Mortgage Rates & Mortgage Broker News in Canada

BMO’s Pricing Strategy & Market Share

BMO says its mortgage balances grew 0.5% last quarter. It was the first such increase since it exited the broker market in 2007.

“We are successfully replacing the runoff of our broker-channel loans with our branch originated (mortgages),” says BMO, whose quarterly market share decreased once again. 

BMO now owns an estimated 9.3% of the mortgage market, a number that’s been falling for several quarters.

BMO is hungrily trying to recoup that share, partly by slashing advertised rates.  Two examples are its 3.79% low-frills 5-year fixed and its 4.95% 10-year fixed. They’re the lowest advertised rates by any national lender for these terms. (Of course, brokers and branches can and will do better for well-qualified applicants.)

This, of course, begs the question:  Will BMO’s overt rate competition pay off? 

ING Direct is widely credited with starting the deep-discount mortgage rate model in the late 1990s. Since then, TD, RBC, and BMO have each taken a stab at the “no haggle” below-market pricing model. The result was that their margins collapsed, driving each of them back to the more concealed and profitable “selective-discounting” strategy.*

It remains to be seen if BMO sticks it out this time, and if any other Big 6 banks follow its lead. CIBC has come the closest with its cash-back switch program. But, while the switch program had fantastic effective rates, CIBC’s nominal (advertised) rates haven't had the sizzle of BMO’s.

If competitors do join BMO in openly advertising deep-discount rates, margins will fall all around and BMO may be no better off.

So far, however, BMO says it’s “pleased with the success” of its new rate promotions. “Our goal is to grow market share and we remain focused on improving the business through investment in the sales force and achieving productivity gains.”

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Partial Sources: BMO Q3 Report, BMO Q3 Presentation

*  Selective discounting is where a bank provides its best rates only to those who negotiate for them.

National Bank Axes Stated Equity Program

National Bank (NBC) has eliminated its conventional stated-income equity product.

It was a bit of a disappointment when we heard. Brokers never did a ton of deals under this program, but it was always a nice solution for self-employed or retired applicants who needed quick and simple 50%-loan-to-value financing.

Despite now requiring greater proof of income, NBC has kept the “Equity” name. NBC has also tried to offset the changes by increasing its maximum allowable TDS ratio on loan-to-values up to 65% and allowing gross-up of NOA income (see your NBC rep for details). Due to the more stringent income documentation requirements, however, it can no longer be classified as an “equity” product.

For stated income deals above 65% LTV, it’s also possible to do them with NBC on the insured side (using Genworth’s Alt.-A program), but the client must pay the insurance premium.

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Sidebar:  NBC considers 65% LTV deals up to 75% TDS, possibly higher on exception (if the client's net worth warrants it).  The All-in-One maximum LTV has also gone up under this new "Equity" program to 65% (from 60%).

Scotiabank #1

Scotia Mortgage Authority says it is now the top lender by volume in the mortgage broker space, with a market share of 19.4%. 

The numbers are based on Davis + Henderson’s latest Q2 Mortgage Broker Market Share Report.

Scotia Mortgage Authority’s market share is up 4.5% year-over-year.

The lender previously in the top spot was FirstLine, the broker division of CIBC.

Merix Financial Posts Solid Growth

Merix Financial, one of the larger non-bank mortgage lenders, has been putting up serious numbers.

Its year-to-date mortgage volumes have jumped 37.1% versus last year.

The company has been a rate leader on numerous occassions the past few months, which is probably part of the reason for its success. In addition, Merix and its affiliate companies are doing major volume in the private label and wholesale lending space.

Merix’s volume gains haven’t been at the expense of productivity, however.  In fact, the company’s key measure of efficiency (its application-to-funding ratio) improved 22.2% since January 1.

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Sidebar:  Merix’s current market share is estimated at 3%, according to a source at the company.

Mortgage Broker Headcount

18,000 to 20,000 people hold mortgage agent and/or mortgage broker licenses in Canada, according to CAAMP. 

In Ontario alone, there are about 10,000. In BC and Alberta, there’s a total of 6,000. In Quebec, another 1,000.

It’s hard to say how many of these agents are truly active, however. The going assumption has been about 10,000 to 12,000. 

Regardless, a more interesting question might be:  How will the broker population change going forward?

While Canada’s broker count has increased over the last three years, it’s been stable at best in the past 12 months, says CAAMP CEO, Jim Murphy.  Ontario, for example, reportedly saw a drop in their license renewals this year.

Increasing competition, falling home prices, rising rates, falling commissions, and bigger sales forces at the banks, could all conspire to shrink the industry somewhat—at least for the next year or so. Just in the last few months we’ve heard two brokerage CEOs say they expect broker headcounts have peaked for the foreseeable future. 

Wouldn’t the banks just be tickled pink about that.

Most Broker Functions Exempt From GST/HST

Earlier this year, brokers got a scare when CRA issued a notice that potentially applied GST/HST to brokering activities. Prior to this, mortgage broker services had long been one of the many exempt financial services.

Since that time, CAAMP (the industry’s trade group) has advocated steadfastly to protect the exemption.

One of the things CAAMP did was engage tax expert, KPMG, for consultation on the matter. KPMG has since issued this advisory.  Below is the gist of it…

The most recent development in all this came on June 30. That’s when the Department of Finance issued these revised Explanatory Notes.

These explanations confirmed that “arranging for” the issuance of a mortgage loan does not constitute a GST/HST taxable service.

But what does “arranging for” mean?

KPMG says that CRA bases the definition on five measures:

• The broker’s degree of direct involvement
• The broker’s time expended 
• The degree that borrowers & lenders rely on the broker
• The intention of the broker’s activities
• The broker’s normal activities in the mortgage industry

(Click here for KPMG’s full analysis)

In essence, KPMG confirms that brokers who actively process and submit deals to lenders in exchange for a commission on closing, are exempt from GST/HST.

On the other hand, consultants who merely refer clients to brokers, with little other involvement, are not GST/HST exempt.  KPMG suggests that CRA could apply this non-exempt definition to certain agents, depending on the circumstances. For that reason, KPMG suggests brokers and consultants/agents “review the nature of their service agreements, the nature of their services, and the facts under their particular circumstances.”

CMP’s Top 50 Brokers List

Brokers are performance-based individuals and they love to know how they stack up to the pack. That’s largely why Canadian Mortgage Professional’s Top 50 broker list is so intriguing.

CMP's latest rankings for 2009 were released just recently. The top five brokers include:

1. Calum Ross (Mortgage Centre, Toronto, ON)  $148 million funded
2. Jim Tourloukis (Advent Mortgages, Unionville, ON) $127 million funded
3. Paul Gazzola (Mortgage Architects, Guelph, ON) $119 million funded
4. Michelle Beet (Mortgage Alliance, Port Moody, BC) $111 million funded
5. Nicole Drummond (Dominion Lending, Ottawa, BC) $97 million funded

Here are some factoids from the top 50:

• Average years in the business:  10.38
• Minimum years in the business: 4
• Average deals per month:  19
• Average volume per year:  $59 million
• Average volume per month:  $4.9 million
• Minimum volume per month:  $2.5 million
• Average administrative staff:  1.4

CMP’s broker ranking is based on voluntary submissions from brokers around the country. CMP then attempts to verify the resulting data as best it can.

Since the survey is voluntary, the majority of Canadian brokers don’t participate. As a result, the list is missing numerous major producers, like last year’s #1, Peter Kinch, for example.

Nonetheless, all of the brokers on the list deserve recognition for outstanding production.  It isn’t easy to build a $30 million+ business, and these folks have each cleared that hurdle, and then some.

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Update:  CMP restated its rankings after this story was published, citing a technical glitch that misplaced some submissions. As a result, CMP says the #2 broker is actually Dan Eisner of True North Mortgage. More...

Canada’s Private Mortgage Insurers Re-Emerge

Just over a year ago, Canada was caught up in a global credit panic. The perceived riskiness of private mortgage default insurers caused their combined market share to plunge an estimated 50% from the summer of 2007 to mid-2009.

Some in the media were going as far as calling private insurers “unsustainable.”

That sort of short-sightedness has since blown over.

Canada’s two private insurers, Genworth Canada and Canada Guaranty, are doing quite well by most accounts. Genworth just reported $85 million in profit and a 71% increase (year-to-date) in new insurance written.

Of the two privates, however, Canada Guaranty (formerly AIG United Guaranty), has had to make the biggest relative comeback. That’s thanks to the colossal liquidity crisis at its old U.S. parent, AIG.

Canada Guaranty has since been acquired by the Ontario Teachers’ Pension Plan (OTPP). That’s helped it make steady progress in adding new lender partners and re-asserting itself as Canada’s #3 insurer. The OTPP acquisition was brilliant in that it added considerable counter-party strength as well as Canadian ownership, both of which lenders find appealing.

As of today, Canada Guaranty’s approved lenders include Street Capital (just added this past Tuesday), First National (the biggest non-bank lender), Home Trust, AGF, and Bridgewater Bank. We also hear whisperings that some major banks will be on board in the not-too-distant future.

From a lender’s standpoint, there’s an incentive to allocate a portion of their insurance business to private insurers. For one, it keeps CMHC further from monopoly status. In addition, having multiple insurers gives lenders options when a file doesn’t meet one insurer’s guidelines.

Canada Guaranty is not an mortal threat to CMHC at the moment. As time progresses, however, it should certainly acquire a fatter slice of the market.

Appraisals: Machine vs Human

An automated valuation system (AVS) is a quick way to value a property without doing a full human appraisal. 

AVSs (a.k.a. AVMs, GVMs, or GVSs) are basically massive computer databases of public records. They use comparable sale data to value billions of dollars of real estate every year, and they do it in seconds or less.

Given their efficiency, AVSs have been catching on with more lenders. While they’re not perfect (some question their accuracy and their occasional fraud allowance), AVSs have two compelling advantages: speed and cost.

Lenders and mortgage professionals love pushing out fast approvals without appraisal conditions. If you’ve got a tight closing, or you are a broker keen on prompt service, then choosing an AVS lender is a definite stress reliever. There’s no waiting for appraisal appointments to be booked, waiting for the appraiser to view the property, waiting for the appraisal report, waiting for the underwriter to review the appraisal report, yada yada...

On the cost side of things, AVSs are also a clear winner. If they’re not free altogether, they’re as cheap as $50-$75. That compares to upwards of $250 or more for a human appraisal.

For most clients, free is pretty appealing. That’s especially true on a refinance. Sometimes applicants pay $250+ for an appraisal only to find out their house isn’t worth enough to support their desired loan amount.

Speaking of cost, some lenders out there charge for AVS appraisals. Others don’t.  Other things near-equal, most mortgage professionals clearly prefer lenders with free AVSs. For some reason though, lenders who charge for AVSs seemingly don’t realize that.

Dominion Lending Signs Don Cherry

Dominion Lending Centers has inked Canadian hockey legend, Don Cherry, to a 2-year endorsement agreement.

Cherry will appear in a $2 million ad campaign starting the third week of September.

Don Cherry is best known for being the ‘flamboyant yin’ to Ron MacLean’s ‘yang’ on the popular Coach’s Corner segment on Hockey Night in Canada, which is the most watched sports telecast in the country.

DLC President, Gary Mauris, said “Don Cherry was a great fit for Dominion Lending Centres as the core demographic that he has most influence over is young families. Don was recently recognized as the 23rd most trusted Canadian by Readers Digest and was named one of Canada's Top Ten Greatest Canadians.”

“Scotiabank and Tim Horton's both have heavily invested in Hockey-related marketing due to the family demographic,” says Mauris. “I believe this will be a Pioneering move in the mortgage industry in Canada. We are moving to all 30 second commercials so that we can begin telling the public the story of what Mortgage Professionals do and the value we have to the consumer. The entire mortgage industry including our competitors, our lenders, insurers and associations are going to benefit from this game-changing initiative.”

It is certainly one of the biggest promotional campaigns we’ve heard to date in the brokerage industry.

Commit To Us

Lots of lenders are saying that these days.  They want brokers to commit as much volume to them as possible.

You certainly can’t blame the lenders. Volume is the gas that keeps their engine running. The tough part, for most brokers, is that there’s only so much volume to go around.

As a broker, do you commit $10-15 million of volume to a lender with great rates today?  How do you know they’ll keep their rates highly competitive?

Do you commit to lenders with promises of prompt turnaround times?  How do you know they’ll maintain their service level agreements?  (This past spring, some lenders’ SLAs weren’t worth the breath used to speak them.)

Promising a lender you’ll give them X amount of deals per month, quarter, or year, is sometimes at odds with our fiduciary responsibility to clients. We’ve touched on this before in stories like “Preferred Broker Status.” With a few exceptions, volume commitments usually benefit the lender more than the broker (and client).

All that said, if the right value were clearly defined ahead of time, it would be easy to commit millions of dollars in business to a given lender.

Suppose, for example, that you’re a broker and the following came through your inbox.

XYZ Lender Launches The “True” Status Program

Commit to funding $10 million in six months and receive:

• 5-year fixed pricing at 110 basis points above the 5-year bond yield *
• 5-year variable pricing at 110 basis points above the 30-day bankers’ acceptance yield *
• 8-business hour approval/decline guarantee, or 5 basis points off the rate on your next deal
• 24-business hour document reviews, or 5 basis points off the rate

* Yield spread adjusted for market liquidity constraints, if applicable. For a full-featured mortgage. 680 minimum Beacon. Fully income-qualifying (no stated income). 50% minimum funding ratio. Other terms apply. Call for details.

If we saw a lender commit to something tangible like this, we wouldn’t be able to dial that lender’s business development manager fast enough. Assuming the lender had client- and broker-friendly policies, we’d happily commit significant volume to this sort of arrangement. 

But lenders haven’t done this (yet). Instead, brokers are asked to commit to volume targets in advance, without knowing what rates and service the lender will continue to offer. Brokers are asked to assume that lenders will deliver what’s needed to be competitive in the marketplace.

A whole lot of brokers find this extremely frustrating.

SINs On Mortgage Applications

Canada’s Privacy Commissioner seems to butt heads with the mortgage industry on the collection of social insurance numbers (SINs).

The Commissioner isn’t too fond of using SINs on mortgage applications.  Her office put out a report June 8 that states:

A “SIN is not required to conduct a credit check.”

“There is no legislative requirement for the SIN to be collected for [mortgage purposes].”

“The Office of the Privacy Commissioner is of the view that the SIN should not be used as a general identifier and organizations should restrict the collection, use and disclosure of the SIN to legislated purposes only.”

Assistant Commissioner Elizabeth Denham, tells us:

“We recommend that no private sector organization request the social insurance number from a customer, and that no customer give the social insurance number to a private-sector organization, unless the organization is required by law to request it.”

That creates a potential conflict because the private nature of SINs generally makes them a reliable part of the identification verification process. ID validation has become vital in an environment where mortgage fraud is a serious risk.

According to the Canadian Bankers Association, there is “nothing specifically legislated that requires banks to ask for a SIN for mortgage purposes.”

“Specifically” seems to be the key word, however.

Certain provincial jurisdictions and regulators do, in fact, require lenders and brokers to make a “best efforts” attempt to ascertain a person’s identity. Confirming a customer’s SIN against credit bureau records has been an important means of doing so.

Lenders, in general, like to see SINs on mortgage applications. As CAAMP’s VP of Education and Professional Affairs, Mark Webb, notes: “Lenders expect that agents ask for the SIN but the client has no obligation to provide it.  If the client refuses then it is up to the lender to assess how they will respond to the application.”

Webb advises that, “Brokers should not make any change with respect to current practices regarding getting SIN numbers.”

From a practical consumer standpoint, the underlying question should be: is the person taking your SIN trustworthy and does he/she store clients’ information in an extremely secure manner. If so, then many feel that SINs should continue to be an essential fraud-prevention tool.

Customer Data Protection

Extrapolating is an innate human tendency. So when people read in the papers that a small group of mortgage brokers failed to protect client data, it damages the reputation of the entire broker channel.

The Privacy Commission’s report last Tuesday will likely prompt that sort of extrapolation.

Read on…

The Pareto Principle

A CMP survey in April suggested that 49% of mortgage brokers are considering exiting the brokering industry in the next 12 months. That’s a stunning proportion compared to just 5% who responded similarly last year.

You may or may not buy into these numbers. Frankly, we find them almost implausibly high, but we haven’t seen the raw data. Whatever the case, our industry is undoubtedly shedding non-performing brokers. We’ve heard unconfirmed reports that as many as 20% of brokers in certain provinces did not renew their licenses last year.

None of this is to be unexpected. Vilfredo Pareto first proposed in 1906 that 80% of wealth is generated from 20% of the population. Mortgage brokering is a good example of an 80/20 business.

Anecdotally, we’ve heard a few lenders suggest that the ratio is closer to 90/10 in some cases. In other words, as much as 90% of the volume at some lenders’ broker divisions comes from the top 10% of broker teams.

For the little guy who’s not at least cracking the top 50% percentile, life is not easy, and it’s getting harder. Small independents are being flanked on multiple fronts (banks, credit unions, other discount brokers, etc.). Furthermore, lenders are increasingly demanding minimum volumes for their best rates and turnaround times.

Despite all this, business is still very healthy for most in our industry. CMP, for example, says that 50% of brokers expect to be hiring in the next year. That means the strong brokers will likely get stronger through expansion and volume aggregation. 

In the meantime, there is one thing we are certain of. If we were a small broker today, we’d find a big “school of fish” to swim with (i.e., work for a larger and stronger broker team). In a volume-driven business, scale is undeniably paramount.

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(Survey source: CMP’s last Broker Sentiment Poll. Sample Size: ~300+)

Nix the Bonuses

Suppose you’re a car salesperson and your boss offers you a $1,000 bonus if you can sell a Toyota Yaris for $50,000.

Would that get you excited?

Us neither. Who wants to stick a poor customer with an overpriced product to make a few extra bucks? (If you answered, “I would,” don’t bother reading further.)

Yet, it’s sometimes accepted practice for lenders to offer bonus compensation to sell mortgages at above-market rates. No offense to any of our lender partners, but this type of compensation scheme doesn't exactly scream of fiduciary responsibility.

It’s even worse when rates should be dropping. Look at our current market scenario for example.

On March 1:

• The 5-year bond yield was 2.52%
• A deeply-discounted 5-year fixed rate was ~3.69%.

As of yesterday:

• The 5-year bond yield was 2.52%
• A deeply-discounted 5-year fixed rate was ~4.29%

That’s a 60 basis point higher rate today, despite yields dropping almost 70 basis points in the last month. There’s no question that 5-year fixed rates should be lower than they are. Yet, most lenders are keeping them inflated.

Instead of lowering their rates, some lenders are offering brokers incentives to sell higher rates. This practice isn’t doing brokers any favours, and it sure as heck isn’t helping customers.

Most, in our business, would rather see lenders avoid incentives not aligned with the customer’s best interests. Lenders could then pass along lower rates and help brokers be as competitive as possible in the marketplace.

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Counterpoint:  This isn’t meant to indict the lenders who offer these incentives. All are, in fact, very reputable organizations. The problem is, there are still competitive pressures (vestiges of yesteryear), that drive these rate-based incentives.

Moreover, in our current market, lenders have run these promotions expecting rates to rise, or remain stable. With yields plunging unexpectedly, certain lenders are now stuck honouring these bonuses, and maintaining higher rates to compensate.

Goodbye HSBC Broker Channel

HSBC Bank Canada finally did what many insiders have expected for over a year.  They shut their doors to mortgage brokers.

“We plan to concentrate on growing our business through our network of over 140 bank branches,” said HSBC Bank Canada spokeswoman Sharon Wilks. (See this Globe Story)

HSBC says it will honour all existing broker commitments.

Besides going into a branch, Wilks said customers will now need to apply for a mortgage “online or work with one of our telephone-based relationship managers.”

None of this is a complete surprise. About a year ago, HSBC began dealing with only its top 100 brokers.  Many industry executives saw this as HSBC’s first step out of the channel. Since then, HSBC’s best rates and products have typically been available only through its branches. HSBC’s broker centre seemed to be running on a minimal staff as well.

Prior to HSBC, the last major bank to exit the broker channel was BMO in 2007.

“BMO has lost significant market share since they stopped using brokers, but their profit margins have improved,” said Canaccord Genuity analyst, Mario Mendonca. (BMO’s share is now estimated at 9.2% versus 9.9% one year ago.)

“It’s hard to tell on a net basis whether [giving up broker business is] the right thing to do,” he says.

So where does HSBC’s move leave the broker industry?  Well, we never like to see a bank exit the channel, but fortunately, HSBC never gave us much to miss. Apart from limited-time rate promos, HSBC’s broker rates was often way above the market. Moreover, its turnaround times during broker rate specials left much to be desired. (We’ll never forget waiting four weeks to get approvals back during HSBC’s summer 2008 rate promo.)

The main niches we liked about HSBC were its products for non-residents, co-ops, and leasehold properties. For those deals, HSBC’s top 100 brokers will now be looking for alternatives.

It’ll be worth watching to see how HSBC modifies its business model going forward. In the meantime, we want to wish the best to all the HSBC broker channel employees affected by this news.

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(Partial source: Globe & Mail, Reporter: Tara Perkins)

Canada’s Biggest Mortgage Fraud

Canada’s largest-ever mortgage fraud unfolded in the press last week.

The fraud reportedly involved straw buyers who were paid up to $8,000 to buy properties for the alleged ringleaders. The accused perpetrators picked cheap homes in neighbourhoods of more expensive homes, used the surrounding home prices to grossly inflate subject property values, created forged documents to fake borrower income, and skipped town with the mortgage proceeds.

BMO is suing hundreds of people including its own employees, Realtors, over 18 lawyers, mortgage brokers, and an MP.

Details are scarce at the moment because BMO is restricted in commenting. There’s also an ongoing RCMP investigation.

An RCMP officer told CBC, "We have a number of issues. First of all, we have real estate agents to interview, mortgage brokers to interview, bankers to interview. And then we have a mortgage file to review — and it's a huge documentary evidence file that we have to review and it can take years to investigate."

BMO acknowledges that nothing has yet been proven and says no customers were directly affected.

“…This experience has provided some learning that we have applied to further enhance our due diligence," said a BMO spokesman. 

No doubt. 

Other lenders’ risk management departments are also likely reviewing their underwriting and closing policies.

AUTOMATED APPRAISALS

One practice this fraud puts under the microscope is that of automated computerized appraisals. Lenders use them to significantly speed up the approval process and reduce costs for consumers. However, Bob Aaron, a Toronto real estate lawyer, suggests automated appraisals may be problematic.

"The banks have been either deliberately or accidentally lulled into believing what the values are - either because they're sloppy or because they've made a conscious decision to ignore values," he says. He suggests human appraisers may help prevent fraud better than electronic ones.

That may be true in some cases.

On the other hand, tighter margins and fraud potential have made risk management departments more vigilant in the last few years. Their confidence in automated valuation systems (AVSs) comes with good reason. AVSs are highly efficient and they reliably value billions of dollars of real estate every year.

According to insurer representatives we’ve spoken with, automated appraisals are accurate to within +/- 5% of actual value over 99% of the times that they’re relied upon (often they’re not used and a real appraiser is dispatched instead).  Rarely is there a incident of magnitude attributed to AVSs, but when such incidents do make the press, it makes people question them.

MORTGAGE FRAUD IN CANADA

A Criminal Intelligence Service report pegs Canadian mortgage fraud at “hundreds of millions” of dollars per year. The Financial Post says it ranges from $300 million to $1.5 billion. To put that in perspective, that’s roughly 3/100ths to 15/100ths of a percent of all mortgages outstanding.

Apart from prevention measures (i.e.  more detailed documentation reviews, technological safeguards, etc.), the industry would also like to see greater deterrents to mortgage fraud. In fact, CAAMP (the mortgage industry’s trade group,) petitioned the government last year to stiffen penalties for mortgage fraud.

“We suggested the penalties should be tougher for mortgage fraud, that time in prison should be doubled. People should absolutely go to jail,” said CAAMP president, Jim Murphy, to the Globe.

There is no better time than the present (after a major event like BMO’s) to revisit the campaign against mortgage fraudsters. Sights also have to be set on the smaller players. For example, we know that some people in our industry knowingly misrepresent and/or omit key information during the application process. They think it’s no big deal, but it is. The actions of these few diminish trust in our profession by lenders and public, and it hurts all of our reputations. Industry participants who falsify mortgage information need to be dealt with firmly and (when caught) removed from the business permanently.

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Sidebar:

• Here are more facts on mortgage fraud from the CBA: Link
• A 2007 report by the FBI suggested 80% of reported mortgage fraud in the U.S. involved industry insiders!
• Here’s a sample automated appraisal report from MPAC:  example
• Here’s a report on automated appraisals from the Appraisal Institute of Canada

Genworth Canada Gains Market Share

Genworth Financial Canada underwrote $6.1 billion of new mortgages last quarter and saw a 47% increase in income from new premiums.

Genworth also estimates that its market share rose “a couple of points" since the 4th quarter.

While there’s no definitive market share statistics in Canada’s mortgage default insurance market, analysts have estimated Genworth held 20-25% of the market as of Q4 2009.  Industry leader, CMHC, held almost all of the rest.

Genworth and it’s Chairman/CEO, Brian Hurley, attributed the company’s strong performance to these factors:

• “A larger mortgage insurance market resulting from improved economic conditions."
• "Low interest rates and a view that rates will go up”—which in turn “attracted many buyers."
• "Deeper customer penetration."

Genworth Canada’s President, Peter Vukanovich, says "our customer focus is clearly working." He says Genworth has invested significant time and resources in supporting its lenders, and it’s paying off.

When asked if premium pricing will drop due to the industry’s new entrant (Canada Guaranty), Hurley said that pricing changes are quickly matched in an oligopoly market.  He said he doesn’t “anticipate any downward pricing pressure" given regulators’ focus on financial soundness and strong capital bases.

Hurley feels that Canada Guaranty’s entry into the market will "keep service levels up.”  But he also suggested that new entrants need to prove themselves, and said:  "We saw the success that [prior insurer hopefuls] had." 

(Prior hopefuls being MGIC, PMI, and Trinity—all of which pulled out of Canada’s market prematurely after the subprime crisis.)

Mortgage Centre Gets CIBC’s Cash Back Product

CIBC’s cash-back switch program has attracted a ton of interest.

Now, Mortgage Centre has become the first brokerage firm (apart from CIBC’s HLC division) to offer it.

The offer consists of a 3-, 4-, 5-, 7-, or 10-year fixed term with 2% cash back, or 3% cash back for mortgages over $400,000.

Here are sample rates as of today:

• 4.40% for a 3-year term
• 4.89% for a 5-year term
• 5.05% for a 7-year term

It’s a pretty solid deal if you take the cash back and make an immediate pre-payment with it. Doing so makes the effective interest rates among the best in the industry.

But there are details to be aware of…

• The offer applies only to transfers in from other lenders
• CIBC requires repayment of 100% of the cash back amount if you break the mortgage before maturity
• The mortgage must close within 30 days from application
• Minimum mortgage amount:  $75,000
• The offer expires June 30, 2010.
• Other restrictions apply

The Mortgage Centre Canada is a division of CIBC. Its independent brokers offer mortgages from CIBC Mortgages Inc., and a variety of other lenders.

BMO Update On Mortgages Via Insurance Agents

We heard a few weeks ago that BMO is considering selling mortgages through insurance brokers.

From the looks of it, it seems that approved insurance agents will basically be referring potential mortgage customers to BMO, without doing much else.

A BMO spokesperson told us, “To maintain our commitment to our brand promise of clarity, any plans will ensure that BMO remains in control of product underwriting and pricing.”

BMO says there is no “specific launch date” for the start of mortgage distribution through insurance brokers, and it will make an announcement at a later time.

When asked if BMO would ever consider re-entering the mortgage broker channel, its spokesperson said: “BMO exited the mortgage brokerage channel a few years ago and remains committed to using our BMO mortgage specialists to offer the best advice and solutions.”