Feds stop backing 40 year, no money down mortgages

In a move that is meant to shield the Canadian housing market and mortgage industry from some of the mistakes made leading to the US housing crisis, the Canadian Federal Government will only back loans will a maximum amortization period of no more than 35 years. Also, to receive a government backed mortgages one will need a 5% down payment. On top of these, according to a Department of Finance press release, a minimum credit score requirement and new loan document standards are to be put in place in an attempt to protect Canadians and the Canadian economy.

According to a ReportonBusiness.com article Canada Mortgage and Housing Corporation (a crown agency) supports the move. Another ROB article points out that the three private mortgage insurers operating in Canada (who have 90% of their loans backed by the federal government, when CMHC has 100% backing) will also be impacted by this move. The same article predicts a rush by mortgage brokers and purchasers to have houses purchased and mortgages in place before the rules come into effect this October 15th.