Genworth Financial, Canada’s 2nd biggest mortgage default insurer, is reportedly making several key changes to its insurance offerings, effective April 18.
The changes will affect new borrowers with less than 20% equity/down-payment, who use a lender that insures with Genworth.
Among other things, Genworth is reportedly:
- Shelving its high-ratio rental and Credit Assist programs.
- Lowering its maximum TDS guideline from 44% to 42% for all products
- Increasing credit score requirements for its Cash-Out Refinance program, from:
- 650 to 700 (for 90.01-95% LTV applications)
- 600 to 660 (for 85.01-90% LTV applications)
- Imposing new credit score minimums for high-rise (4+ floors) condominiums of:
- 700 (for 90.01-95% LTV applications)
- 660 (for 85.01-90% LTV applications)
Genworth did not previously have credit score minimums specific to high-rise condos.
- Increasing credit score requirements for its Business For Self (Alt. A) product, from:
Genworth said it will accept applications for the above programs (under the old guidelines) until April 17.
Collectively, these are significant changes for Genworth. So far, the only explanation we’ve seen from them is that the moves were due to “changes in the Canadian economy and housing markets.” We’re hoping to get a bit more clarity next week on the “why” factor.
One thing seems clear: If CMHC keeps it’s own guidelines as-is, Genworth will likely lose additional market share to the country’s number one insurer.
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Sidebar: When evaluating an applicant against the above credit scores, Genworth will “average the scores pulled from both credit bureaus for each borrower, and the recommended score requirement will apply to all borrowers on the application.”
Last modified: April 26, 2017
Genworth is probably getting pressure from its U.S. mothership. That’s too bad. I think this might make them an afterthought to most lenders and brokers.
Personally, I think this is likely a move because investors are shying away from Genworth due to the 90% protection from the Goverment if Genworth defaults vs. CMHC with 100% backing and Genworth wants to entice the investors back. Stricter guidelines will give investors assurance, so this will likely bring Genworth more business in the interm.
If investors like the stricter guidelines they are going to buy Genworth insured products thus giving lenders some confidence in being able to sell Genworth insured mortgages on the back end.
Hi Catherine,
Appreciate the comment. As soon as I saw Genworth’s announcement I had similar thoughts to you. If what you suggest occurs, then that’s a good thing.
The problem is, these tighter guidelines will also shut the door on a lot of business. It will therefore be interesting to see if the market share gained offsets the market share lost from borrowers who no longer qualify under Genworth’s guidelines.
Cheers,
-rob
Genworth is currently an after thought for most lenders, this will make that even more so.
You guys need to look at the following story;
http://www.bloomberg.com/apps/news?pid=20601087&sid=ak5mAJCkXq_w&refer=home
Genworth is in serious trouble. They did not qualify for an injection of capital from the US Treasury. Catherine is wrong, so is Kirby.
Genworth is in deep “doo doo” to use a technical term. The problem is that anyone who had a 40 year amortization is not going to be able to renew that mortgage unless they can come up with more money for a downpayment.