Canada's First-Time Home Buyer's Incentive launching on September 2
An overview of the incentive and relevant details for real estate solicitors
The First-Time Home Buyer's Incentive is schedule to be launched in the beginning of September, 2019.
A first time home buyer is defined as:
(a) someone who has never purchased a home before;
(b) has not occupied a home owned by either themselves or their spouse in the last 4 years; or
(c) has gone through a breakdown of a common law relationship.
Potential buyers could qualify for the program even if they have owned a home before. Only traditional down-payment sources qualify applicants for approval. The program outlines income criteria, debt ratio and property type that would be applicable. Lenders work with purchasers during the application process and lawyers secure the funds, which First Canadian Title, as administrator for advancements, will be responsible for, and attend to the necessary registration with the applicable province's land registry system, and final reporting.
Impact on Users of RealtiWeb
We are in contact with CMHC, the Program Administrator for the First Time Home Buyer’s Incentive. As soon as they make documents and/or further instructions available, we will update RealtiWeb if necessary.
Policy Manual & Information Relevant to Solicitors
The Government of Canada has produced a Policy Manual, including details that may be relevant to solicitors acting on these transactions.
Here are some excerpts from the manual.
6.4. Incentive Closing Instructions
The lender must direct the closing lawyer to contact First Canadian Title (FCT), whom is acting on behalf of the Program Administrator to request the advancement of the Incentive. The closing instructions for the Incentive must include the following:
“Your client is participating in Canada’s First Time Home Buyer’s Incentive (FTHBI) Program. You will be required to complete a mortgage on behalf of CMHC and in order to receive instructions you must contact FCT immediately at FTHBIncentive@fct.ca or 1-(833)-974-0963 with the FTHBI identification number ___________ and approved amount ___________. Failure to contact FCT may result in funds not being available on closing.”
6.5. Incentive Advancing
The Incentive will be advanced at time of closing of the insured first mortgage.
In the case of a new construction progress advance, the Incentive will be advanced following the contribution of the borrower’s down payment, all insured first mortgage draws have been made, and the home is 100% complete.
6.7. Minimum Documentation and Retention Requirements
Lenders must adhere to the minimum documentation and retention requirements set out by Lenders and the respective Mortgage Loan Insurer’s policies. In addition to minimum documentation requirements set out by the respective Mortgage Loan Insurer’s policies, lenders must also obtain and retain on file Canada’s FTHBI Program Attestation, Consent & Privacy Notice document.
Documentation must be retrievable (directly or indirectly) using the Mortgage Loan Insurer reference number and made available to Program Administrator upon request.
7.1. Mortgage Assumption, Release and/or Replacement of Covenant
A mortgage assumption or release and/or replacement of a covenant where title to the property remains with at least one of the original borrowers does not automatically trigger repayment of the Incentive. Notwithstanding the foregoing, in the case of the death of the original borrower(s), the spouse or child is permitted to assume the obligations under the Incentive without triggering a repayment.
In order to effect a change of a covenant to the Incentive, the borrower must contact the Program Administrator and provide documentation to support the change of covenant from the first ranking mortgage. It will also be incumbent on the borrower to make the necessary arrangements with their lawyer to receive instructions from the Program Administrator on the preparation of the necessary agreement (e.g. assumption agreement or release of covenant) and to coordinate its execution.
It is recommend that all borrower(s) obtain independent legal advice when considering a change of covenant. The borrower will pay any costs associated with a change of covenant.
In effecting a release and/or replacement of covenant, the Lender and/or Mortgage Loan Insurer’s respective underwriting policies must be adhered to, as applicable.