Question

Compare and contrast the key features of each of the private mortgage insurers against the CMHC mortgage loan insurance program. Summarize your results in a table.

Answer 1

The two main private insurers, Genworth Canada and Canada Guaranty, compete with theCMHC, a Crown corporation. Currently,the CMHC accounts for roughly 60 percent of mortgage insurance, with Genworth Canada holding roughly one-third. While all three
underwrite insurance for residential mortgages for
one to four units, only the CMHC insures multi-
unit residential rental properties.
Although premiums vary by loan-to-value
ratios, they do not vary with risk factors such as
occupation, credit score or location. In practice,
private insurers generally match the CMHC
premium schedule. The lack of price dispersion
may reflect borrowers having little incentive to
distinguish among insurance products, combined
with the limited incentive by lenders to bargain
for lower premiums. Competition thus takes place
mainly on the product and process level, where
private insurers are somewhat more flexible in
targeting specific demographic and socioeconomic
groups with a focus on insuring mortgages in
urban centres.