The client
A household in Midland bought a $385,000 home at 10% down, carrying a $4,200 Employment Insurance overpayment from a prior claim, referred to a collection agency and showing on the bureau as a government debt.
Purchase price
$385,000, Midland
10% down, insured
EI overpayment balance
$4,200
Referred to a collection agency; not registered against any property
Combined income
$7,700/month
Other debt
$245/mo car loan
The problem
A bureau file can show a government-debt collection account without any indication of whether that debt carries a registered claim against real property. A CRA tax certificate can be registered as a lien; an Employment Insurance overpayment has no such mechanism.
What the first lender got backwards
- ▸The EI overpayment showed on the bureau as a government debt, referred to a collection agency
- ▸The first lender's underwriter treated it exactly like a CRA tax lien and demanded a title discharge statement
- ▸No such document exists for an EI overpayment, because nothing had ever been registered against the property to discharge
The file stalled for weeks on a document nobody could ever produce, for a debt that had never touched the title at all.
The numbers
Once the EI overpayment was paid out from savings, the ratios themselves were never close to a problem.
| The insured purchase, correctly classified | Amount |
|---|---|
| Base mortgage (90% of purchase price) | $346,500 |
| CMHC premium (3.10% at 90% LTV) | +$10,742 |
| Total insured mortgage | $357,242 |
| Ratio check at the qualifying rate | Figure |
|---|---|
| Payment at the qualifying rate (6.95%), 25 years | $2,491/mo |
| GDS (payment + $300 tax + $120 heat) ÷ $7,700 income | 37.8% |
| TDS (GDS numerator + $245 car loan) ÷ $7,700 income | 41.0% |
37.8% and 41.0% sit comfortably inside CMHC's 39% GDS and 44% TDS maximums, well within the range household debt service ratios typically run across Canada. The ratios were never the obstacle on this file -- the misclassification of the debt was.
The solution
A mortgage agent licensed under Ontario's Mortgage Brokerages, Lenders and Administrators Act separated what the EI overpayment actually was, legally, from what the first lender's underwriter assumed it was.
First, confirmed in writing with Service Canada and the collection agency that the overpayment carried no registered claim against the property. There was no title interest to discharge because none had ever been created.
Second, paid the $4,200 balance out in full from savings, ahead of closing, and obtained the collection agency's written confirmation that the account was settled.
Third, moved the file to a lender whose underwriter correctly read a government-debt collection account as an ordinary unsecured obligation, with no title implication and no lien-discharge document required.
The outcome
The purchase funded insured at 37.8% GDS and 41.0% TDS, with nothing left to discharge because nothing had ever been registered against the property in the first place.
Both ratios sit comfortably inside CMHC's 39% GDS and 44% TDS maximums; the file was never close to either ceiling once correctly classified.
What to take from this file
- 01A CRA tax certificate and an EI overpayment are not the same kind of debt. Only the former can be registered as a lien against real property; the latter cannot, no matter how it appears on the bureau.
- 02A lien-discharge request for a debt with nothing registered against title is a request no one can satisfy. Recognize the mismatch early, rather than chasing a document that does not exist.
- 03Get written confirmation of exactly what kind of debt is being dealt with, from the actual creditor, before assuming the strictest possible treatment applies.
- 04A small collection balance paid out before closing removes the question entirely. This file's ratios were never the issue -- clearing the confusion about the debt's nature was.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸CMHC — Purchase (Mortgage Loan Insurance) — default-insurance premium schedule by LTV band (25-year amortization).
- ▸CMHC — CMHC Home Start — minimum down payment tiers (5%/10%) and the $1.5M insured price cap.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸4.95% contract rate — rates move daily; not a quote.
- ▸the first lender's lien-discharge request for an EI overpayment — each lender sets its own policy for reading a government-debt collection account; the request applied here does not reflect any published rule about EI overpayments.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.