CMHC Advice No. 275: More Discretion For Approved Lenders Means More Responsibility

With contributions from Nicole Bernt, a summer student at Dale & Lessmann

CMHC Advice No. 275, Updates to CMHC Multi-Unit Mortgage Loan Insurance Policies Regarding Loan Administration Requirements and Due Diligence Responsibilities, became effective on August 5, 2026. CMHC-Approved Lenders which finance multi-unit residential properties should take note of a policy shift designed to ensure more disciplined lending procedures, not only at approval but also during the loan administration/servicing stage.

The most significant risk-related changes in Advice No. 275 relate to MLI Select compliance. Lenders are expected to monitor affordability, energy efficiency and accessibility compliance throughout the servicing period, identify potential deficiencies, engage with borrowers where corrective action is required and, in certain circumstances, escalate issues to CMHC. The revised guidance provides clearer expectations regarding how lenders must respond when non-compliance is identified, including circumstances where immediate reporting to CMHC is required and circumstances where corrective action with the borrower must first be pursued.

Importantly, CMHC has also reiterated that lender compliance will continue to be reviewed through its quality assurance review of lender activities. Where deficiencies are identified, CMHC may require corrective action plans and in cases of persistent deficiencies, may initiate a staged escalation process. For lenders with significant MLI Select portfolios, this serves as a reminder that compliance obligations extend beyond underwriting and continue throughout the servicing period.

Many of the changes introduced by Advice No. 275 can be viewed within a common theme: CMHC is moving away from mandatory processes and toward outcome-focused oversight. Lenders are no longer required to collect and remit property tax payments on behalf of borrowers, but must conduct timely verifications on an ongoing basis. Annual financial statement review requirements have been relaxed for approved loans under $5 million, but there must be an annual assessment of the “financial soundness” of the borrower and any guarantors and beneficial owners. There is discretion to reduce or suspend replacement reserve contributions, provided that the reserve remains adequate having regard to the condition and anticipated needs of the property.

On their face, these changes reduce the administrative burden on lenders, but there is no reduction in lender responsibility. Greater decision-making authority, and corresponding accountability, has been transferred to lenders, so risk management practices and procedures must be capable of identifying issues before they threaten the viability of the project or the insured loan. While risk management practices have always been integral for prudent lenders , these changes require a more active monitoring role. A lender that elects not to collect and remit property taxes must still ensure that property taxes are paid when due. Similarly, Approved Lenders must assess the financial soundness of loan parties and employ sound discretion decisions regarding reserve contributions.

The practical challenge for lenders will be to demonstrate why a particular decision was made. Where a lender exercises discretion, it should expect that CMHC may later ask how that decision was reached and what information supported it. Where affordability non-compliance arises under an MLI Select loan, CMHC expects lenders to engage with the borrower and undertake reasonable efforts to restore compliance before escalating to CMHC. Lenders must be able to prove those efforts if questions later arise regarding the handling of the file.

Although Advice No. 275 contains several technical servicing changes, its broader message is arguably more significant than any individual change. CMHC-Approved Lenders may wish to consider whether their current servicing practices, documentation standards, escalation procedures and MLI Select compliance frameworks are sufficient to demonstrate the level of involvement CMHC expects. The central theme of Advice No. 275 is that CMHC is placing less emphasis on prescribed processes and greater emphasis on a lender's ability to demonstrate sound oversight and decision-making.