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Expert: Treat mortgage insurers the same

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Guest | 20 Jun 2012, 08:03 PM Agree 0

In an interview with the Macdonald-Laurier Institute, Londerville, a professor at the University of Guelph, said the government guarantee of 90 per cent of the value of mortgages insured by private firms compared to 100 per cent of those insured by the CMHC was a “troubling distortion.”
While Londerville, who has an MBA from Harvard, praised Canada’s prudent lending criteria she said the current gap in insurance has resulted in an uneven playing field.
“Particularly during the financial crisis, we saw that CMHC continued to write mortgage insurance while there was a drop-off in what the banks sent to the leading private insurer, Genworth Financial Canada, because banks were so tight on capital that the extra capital reserves they had to hold to cover even that 10 per cent guarantee gap made a substantial difference to them,” she said.
Londerville called for the government to give all insurers the same level of protection.
“Either all participants should be at 100 per cent guarantee, or zero guarantee, or something in between. It could be the 90 per cent private firms now get, if the mortgage insurance portion of CMHC was spun off,” she said. “Such a change would mean more competition in the mortgage insurance business.”
She said the imbalance was evident in CMHCs 70 per cent of the market of mortgage insurance, the lion’s share not accounted for by differences in services provided by CMHC versus its competitors.
Londerville wrote a 2010 paper for MLI suggesting the government put CMHC under the supervision of the Office of the Superintended of Financial Institutions; change federal legislation for covered bonds and close the insurance gap between private lenders and the CMHC.
  • Carol Selinger | 21 Jun 2012, 06:49 PM Agree 0
    I recently ran across reverse discrimination by the Government-I am a Real estate Associate based in Edmointon,Alberta-many years experience-I personally have a condo listed for sale-age restriction-18 years or over-except the main floor of this 4 storey building allows families to buy or rent-my personal unit is on the top level-I have owned it for approx 11 years-as a rental unit-perfect building for young working professionals or seniors whom want peace and quiet-another associate from a different real estate company brought an offer from a purchaser-approx 60 to 65 years old-5% down payment----perfect client for the building-----guess what--she was approved by her bank----but was turned down by CMHC because our building had an age restriction on it---------she has since purchased -in a hurry-a unit in another substandard building---no elevators,no underground parking, and a building with no age restrictions---that building has had many assessment problems, not to mention the problems with all their noisy tenants----etc--------now isn't this called reverse discrimination by the CMHC-the very Government who sets the rules about no discrimination due to color,race,age,etc?????????
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