There’s always something to learn about the mortgage industry in Genworth Canada’s earnings announcements. Here are some takeaways from its latest report:
- A Shrinking High-ratio Mortgage Market:
Genworth says that last July’s insured mortgage rule changes “will likely reduce the annual residential mortgage insurance” market for high loan-to-value mortgages “by approximately 15%, as compared to the 2012 market size.”
In a report yesterday, National Bank Financial said that Genworth “wrote 16% less new insurance on high loan-to-value (LTV) mortgages than it did a year ago, mainly as a result of new mortgage insurance rules introduced by the federal government last July that effectively eliminated insurance for refinance transactions.”
- Bulking up on Bulk Insurance:
In 2012 Genworth wrote $20.4 billion of new insurance on low loan-to-value mortgages. That compares to $4.2 billion in 2011. This is a direct result of “more low loan-to-value (bulk) mortgage insurance opportunities,” says the company. Those opportunities were created in large part when its #1 competitor, CMHC, started pulling back from the bulk insurance business in late 2011.
- Fewer Arrears:
Genworth’s delinquency rate fell to a scant 0.14% last quarter, versus 0.20% a year earlier.
On a side note, Genworth MI Canada’s stock price has soared 47% from its low last July. Its investors apparently aren’t dreading a housing downturn as much as some had speculated last summer.
Rob McLister, CMT
Last modified: April 26, 2017
I don’t understand why bulk insurance sometimes gets a bad rap. Barring income loss, who the #$%@$ is going to default when they have 20% or more equity?
Even with 20% down, if the market was to take a turn that equity gets eaten up pretty quickly. Fact is most lenders lose money on 80% LTV foreclosures, and come out about even on 75% LTV foreclosures. It’s due to:
– Potentially falling real estate values.
– Lower sale price due to “foreclosure” stigma
– Often poorer property condition (why would current owner maintain a property they will be losing?)
– Unpaid property taxes for 1+ years
– Unpaid mortgage payments for 9 – 18 months
– Lawyer fees
– Realtor fees
It adds up pretty quickly.