Insured (CMHC or Genworth) Vs Uninsured (previously conventional 80% and less)
As a result of the increase of the capital requirements on the mortgage default insurers (CMHC, Genworth Financial and Canada Guaranty) by the Office of the Superintendent of Financial Institutions (OFSI) as of January 1st 2017, the mortgage default insurers have significantly increased the amount they charge the lenders for the insurance.
All mortgages securitized through CMHC's NHA MBS Program in Canada require either high ratio (Transactional) insurance paid by the borrower or low ratio (Bulk/ Portfolio) insurance paid by the lender. As a direct result, this change has significantly increased the cost of low ratio insurance paid by the lender. Furthermore, the price lenders now pay for low ratio insurance is based on the risk characteristics of the mortgage. As viewed by OSFI, mortgages that have a higher loan-to- value (LTV of 80-95%) and/or lower beacon score require the mortgage default insurers to hold more capital. Even if mortgages that have a lower loan-to-value (LTV) and/or higher beacon score require the mortgage default insurers to hold less capital, more capital is required prior to January 1, 2017.