Good afternoon. My name is Winsor Macdonell. I am the Senior Vice-President and General Counsel for Genworth Financial Canada.
Our president, Peter Vukanovich, could not be here today and sends his regrets.
I would like to thank the committee for allowing me to participate in the hearings on Bill C-37. I apologize for my late arrival.
Genworth is Canada's home ownership company. We are the largest private sector provider of mortgage default insurance in Canada. Since 1995 we have helped over 700,000 middle-income Canadians achieve the dream of home ownership.
As you are probably aware, mortgage default insurance protects lenders against losses caused by a homebuyer's default on a mortgage, particularly low down-payment mortgages. It should not be confused with creditor life insurance, which has been the topic of discussion recently.
The benefits of mortgage default insurance are clear. It is the fastest and least expensive way for Canadians to get a home and build wealth sooner. Broadly, mortgage insurance increases the efficiency of the entire mortgage industry and contributes to the safety and soundness of the financial sector. Because of these benefits, mortgages with low down payments account for about half of all mortgages originated in Canada, and are a major reason Canada has one of the highest home ownership rates in the world.
Genworth supports the proposal in Bill C-37 to raise from 75% to 80% the loan-to-value threshold above which mortgage insurance is required by law. The 80% threshold is consistent with the threshold used in other major lending countries, such as the United States and Australia.
I would like to take this opportunity to thank the government, and particularly the Department of Finance, for being responsive to the issues raised during the consultation exercise leading up to the legislation. For us, while raising the minimum to 80% is an important change, even more importantly, the review that was conducted highlighted the value our mandatory system brings to Canadian consumers and lenders.
Mandatory mortgage insurance works in Canada because it allows mortgage insurance companies to spread the risk of homebuyer default across a large pool of loans, including varying borrower profiles, different geographic regions, and various lenders. This pooling effect results in fairness and choice for consumers, who pay the same premium regardless of where they live. It is clear that a weakening of the mandatory requirement would result in consumers having to pay considerably more by way of higher interest rates for low down-payment loans.
Our system is working for Canadians. For the average family, real estate assets currently account for about 35% of their overall wealth, up from 29% just four years ago. At the same time, Canada's mortgage insurers collectively reduced premiums twice since 2003, effectively keeping $700 million in the hands of homebuyers.
Mortgage insurance also helps Canadian homebuyers in another way. Genworth is particularly proud when it can help homebuyers stay in their homes when they experience periods of economic distress and default on their mortgages due to temporary job loss or illness.
Beyond individual consumers, mandatory mortgage insurance also benefits the entire mortgage industry. The current system enables vigorous competition between national and regional lenders, like credit unions, and encourages product innovation to help growing segments of the population—such as new Canadians, self-employed people, and renters—to purchase homes. It also helps maintain the availability of mortgage credit at affordable interest rates during good and bad economic cycles, because lenders transfer the risk to well-capitalized, specialized insurance companies.
In closing, we support the change in Bill C-37 to raise from 75% to 80% the loan-to-value threshold above which mortgage insurance is required.
Thank you for your time.
I will be pleased to answer your questions.
Thank you very much.