Oh how times are a’changing for mortgage insurance!
It used to be that if you needed a mortgage and didn’t have enough of a down payment, you could get mortgage insurance fairly easily. You could get it from the Ottawa mortgage insurance Crown corporation, CMHC, or you could go to either of Canada’s other two private insurance mortgage insurers. Most banks and borrowers chose to work with CMHC, as they were guaranteed as a Crown company. Meanwhile, Canada Guaranty, suffered after its parent company, American International Group, hurt their reputation. Now though, CMHC is coming dangerously close to hitting their $6 billion cap on mortgage insurance, and lenders and borrowers are forced to look at different options. Enter in Canada Guaranty.
Even with the struggles it’s had to face in recent history, Canada Guaranty is now the third-largest private mortgage insurer in Canada and currently, they hold about 5% of the market share. However, as options start to wane and people are forced to consider their options, they could soon be one of the largest. And one of the reasons for it is that Canada Guaranty is stepping up its supply of portfolio insurance for banks. This insurance is applied to an entire group of uninsured mortgages, making it easier for banks to secure them and possibly turn them into bonds, which increases their ability to lend. Portfolio insurance is generally something that’s only offered to good customers, and so this looks good on the bank and thus, allows Canada Guaranty to shine. Shine they are, and it’s caused many major banks to make the switch to Canada Guaranty, if they weren’t working with the company already.
The Bank of Nova Scotia agreed just last week to start insuring their Oakville mortgages and other Canadian mortgages through Canada Guaranty, while Bank of Montreal has been working with the company since last year; and CIBC may be the biggest bank with the longest history with the company, already being a customer of Canada Guaranty’s for several years.
Who ever thought that Ottawa saying “No” to increasing CMHC’s mortgage insurance cap would be so beneficial to everyone? Andrew Charles, chief executive offer of Canada Guaranty, summed it up nicely by saying, “Those market implications have served to reinforce to lenders that diversifying the amount of suppliers you have is critical.”
Now they have, and it seems that everyone’s a winner because of it.
