Sagen takes CMHC’s place as Canada’s biggest mortgage insurer

It looks like the Canada Mortgage and Housing Corporation (CMHC) has lost its title of Canada’s biggest provider of mortgage default insurances recently.

According to the recent report by RATESDOTCA, CMHC’s total market share has declined and now remains below 30%. Meanwhile, it was about 46% back in 2019.

At the same time, Canada’s two private providers of mortgage default insurance have raised their market shares, with Sagen (ex. Genworth) showing an annual increase from 30-35% to almost 43%. In addition to it, Canada Guaranty President and CEO Andy Charles says its share was up from mid-20% to about 30%.

It should be noted that CMHC’s market dominance has been slowly weakening, but the sharp decline was reported after it had tightened underwriting rules last June reacting to the pandemic.

The new rules included lower maximum limit of total and gross debt service ratios, higher minimum credit score (a rise from 600 to 680), and banning non-traditional resources of mortgage down payments.

“Such measures will protect homebuyers, decrease government and taxpayer risks and support the stability of real estate markets, reducing excessive demand and strong house prices growth,” – noted former CEO Evan Siddall at the time.

However, Sagen and Canada Guaranty decided not to follow CMHC’s example, saying the current underwriting standards were quite adequate.

In the end, many borrowers who couldn’t qualify for insurance with CMHC under the new rules switched to private insurers.

Both Sagen and Canada Guaranty saw their business rising due to high-debt-ratio clients. Moreover, many lenders were thankful that they kept accepting the deals that CMHC couldn’t. As a result, the private insurers benefitted from the situation with their portfolios balanced.