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sagen overtakes cmhc in mortgage default insurance

Sagen Overtakes CMHC as Canada’s Largest Mortgage Default Insurer

The Canada Mortgage and Housing Corporation (CMHC) has reportedly lost its title as Canada’s largest provider of mortgage default insurance.

The national housing agency’s total market share has slipped to just under 30%, according to a report by RATESDOTCA. That marks a steep decline from CMHC’s market share of approximately 46% in 2019.

Meanwhile, Canada’s two private providers of mortgage default insurance have seen their market share jump. Sagen reported a rise in market share to about 43%, up from 30-35% a year ago, while Canada Guaranty President and CEO Andy Charles confirmed to CMT its share is around 30%, up from mid-20% a year earlier.

CMHC’s majority hold on the market had been gradually falling for years, but took a steep dive after it introduced stricter underwriting guidelines last June in response to the pandemic.

Those measures included reducing the maximum total and gross debt service ratios needed for an insured mortgage, increasing the minimum credit score to 680 from 600 and banning non-traditional sources of down payments.

“These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth,” former CEO Evan Siddall said at the time.

But both Sagen and Canada Guaranty declined to follow CMHC’s lead, deciding that the current underwriting standards were adequate to manage the existing risk in the market.

Private Insurers are the Big Market Share Winners

As a result, many borrowers who could no longer qualify for default insurance through CMHC turned to the private insurers.

Not only did both Sagen and Canada Guaranty pick up business from high-debt-ratio clients, but many lenders were grateful that they continued to accept the deals that CMHC would no longer take, and as a result decided to reward the private insurers with more of their standard business to keep their portfolios balanced.

“It’s been great quality business, we’re very comfortable with what we’re underwriting today and we’re very grateful to the support we’ve seen from our customers,” Levings told CMT in an interview conducted last month.

Charles confirmed to CMT that CMHC’s underwriting changes “certainly did allow us the opportunity to deepen our relationships with our lenders and we were rewarded with increased volume to ensure a balanced portfolio.”

But Levings thinks the dust has settled for now, and doesn’t expect drastic changes in market share in the near future.

“I do think the market is now a lot more mature, and saturated, in terms of where the three players sit,” he said. “So, I don’t expect to see major shifts in market share at this point.”