Ottawa's move to increase by $50-billion the amount of residential mortgages it will back through Genworth and Canada Guaranty may ultimately accrue to the benefit of alternative clients, suggest some brokers.
"The maximum outstanding insured exposure for private insured mortgages will be increased from $250 billion to $300 billion," reports the larger of those two private default insurance providers. "The current risk premium is being replaced by a risk fee payable by the company to the federal government equal to 2.25 percent of gross premiums written."
The move effectively deepens the bulk insurance pockets of both Genworth and Canada Guaranty, and could, argue some channel veterans, encourage the insurers to provide more of those funds to lenders looking to minimize their conventional lending exposure.
Ostensibly, that could work to the advantage of brokers finding it increasingly difficult to arrange loans for self-employed clients, said one mortgage broker Wednesday. He points to last year's pullback by several lenders when the government announced it would keep CMHC's $600-billion cap in place.
In fact, Genworth may, in fact, already benefited from that decision, which effectively limited lender access to portfolio insurance.
“There is plenty of runway." said Genworth CEO Brian Hurley last spring, pointing to the insurer's willingness and, indeed, its ability to write new bulk insurance business.
Genworth, including Canada Guaranty, will collectively tap into the government-backed fund now capped at $300 billion – and not the CMHC’s $600 billion pool, now nearing its lending limit.
But all lenders are themselves working with new, tighter guidelines from the Office of the Superintendent of Financial Institutions, likely to act as a limiting factor for many BFS deals -- high ratio or otherwise.