Insurable Housing Loan Regulations — 6
Low ratio loans 6 (1) A low ratio loan must meet the following criteria: (a) the loan agreement must establish scheduled principal and interest payments that will begin reducing the outstanding principal in accordance with the overall amortization schedule agreed to at the making of the loan, commencing on (i) the day on which the loan is funded, (ii) the day on which the agreement of purchase and sale closes, or (iii) the day on which the improvement, conversion or development of the eligible residential property is completed; (b) [Repealed, SOR/2017-271, s. 2] (c) if the loan is part of a pool of loans on the direct basis of which marketable securities are issued, any securities issued on the direct basis of the pool after July 1, 2016 must be guaranteed under subsection 14(1) of the Act; (d) if the loan is not part of a pool of loans on the direct basis of which marketable securities are issued, (i) the loan must be insured on an individual basis on either the day on which it is funded or the day on which additional money is advanced to the borrower as part of the loan’s refinancing, (ii) for any given day, for at least one day in the six-month period prior to that day, the loan must have been part of a pool of loans that meets the criterion set out in paragraph (c) or have not been insured, (iii) the loan must have been in arrears, have been insured when it fell into arrears and since remained insured, and, as a result, not be eligible to be part of a pool of loans, (iv) the loan must belong for insurance purposes to a portfolio of loans with the Corporation and at least 95% of all portfolio insured loans of the lender with the Corporation must meet the criterion set out in paragraph (c) or subparagraph (ii) or (iii), or (v) the loan must be held or will be held in a registered retirement savings plan or a registered retirement income fund of (A) any partnership that does not deal at arm’s length, within the meaning of section 251 of the Income Tax Act , with the borrower, or (B) a connected person , as defined in subsection 4901(2) of the Income Tax Regulations , to the borrower; (e) the purpose of the loan must either (i) include the purchase of the eligible residential property against which it is secured, or (ii) be the discharge of the outstanding balance of a prior low ratio loan; (f) the outstanding balance of the loan at any time over the term of the loan is not to be increased to exceed the balance that would have been outstanding at that time under the lender’s original amortization schedule; (g) the amortization schedule is not to be extended over the term of the loan and is not to exceed (i) if the loan is for the purchase of the eligible residential property against which it is secured, 25 years, or (ii) if the loan is for the discharge of the outstanding balance of a prior low ratio loan, the lesser of 25 years and the remaining amortization period of the prior low ratio loan; (h) at either the time of the initial approval of the loan by an approved lender or discharge of the outstanding balance of a prior low ratio loan by the approved lender, the value of the eligible residential property against which it is insured must be less than $1,000,000; (i) if the loan agreement allows for fluctuations in the amortization period as a result of a variable rate of interest during the term of the loan, the loan payment must be recalculated at least once every five years to conform to the lender’s original amortization schedule; (j) at the time of the mortgage or hypothecary insurance application, at least one of its borrowers or guarantors must have a credit score that is greater than or equal to 600; (k) at the time of the approved lender’s initial approval of the loan or discharge of the outstanding balance of a prior low ratio loan, as the case may be, the gross debt service ratio and total debt service ratio must not exceed 39% and 44%, respectively; (l) at the time of the approved lender’s initial approval of the