NOT THE ONLY GAME IN TOWN
December 3 2012 Posted by Mary Poburan
The majority of Canadian mortgages are insured either because they are required to be due to less than 20% down or because the lenders themselves back-end insure the mortgages for their investors(more to come on this topic next week). Did you know that in Canada we now have 3 insurers? The most commonly referred to insurer is CMHC.Almost everyone knows that this is the major player in insuring many of today’s mortgages. There are however 2 more players in the Canadian marketplace. Although used somewhat interchangeably there are some distinct differences.
1) CMHC… is Canada’s national housing agency. Established as a government-owned corporation in 1946 to address Canada’s post-war housing shortage, the agency has grown into a major national institution. CMHC is Canada’s premier provider of mortgage loan insurance. CMHC offers 100% protection to the lender in the event of default. As a crown corporation however, any shortfall in a loss incurred as a result of a claim will haunt you forever. CMHC has the ability to garnish wages, gst credits, etc. until the debt is repaid in full. The guidelines set out by CMHC take precedence over lenders policies therefore a preapproval will not necessarily guarantee you an approval through CMHC if they consider excessive mitigating risk that they are not comfortable with.
2) Genworth… Canada's largest private mortgage insurer with a history dating back to 1995.Genworth Canada is the brand name of Genworth Financial Mortgage Insurance Company Canada, a subsidiary of Genworth MI Canada Inc. (TSE:MIC). Also known as "The Homeownership Company," they provide mortgage default insurance to residential mortgage lenders that enables Canadians to own a home more affordably and stay in their homes during difficult financial times. As a private insurer, they will only insure 90% of the mortgage for lenders. Given that risk of default is low, lenders are willing to include a percentage of Genworth nsured mortgages in their portfolio.Their policies, although similar to CMHC are varied and allow for insurance on properties and borrowers that would otherwise be exempt. For example, Genworth looks at self employed individuls, new to Canada clients, rental properties and age–restricted buildings differntly than does CMHC. Most lenders will use both CMHC and Genworth as their main insurers to allow for different policy fits.
3) Canada Guaranty… Since entering the market in 2010, Canada Guaranty has successfully established a number of strong relationships and continues to build new partnerships throughout the industry. As the only 100% Canadian-owned private mortgage insurer, they are committed to delivering service excellence and improved solutions to support lenders and borrowers alike. As the newest player in town they are looking to build market share. Only a handful of lenders have come on board and now use all 3 insurers so it is critical to have access to a broker who has access to each insurer and lender so that the best chance of approval is available.
Although the premiums and cost are identical with all 3 insurers, the differences will come from the finer points of the deal. Only working with an experienced professional Broker will allow you to have access to the right insurer based on your individual situation. Don’t pigeonhole yourself with just one lender or one insurer. There is a world of choice out there!
