Independent insurers to take advantage of CMHC's risk fee?

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CMHC increased its risk fee to 3.25 per cent last week and one broker believes Canada’s independent insurers – and the brokers who deal with them – are poised to take advantage.

 “A lot of lenders aren’t signed up with Canada Guaranty and Genworth but those who are may benefit,” Drew Donaldson of Verico Safebridge Financial told MortgageBrokerNews.ca. “Those who are signed up with all three would benefit if the two others hold off for a while because it’ll cost the client less so brokers would be more inclined to go with Genworth or Canada Guaranty.”

However, Donaldson isn’t sure how long the window of opportunity will be open.

“From what I understand the independent insurers are holding off but I expect them to follow suit eventually,” Donaldson said. “I hope they don’t.”

Sylvie Crispo, VP of insurance product and business development at CMHC, sent a letter to broker offices Wednesday breaking the news that a risk fee of 3.25 per cent will come into effect on January 1, 2014, applicable to all premiums written and payable to the federal government.

For now, Donaldson believes Canada Guaranty and Genworth have the advantage over CMHC; brokers who deal with lenders who work with all three may be more inclined to work with the private lenders – who haven’t yet hiked their risk fees.

 “Long-term everything will get straightened out but in the short term you may see some lenders and even some brokers benefitting by using (Canada Guaranty or Genworth).”

However, the issue may go deeper than the two private lenders’ plans for future risk fees. With a lack of competition, Donaldson sees no reason for the two private lenders to not follow the status quo.

“I think it’s kind of a given that if CMHC does it the other two will follow suit; if CMHC is doing it, there’s no way they won’t,” he said. “I’d like some other players to come into the market to create more competition.”

  • Dale on 2013-12-09 9:55:31 AM

    So lets ask our Finance Minister? CMHC is a "very profitable" company for the government.
    Our minister and the B of C talk of personal debt rising to very high levels. Why is it that "THEY" the government want to put us further in debt? Seems contradictory, plus with limited competition...which the government states they want to see...the other two insurers will likely follow immediately on the heels of CMHC and raise to increase profit margins.

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