In a surprising but strategically sensible move, Brookfield has acquired a 57% stake in Genworth MI Canada, Canada’s largest private residential mortgage insurer. “Genworth is an industry-leading business that generates strong, consistent earnings and operates in a sector with high barriers to entry,” David Nowak, managing partner of Brookfield Business Partners, said in his statement.
This is positive news for Genworth and Canada’s mortgage industry, as the acquisition by the respected Brookfield Business Partners keeps capital local, and shows confidence in not just Genworth MI but Canada’s mortgage market in general.
The retention of ownership inside North America will also likely end a Canadian regulatory stalemate which has existed since 2016, when Canadian authorities first withheld approval of Genworth MI Canada’s sale to its parent company’s prospective foreign buyers, China Oceanwide Holdings Group Co. Ltd. Ottawa had stated concerns related to data and national security, but didn’t provide many details. In a statement, Oceanwide says that it is, “pleased with the quality of the buyer [Brookfield] as well as the purchase price they have offered.”
As a business, Genworth Canada has been a member of Mortgage Professionals Canada for many years and we have full confidence in its executive and management team. Given CMHC’s strategic reduction in insured volumes over the last few years, which has increased Genworth’s risk footprint, and given that Ottawa still guarantees 90% of Genworth’s exposure, it’s a pretty good assurance that Ottawa is confident in their operations.
As an aside, our industry still feels and proposes that it would be in the best interest of Canadians, especially younger and/or single homebuyers, to have a lowered stress test and a return to 30-year amortizations on insured mortgages for first time homebuyers. We are happy that Canada’s Big Banks have, in recent weeks, begun following MPC’s lead regarding the need for stress test recalibration.