CMHC’s bulk insurance fund stood at a virtual standstill last year as the government clawed back on lender access to that portfolio insurance, making it harder for brokers to secure financing for clients.
“CMHC’s strong underwriting practices and sound mortgage loan insurance portfolio are reflected in the 2012 results,” writes the Crown corporation in its 2012 annual report. “The total insurance in force, which represents the aggregate exposure of the mortgage loan insurance activity, stood at $566 billion as at December 31, 2012, virtually unchanged from the beginning of the year, and within CMHC’s $600 billion limit.”
While CMHC is lauding the development – or lack thereof – some brokers are less sure. They point to the challenges many have had in winning low-ratio mortgages at some lender as those banks and non-banks found their access to mortgage insurance for those conventional loans restricted.
The government decided to ration lender use of the $600B fund last year as a way of slowing the market and lessening the threat of household debt. But the result was that many lenders, who had used the bulk insurance to then securitize mortgages and sell them to investors, decided to shrink their lending in that area.
The move meant some investors found the business-for-self programs they had relied on to win mortgages had disappeared. For those options that remained many lenders decided to then charge borrowers for mortgage insurance as a way of covering their costs but also allowing them to continue selling those mortgages and so get them off their books.
But many lenders have now returned to lending in that arena, turning to the country’s other mortgage insurers for bulk insurance.
So, ultimately, say brokers, CMHC’s loss in that business line has been to the gain of its competitors, Genworth
and Canada Guaranty.