CMHC’s loss is Sagen’s gain, as private-sector mortgage insurer sees market share grow
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CMHC said in a statement to the Post that it doesn’t publicly report its market share, but that its “target homeowner market share” is currently between 40 and 50 per cent.
“To be able to act upon our financial stability mandate, CMHC aims to maintain enough presence to be able to: a) step in to enable financial stability and b) absorb market share if private insurers exit market,” the agency said. “We will continue to monitor the environment to ensure that we remain in a position to maintain our financial stability mandate.”
While it may seem like an obscure part of the financial industry, federally regulated lenders such as banks need to buy borrower-default insurance when a loan is worth more than 80 per cent of the value of the house. Given that not every buyer can make a down payment of more than 20 per cent, obtaining that insurance (with the cost of premiums usually passed on to borrowers) can be crucial to purchasing a property.
The coronavirus pandemic also stoked concerns about a rise in mortgage defaults, prompting lenders to allow borrowers to defer their loan payments — with the blessing of mortgage insurers.
Although Sagen expects most payment deferrals will end with borrowers resuming their regularly scheduled payments, it does anticipate “a subset” will go into default, which has prompted it and its lenders to plan to increase loss-mitigation activities.
In announcing its latest financial results, Sagen said the outstanding principal balance of its insured mortgages on which payments were being deferred by COVID-19-affected borrowers fell to $12.2 billion, or around six per cent of its outstanding insured mortgage balances as of Sept. 30. As of the end of June, those deferrals were happening on around 14 per cent of its loans.
