It’s another somber development for the Canadian mortgage industry. While PMI was not a significant fixture in our default insurance market, they did promise to add competition to the marketplace. Just a few weeks ago there was even speculation in the press that PMI was trying to provide an alternative to the government’s new 5% down payment rule. Obviously, that was weak information and it’s all out the window now.
CEO, Steve Smith said the announcement was “a difficult decision driven by market conditions.” He said, “PMI continues to have a positive view of mortgage insurance opportunities in the Canadian mortgage market.”
The company has started winding down already. It says its “top priority” is “continuing to meet customer needs while exploring arrangements to transition existing insurance coverage to another approved Canadian mortgage insurer.” In other words, it will likely sell off the Canadian policies it’s written so far.
PMI Mortgage Insurance Company Canada is a subsidiary of American insurer PMI Group, Inc. (NYSE:PMI). PMI’s products protect lenders and investors against losses when borrowers default on residential mortgage loans.
The company’s U.S. parent just announced a $246.3 million loss today. It’s probably not a coincidence that PMI announced the Canadian closure the same day. It’s a move to appease shareholders and show them the company is refocusing on it’s “core” business. In fact, the company was clear to point out that it is repatriating about $60 million of Canadian capital back to its U.S. mortgage insurance operations.
Canada will now be left with its three existing insurers: CMHC, Genworth, and AIG. Just a year ago, the market was awaiting the entrance of PMI, Triad, and MGIC. Each of which has now pulled their Canadian operations.
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