Evidence of meeting #6 for Finance in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was competition.
President and CEO, Genworth Financial Canada
Yes, absolutely, Canadians were able to benefit from having another player. There was product innovation, there was technology innovation, and there was service innovation that provided faster approvals on mortgages.
Again, I think that you have to look at it. Mr. Turner accurately quoted earlier that half of the mortgage market is now an insured market. That is significantly beyond where we were. I think that makes it very interesting.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
You think that your entering the field made for more competition, but anyone else entering the field now wouldn't have the same effect.
President and CEO, Genworth Financial Canada
No, I'm not saying that.
I'm saying that a lot has happened since 1995, a lot has happened. There have been very high switching costs and very high start-up costs, and the relationships that we currently have in place are very deep. For these folks to change those relationships with lenders, they're going to have to work very hard to come up with something new. I'm interested, as you are, to hear what that would be.
At the same time, we believe the Canadian marketplace in general has been very well served. We want to make sure that we don't end up in a destructive type of environment, where new players start coming in and creating an environment that's not positive for homebuyers. That's why we're requesting the legislation.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Perhaps I could see if others could answer that question.
If you entered this area, how would consumers benefit? How much cheaper would the rates be?
President and CEO, AIG United Guaranty Canada
Thank you for the question.
By definition, when coming into an established marketplace, one needs to compete on a number of different factors of product, innovation, and price. While I'm not in a position, with my competitors being in the room, to say the price is going to change by x percent, I can give you a very comfortable level, being on the public record today. Price is going to be something that is going to be decreasing, and we will compete on price to some degree.
To your second question, on how this will help Canadians, we've spoken a little about the immigrant market, the self-employed market, and people who may have had a credit impairment in the past. The lending process in this country, and I've been on the lending side for the last 15 years, still requires a lot of due diligence; due diligence is done by the lender, and due diligence is done by the insurer. We think there are opportunities to increase home ownership and the rate of home ownership in Canada.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Well, I know there are problems in terms of people accessing mortgages. There are problems at the lending level. I don't understand how your getting into this business in terms of mortgage insurance is going to have any bearing on the lending scene.
I keep hearing this jargon around product. I don't know what “product” means. I've had this discussion with many others.
If the problem is in fact with the lender, we should fix the problem at that end. I don't see how your coming onto the scene is actually going to put pressure on the banks to suddenly lend to an immigrant family that doesn't believe in using credit cards and therefore has no credit record and can't get a mortgage. They'd like to give straight upfront cash and could probably do the whole house, or most of it, in straight-up cash, but they don't get to deal with the banks. How are you going to make that—
Conservative
The Chair Conservative Brian Pallister
No. Thank you, Madam Wasylycia-Leis.
Mr. Savage, you have five minutes. It's your turn, sir.
Liberal
Michael Savage Liberal Dartmouth—Cole Harbour, NS
Thank you, Mr. Chairman.
I might actually come back to Ms. Wasylycia-Leis' question, not the socialistic rant part, but what I thought was a reasonable question at the end.
The first question is this. On the off chance that there might be a Canadian out there who doesn't make study of mortgage insurance his or her life mission, Mr. Vukanovich, can you tell me how mortgage insurance is chosen? It's the lender who chooses it, not the consumer. Is that correct?
Liberal
President and CEO, Genworth Financial Canada
Well, the process is this. A consumer would come into the bank and ask for a mortgage on a home. The lender would ask how much of a down payment the consumer has. If it's less than 25%, it would require that the information not only be taken by the lenders to be put in their system, but they would also purchase insurance so that if there's a default on that loan, our company would have the reserves to pay back the bank or the lender.
Liberal
Michael Savage Liberal Dartmouth—Cole Harbour, NS
The homeowner, the buyer, actually has no say in that.
President and CEO, Genworth Financial Canada
Well, I would say no or little say.
Liberal
Michael Savage Liberal Dartmouth—Cole Harbour, NS
Okay. Let me come to the sensible question that my colleague asked, which is the question on potential competitors.
I'm interested in what your value proposition would be in the marketplace. Keeping in mind the sensitivities around competition and things like that, can you give me a sense of what the benefit to Canadian consumers will be if this goes ahead? If you can't specifically tell me to your business, which I would like to hear about, what would the benefit to consumers be in general?
President and CEO, AIG United Guaranty Canada
If I may, AIG United Guaranty, coming into the market as a mortgage insurer, may provide comfort to those lenders that in the past may not have wanted to participate in a certain segment of the Canadian consumer marketplace. By virtue of providing insurance, they may recognize now that the new immigrants coming into Canada may provide an opportunity wherein they can compete more aggressively. They may say, upon reflection, that although someone may have had a credit impairment in their past, with mortgage insurance they would now be in a position to be a little more aggressive in that field and help more Canadians realize the dream of home ownership. So we would be providing comfort to the lender to go into a certain market segment.
Conservative
President, CEO, Triad Guaranty Insurance Corporation
Thank you.
We start with the mission of our company: the way we think about it is that we provide solutions for those who are trying to make home ownership a reality. In this country, that would be the financial institutions, the credit unions, the caisses, etc. Our view is that we should focus on the things we focused on for the last 18 years--that is, prudent risk management, making sure that the people who do get mortgages can afford the mortgages they have taken on; product innovation, to make sure that the greatest variety of payment plans could be supported by the banks; and superior customer service, in making access to these products easier for all Canadians. We believe this provides the type of value the committee is searching for.
Conservative
Liberal
Michael Savage Liberal Dartmouth—Cole Harbour, NS
Mr. Turner asked a question of Mr. Vukanovich, I think, and it seems to me I'm getting two points of view here. Would Canadian consumers, perhaps those with a spotted credit history, immigrants, self-employed people, be better off in an open market, or would they be better off under the system we have now? I would like to hear from Mr. Vukanovich first.
President and CEO, Genworth Financial Canada
I think we have an open market today, Mr. Savage.
President and CEO, Genworth Financial Canada
Yes, if new entrants came in and decided they had more risk tolerance than is currently in place, then you could argue that more people would get into a home. We believe, though, that we pretty much reached that breach with the existing competitive situation.
Mr. Turner was talking a little bit about people getting into too much debt. There's a market in the U.S. called the sub-prime market, which is slowly but surely growing in Canada. The sub-prime market is one that is currently not served by the mortgage insurance industry here in Canada. It's about 5% of the total originations in Canada. It's been fraught with a lot of issues in the United States. So if that's what we're going to be getting into with regard to a publicly guaranteed company, I think we really ought to study that and make sure it's going to be a positive for both those consumers and homebuyers as well as the government.
Liberal
Michael Savage Liberal Dartmouth—Cole Harbour, NS
Thank you.
I wonder if Mr. Charles or Mr. Tonnesen would answer that same question.