Level the playing field for Genworth, expert warns
Amid growing economic uncertainty in Canada’s housing market, mortgage finance expert Jane Londerville has called for a levelling of the playing field for government-backed residential mortgages.
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.
