Private insurer picks up CMHC slack

The private insurers continue to win a larger piece of the mortgage default insurance pie following CMHC’s program cuts, with one major insurer reporting strong second quarter earnings.

Private insurer picks up CMHC slack
The private insurers continue to win a larger piece of the mortgage default insurance pie following CMHC’s program cuts, with one major insurer reporting strong second quarter earnings.

"Strong business execution led to solid top line growth and our high quality insurance portfolio supported our trend of lower losses," Brian Hurley, chairman and chief executive officer for Genworth Canada said in an official release. "The business performance combined with the stable economic climate continues to drive our positive momentum."

Genworth reported $97 million net income for the second quarter of 2014 and a net operating income of $99 million. Overall, premiums written increased 17 per cent of prior year in both high and low LTV mortgage segments.

The results follow months of speculation about the potential for growth among the two major private mortgage insurers, Genworth and Canada Guaranty, since Canada’s largest provider, CMHC, made a number of moves to slash its offerings.

CMHC announced it will nix its loan insurance for the financing of multi-unit condo construction and that it will align its low-ratio product with its high-ratio insurance by implementing maximum house prices, amortization periods and debt servicing ratios, effective July 31.

“The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC,” an official release from the crown corporation reads. “They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance, as noted in Economic Action Plan 2014.”

The news had brokers wondering how much of the slack the private insurers would pick up.

“I think the goal is to eventually have the private insurers take over a larger market share,” Andrew Libby of The Mortgage Makers told MortgageBrokerNews.ca in early June.

Related:

OECD calls for CMHC cuts
Brokers: CMHC refocus is misguided