Genworth has responded to the Globe & Mail's somewhat fallacious story on "high risk" mortgages.
Brian Hurley, President of international development at Genworth, said this in a statement published by the Globe Tuesday:
It was the easing of traditional underwriting standards in the U.S. – not extended amortizations – that put so many subprime borrowers in loans they could not afford. Here in Canada, the overwhelming majority of 40-year mortgages are prime loans held by customers with solid credit – and who would have qualified for mortgages with 25-year amortizations. Arrears here are near all-time lows.
Genworth supported Ottawa's decision to limit its government guarantee to mortgages with a maximum 35-year amortization. Healthy competition between CMHC and Genworth has provided an important second set of eyes that act as a check against unwise lending.
On a related note, we heard an interesting stat from one insurer yesterday. Only 3 out of every 100 borrowers with a 40-year amortization would not have qualified at a 25-year amortization. It therefore appears clear that Canadians were using 40-year mortgages as an option and not out of necessity. (Contrary to the anecdotal cases we've seen.)