The Canada Mortgage and Housing Corporation remains the country’s only mortgage insurer fully guaranteed by the federal government after private insurers’ attempts to increase their 90 percent guarantee failed to make the 2009 budget.
“Lenders are under pressure to obtain the strongest possible assurances on their credit enhancement, and the 10% difference between the CMHC and Genworth Financial has impacted lender decision-making” said Peter Vukanovich, president of Genworth Financial Canada.
Finance minister Jim Flaherty said the government will “move forward to make mortgage insurance more transparent, understandable and affordable” through greater disclosure to borrowers, but didn’t mention boosting private insurers’ guarantees to match the CMHC’s.
“We believe increased competition has greatly benefited the Canadian market and has resulted in a number of positive changes within the mortgage default market, including more affordable premiums and the elimination of almost all mortgage insurance application fees”, said Andy Charles, president and CEO of AIG United Guarantee Mortgage Insurance Company.
Vukanovich said a full guarantee by the government would not be akin to a private industry bailout because the probability of a default on Genworth’s behalf is remote, and the insurer also has approximately $1.5 billion in assets for potential future claims payment.
What does this mean for consumers, lenders, and brokers? “As a consequence, over time, both consumers and lenders will have less choice, fewer products, and less price competition if this imbalance is not corrected.” Your Calgary and Southern Alberta MBN Mortgage Specialist can discuss these implications in more detail and help you understand how it affects you as a homebuyer.
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