Private insurers won’t reflect CMHC rules
June 19, 2020
Canada’s private mortgage insurers, Genworth Canada and Canada Guaranty, have confirmed they will not be following the lead of Canada Mortgage and Housing Corp. (CMHC) in tightening underwriting policies.
“Genworth MI Canada Inc. confirms that it has no plans to change its underwriting policy related to debt service ratio limits, minimum credit score and down payment requirements,” the company said in a release.
Similarly, Canada Guaranty said it “confirms that no changes to underwriting policy are contemplated as a result of recent industry announcements.”
CMHC’s new mortgage rules become effective July 1 for those purchasing a home with less than a 20 per cent down payment.
CMHC’s mortgage rule changes lowered the maximum debt service ratio to 35 per cent and maximum total debt service to 42 per cent.
The minimum credit score needed to qualify will rise to 680 (from 600) for at least one household borrower. Also, homebuyers are now allowed to borrow money required for a down payment.
“We acknowledge the potential ‘pro-cyclical’ negative impacts on housing markets of CMHC’s decision to tighten underwriting,” CMHC CEO Evan Siddall wrote in response to criticism. “However, the benefits of preventing over-borrowing far exceed these costs. Not acting also exposes young families to the tragic prospect of foreclosure.”
In explaining its contrary decision, Genworth Canada president and CEO Stuart Levings said the company’s current underwriting policies for insured mortgages already allow it to “prudently” manage its risk exposure.