Default Insurance
If a homeowner wishes to purchase or refinance a residential property and borrow the money form a Canadian financial institution, and the homeowner does not have the minimum down payment funds or equity that is prescribed by regulation, federal and provincial statutes require that the mortgage must be insured against default by the homeowner, thereby protecting the financial institution against potential losses if a default occurs. If a default occurs, and the financial institution is forced to sell the property to repay its mortgage loan, and if the institution suffers a deficiency when it sells the property, the institution may file a claim with the insurer to recover the deficiency that it suffered.
There are currently 3 mortgage default insurers that are licensed to offer such insurance in Canada. All 3 companies’ insurance programs are similar, but with slight differences that relate to geographic location of property and qualifying rules. The only company that offers mortgage default insurance everywhere in Canada, which is mandated by law, is CMHC.
Canada Mortgage And Housing Corporation (“CMHC”)
CMHC is an agency of the Government of Canada that provides mortgage default insurance to financial institutions as well as other housing-related services. CMHC was initially established on January 1, 1946. It was initially named Central Mortgage And Housing Corporation, which was changed to its current name in 1979.
Throughout its history, CMHC has been a prominent vehicle for housing Canadians, enabling the development of communities, the renewal of Canadian cities, providing affordable rental housing and providing inexpensive source of financing. Most Canadians though know it primarily for its mortgage default insurance program.
Genworth Financial Canada (“Genworth”)
Genworth is a publicly traded, private-sector supplier of mortgage default insurance in Canada that has been in existence since 1995. Genworth is part of an international conglomerate that through its various divisions operates in approximately 25 countries and offers personal and commercial insurance products.
Canada Guaranty Mortgage Insurance Company (“Canada Guaranty”)
Canada Guaranty began operation on April 19, 2010 when it acquired AIG United Guaranty Mortgage Insurance Company Canada. Canada Guaranty is owned by a group of investors that is jointly headed by Ontario Teachers’ Pension Plan and National Mortgage Guaranty Holdings, Inc.