Advisories
Advisory 11
Appraisal Requirements On Transferred Mortgages
We have noted a number of instances identified
in examination reports where credit unions have
accepted a transfer of a residential mortgage loan
from another financial institution and the loan
was subsequently identified as being irregular because
it was not supported by a real estate appraisal.
While CMHC insured mortgages do not require the
support of an appraisal, conventional mortgages
being transferred from other financial institutions
require a real estate evaluation in order to satisfy
the requirements of both the Nova Scotia Credit
Union Act and its Regulations, as well as the credit
union's own loan policy. Section 16(4) of the Regulations
specifically limits non CMHC insured mortgages to
75% of the fair market value of the property at
the time that the mortgage loan is granted. This
provision, contained in the Regulations, cannot
be overridden and the Corporation does not have
the ability to grant any exception to a credit union's
loan policy which would permit an advance greater
than 75% of the fair market value of the residential
property.
If a credit union encounters a situation where
a transfer of a residential mortgage from another
financial institution is being considered and a
real estate appraisal is not available, the Corporation
will consider granting an exception to the credit
union's loan policy, provided the mortgage balance
is within 75% of the currently assessed value of
the property. If an exception is approved by CUDIC,
the loan file must be documented with the following:
- A copy of the current property tax assessment.
- A recent photo of the residential home.
Should the balance of the mortgage loan being considered
exceed 75% of the property tax assessment, it will
be necessary to obtain a market appraisal and the
mortgage balance must be contained within 75% of
that value prior to being advanced.
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