Measures taken by the federal government and CMHC to counter the economic effects of COVID-19

On March 16, the Government of Canada, through Canada Mortgage and Housing Corporation (“CMHC”), launched a revised version of the Insured Mortgage Purchase Program (“IMPP”), under which the government committed to purchase $50 billion in mortgage pools insured by CMHC. The goal is to provide stable financing to banks and mortgage lenders to ensure the continuity of lending to Canadian consumers and businesses. On March 26, CMHC expanded the IMPP to $150 billion.

CMHC’s purchase of these loan blocks will provide the banks with additional funds, which they can then use to make new loans to help businesses and other borrowers. In context, this is excellent news for the Canadian real estate market. These measures will enable Canadian banks to lend more, and thus facilitate economic recovery once the crisis is over.

This measure is in addition to several already initiated by the federal government on March 13 to support the economy and the financial sector. This will ensure the smooth functioning of markets and continued access to financing for Canadian businesses during the COVID-19 crisis, including the following measures:

  • 10 billion in financial support via a business credit program offered through BDC and EDC
  • a relaxation by the Office of the Superintendent of Financial Institutions (OSFI) of the stability reserve requirements for domestic systemically important banks
  • a new mechanism for acquiring bankers’ acceptances
  • expanding the scope of the Government of Canada bond buyback program to inject liquidity into markets and support the pricing process
  • the key interest rate was lowered for the third time in March 2020, to 0.25%; as of the date hereof, a number of Canadian banks have already followed suit, setting their prime rate in Canada at 2.45%.

COVID-19 mortgage deferral program

Homeowners who are unable to make their next mortgage payment due to job loss or reduced working hours can request a deferral of their mortgage payments at any time during the pandemic.

This agreement, between the homeowner and their lender, allows mortgage payments to be deferred until the end of the agreement. Deferred payments do not lapse, and must be made by the end of the agreement. Increased interest on deferred amounts is added to the principal balance then due. The deferral agreement applies only to mortgage payments and not to other related payments, such as property taxes or life/disability insurance premiums, which must be made at all times when due.

CMHC recommends that homeowners contact their financial institution to make arrangements. You can also talk to your legal advisor about commercial real estate issues.

By Nicolas Lanthier

Photo credit: Freepik

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