amount up to which they`ll lend - though they are more inclined at 90% than 95%....... When you have more than a few high ratio rentals, CMHC really starts to look at the worst case scenario - what if several units are empty? Can they afford to make all those mortgage payments? What if property values continue to decrease and the cumulative portfolio LTV is high?

The difference between a yes and a no on the high ratio deals is in the liquid assets. If you are in a position with signifigant liquid assets (ie cash, RRSPs, investments etc....), CMHC will more likely say yes. If your liquid assets are limited, and you`d have a tough time if you had vanancies, the answer will probably be no.

 

[Thomas Beyer]

QUOTE (CanadianMortgageTeam @ Feb 20 2009, 01:34 PM)
There isn't really a dollar amount up to which they'll lend - though they are more inclined at 90% than 95%....... ...

The difference between a yes and a no on the high ratio deals is in the liquid assets. ...


indeed .... find out: WHY !



We have probably $30M worth of CMHC mortgages (all multi's though ..) .. so it maybe

a) cash

b) high ratio

c) DCR's

d) your net worth vs. the mortgage amount

e) vacancies

f) value drop on existing, CMHC insured assets

 

[Cargren]

QUOTE (selewis @ Feb 20 2009, 01:30 PM) Currently of our 11 properties, only 6 are CMHC insured. The rest are conventional. The present value of the six loans with CMHC is about 730k.

This sounds about right. It was around $1,500,000 with two of us qualifying.

 

[RedlineBrett]

Can`t find a different insurer? What about a lender that uses Genworth or AIG?

 

[kboughen]

QUOTE (selewis @ Feb 20 2009, 02:05 PM) We just ran into our first refusal by CMHC.
CMHC has been turning down rental deals, even when all their published guidelines are being met. A common reason I am hearing is that they are uncomfortable with multiple purchases by one applicant within a "short period" of time. These declines are at their discretion, they are definitely tightening up. You can go to Genworth, but unfortunately they don`t use an 80% offset on your portfolio properties, so it is much harder to qualify with them when you have a portfolio. They also have a max LTV of 90% on rentals.

Conventional purchases with VTB, JV partners or RSP seconds are becoming even more important strategies to grow your portfolio.

 

[AndyLuchies]

selewis, I apologize in advance for hijacking your post, but I have a quick related question: how do you go about getting 95% financing on your property? Is this a simple high ratio mortgage with CMHC? (I heard that 95% LTV with CMHC was pretty much unheard of--pardon the pun).



QUOTE (selewis @ Feb 20 2009, 02:05 PM) Hey all.

We just ran into our first refusal by CMHC.

We currently own 10 income properties (all duplexes, triplexes, or fourplexes), plus our personal residence.

For the first time, even though the lender we normally use was positive toward the deal, CMHC said no. Current property is a duplex, was working on 5% down, 95% financed.

Any help would be appreciated.

What are CMHC`s guidelines for turning down a deal? Our mortgage broker is trying to get more details. So far we have been told something about "high risk." Does that mean that we have too many mortgages where the value of the property does not exceeed the mortgage by enough of an amount? Is my salary too low? (We did have one lender refuse to lend to us recently because they were concerned that my annual salary "was not enough to cover all of the properties if they were all empty at the same time." geesh!) Wondering what CMHC`s criteria is. Have they tightened the reins since the economic downturn?

Our mortgage broker is going to submit our current deal to a couple of lenders that use Genworth. But this "no" from CMHC was a surprise to us.

If we have to go back to 20% down it will mean a significant slow-down in the number of properties we can purchase. Last year we bought four. We were hoping to have two or three before April this year. Have two in the works, as well as a third one we were just about to put an offer on. But with this refusal, we`re not sure how to proceed.

Where do we go next?

Any ideas would be much appreciated.

Signed,
Needing Help In Ontario!!

 

[Thomas Beyer]

QUOTE (jessandy @ Feb 21 2009, 04:37 AM) selewis, I apologize in advance for hijacking your post, but I have a quick related question: how do you go about getting 95% financing on your property? Is this a simple high ratio mortgage with CMHC? (I heard that 95% LTV with CMHC was pretty much unheard of--pardon the pun).
yes .. up to 95% with CMHC .. or 90% with privately insured lenders such as Genworth .. ask a mortgage broker .. they`d know all lenders which go over 80% .. as 80% is the Canadian Bank Act maximum, above that private insurance is required !

 

[kboughen]

QUOTE (jessandy @ Feb 21 2009, 06:37 AM) how do you go about getting 95% financing on your property?
CMHC has a 95% program for rental properties with unique qualifications and pricing. More information can be found here;

http://www.cmhc-schl.gc.ca/en/hoficlincl/m...me-Property.pdf

Even though CMHC offers this, not all Lenders do. An independent mortgage broker specializing with investment properties will be able to put a plan together for you. Feel free to contact me with other questions.

 

[RobMacdonald]

Financing properties at 95% LTV simply cannot be your #1 strategy to creating a rental property. CMHC and any lender that offers the program will eventually decline the application. There is just not enough equity in the property and the other insured properties for their comfort level. There are limits to eveything. If you or your lender contact CMHC, they probably will provide an alternative. It might be a lower LTV, but they will ususally provide an option.

Genworth and AIG could both be an option, but there programs are much more difficult to qualify for.

For residential financing, times definitley have changed. We`ve seen continual tightening in lending practice right across the country. In order to get your application approved, you need to fully understand what your options are today, and how that will affect your long term plan.

 

[Thomas Beyer]

QUOTE (RobMacdonaldCMT @ Feb 21 2009, 09:27 AM)
Financing properties at 95% LTV simply cannot be your #1 strategy to creating a rental property. CMHC and any lender that offers the program will eventually decline the application. ...



For residential financing, times definitley have changed. We've seen continual tightening in lending practice right across the country. ...


indeed ..



another related post here .. from a few months ago, on a more difficult lending environment:



http://myreinspace.com/public_forums/Real_Estate_Discussion/62-6908-More_difficult_lending_environment_.html

 

[selewis]

QUOTE (jessandy @ Feb 21 2009, 06:37 AM) selewis, I apologize in advance for hijacking your post, but I have a quick related question: how do you go about getting 95% financing on your property? Is this a simple high ratio mortgage with CMHC? (I heard that 95% LTV with CMHC was pretty much unheard of--pardon the pun).

CMHC will insure 95% LTV for single family or duplex properties. once you hit triplex, it drops to 90% max. although, as i have found out, even though their guidelines allow for 95%, it is not too comfortable for them in the current economy.

 

[Nir]

QUOTE (selewis @ Feb 21 2009, 11:17 AM) CMHC will insure 95% LTV for single family or duplex properties. once you hit triplex, it drops to 90% max. although, as i have found out, even though their guidelines allow for 95%, it is not too comfortable for them in the current economy.

Wow, 10 properties! can`t you retire (or just take a break, travel, do something you really like)?

I would at least consider that – No one is expecting us to be like Thomas Beyer

 

[selewis]

QUOTE (investmart @ Feb 21 2009, 04:05 PM) Wow, 10 properties! can`t you retire (or just take a break, travel, do something you really like)?

I would at least consider that – No one is expecting us to be like Thomas Beyer

LOL. thanks for the encouragement. on paper, cash flow from these 10 properties should support us. but that assumes no m&r, no vacancies and no delinquent tenants. unfortunately all three of the above come with the territory sometimes. so we`ll put off any big travel plans for now. and while we`re waiting, we`ll try to purchase more properties!