Private Mortgage Insurers Opt Not to Match CMHC’s Cuts

Canadian 5 year bond yields markets  -.01 to 1.63.  The spread (obtained by subtracting the bond yield above from the industry average 5 yr rate Published mortgage rate of 3.29) has moved well below  the profit range at 1.66.  If the increase in bond yield continues upward, the spread shrinks, which could prompt interest rates to rise. The range for investor desired profitability is currently a bit lower in the region of 1.75 and 1.95. Investors are currently accepting far below to achieve market share in spring market


Private mortgage insurers opt not to match CMHC’s cuts

TARA PERKINS - REAL ESTATE REPORTER The Globe and Mail  May. 02 2014

Canada’s two private-sector mortgage insurers have decided not to match all of Canada Mortgage and Housing Corp.’s recent product cuts.

Genworth MI Canada sent a letter to banks Friday saying that it will not be making any changes to its standards for self-employed borrowers.

Genworth will, however, tighten its rules for second homes slightly. As of May 30, it will only sell second-home mortgage insurance on homes with one unit in them, rather than two (such as duplexes or a self-enclosed apartment in a house).

Up until now, Genworth has been willing to insure second homes with two units, as long as one of those units was occupied by the mortgage holder or one of their immediate family members.

Canada Mortgage and Housing Corp. (CMHC) said last week that, as of May 30, it will stop insuring mortgages on second homes and will stop offering mortgage insurance to self-employed people who don’t have standard documents to prove their income.

“There will be no amendment to the maximum number of Genworth-insured properties per borrower,” Genworth said in its letter to lenders.

Canada Guaranty, the country’s third-largest mortgage insurer, is similarly limiting its second-home insurance to one unit, but not changing its rules for self-employed borrowers.

Mortgage insurance is mandatory in Canada for federally-licensed lenders when a borrower takes out a mortgage with a down payment of less than 20 per. The insurance pays the bank back if the borrower defaults on their loan.