January 28, 2009
Private mortgage insurers face a tougher future in the Canadian market after an intense lobbying campaign failed to persuade Ottawa to fully guarantee their home insurance policies.
Canada's two remaining private insurers, Genworth Financial Inc. and American International Group Inc., had pushed for the government to raise guarantees of their mortgage insurance policies to 100 per cent from the 90 per cent that has been in existence since the late 1980s.
Without the full guarantee, the two U.S.-based insurers, according to sources, have privately warned Ottawa that their business is unsustainable, leaving Canada Mortgage and Housing Corp. with a monopoly.
In the wake of the global credit crisis, Canada's banks have shifted virtually all new mortgage insurance business to CMHC to eliminate any risk that they might be left on the hook to pay home insurance policies that are not fully guaranteed by Ottawa.
CMHC's mortgage insurance business is backed 100 per cent by the federal government.
Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals, declined to talk directly about Ottawa's decision not to fully guarantee private insurers, other than to say "we support competition."
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