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Mortgage Insurance (also known as Default Insurance)


Mortgage insurance is necessary when someone purchases a property with less than 25% of the value of the property as a down payment. For example as a First Time Home Buyer you could still purchase a house with only 5% down payment. However, to make this purchase happen, the financial institution will require you to have the mortgage insured with one of the mortgage insurer companies available in Canada – see their profiles below.

Since the financial institution would be taking a greater risk in extending a mortgage to someone who has 5, 10, 15 or even 20% as down payment on their purchase, they want to make sure that if the person defaults (does not pay) on their mortgage payments, they get the mortgage insured so that the mortgage insurance company can pay them their loss if they have to foreclose (reclaim) the property.


Here are the three Mortgage Insurance Company available in Canada:

Canada Guaranty

On April 16, 2010, a Canadian private investor group, comprised of the Ontario Teachers’ Pension Plan and National Mortgage Guaranty Holdings Inc., acquired AIG United Guaranty Mortgage Insurance Company Canada. This transaction created the only 100% Canadian-owned private mortgage insurance company, known as Canada Guaranty Mortgage Insurance Company (“Canada Guaranty”). www.canadaguaranty.ca

Canada Mortgage and Housing Corporation(a.k.a. CMHC)

In 2011, Canada Mortgage and Housing Corporation celebrated 65 years of service to Canadians and is a federal crown corporation. It all began with the National Housing Act, introduced in 1944,which consolidates all housing legislation and gives the federal government a leading role in housing programs.

National Housing Act:The National Housing Act was passed by the Parliament of Canada in 1938 and its purpose, in relation to financing for housing, is to promote housing affordability and choice, to facilitate access to, and competition and efficiency in the provision of, housing finance, to protect the availability of adequate funding for housing at low cost, and generally to contribute to the well-being of the housing sector in the national economy. It was later amended in 1985, 1999 and 2007.

On January 1, 1946,the Central Mortgage and Housing Corporation was created (changed to"Canada" Mortgage and Housing Corporation in 1979) to house returning war veterans and to lead the nation's housing programs.

CMHC's basic functions are to administer the National Housing Act and the Home Improvement Loans Guarantee Act, and provide discounting facilities for loan and mortgage companies. The capital of the Corporation was set at $25 million (a substantial amount for the time), and a reserve fund of $5 million authorized to be accumulated from profits. This requirement and capital structure are still in effect today.

In 1954, the federal government expanded the National Housing Act to allow chartered banks to enter the NHA lending field. CMHC introduced Mortgage Loan Insurance, taking on mortgage risks with a 25% down payment, making home ownership more accessible to Canadians. www.cmhc.ca

Genworth Mortgage Insurance Company of Canada

Genworth is Canada's largest private mortgage insurer with a history dating back to 1995. Genworth Canada is the brand name of Genworth Financial Mortgage Insurance Company Canada, a subsidiary of Genworth MI Canada Inc. (TSE:MIC). Also known as"The Homeownership Company,” through their marketing efforts.

                                                                                                                           

As of June 30, 2012, Genworth Canada had $5.5 billion in total assets and $2.8 billion in shareholders' equity. Based in Oakville, Ontario, the Company employs approximately 260 people across Canada.  www.genworth.ca