Thank you very much, Mr. Chair.
Good morning, everyone.
My name is Francesca Iacurto and I am Vice-President, Government Relations, with Genworth Financial Canada. My colleague Winsor Macdonell has been delayed, but he should be here any minute to answer your questions.
Genworth is Canada's home ownership company. We are the largest private sector provider of mortgage default insurance in Canada, and one of the largest in the world. We operate in 25 countries. Today Genworth Canada has about $4 billion in assets and 300 employees, and it operates in every province and territory.
More importantly, we have helped over 900,000 Canadians purchase and stay in their homes since 1995. We have also helped lower the cost of home ownership by reducing mortgage insurance premiums twice since 2003. In pure dollar terms, these industry price cuts have saved Canadian homebuyers $700 million.
Before I continue, I would like to give you some background on the mortgage insurance product and the industry. First, mortgage default insurance is the fastest and least expensive way to achieve home ownership. This is because it allows homebuyers to obtain mortgage financing with little or no down payment while borrowing at the lowest possible interest rates. Mortgage insurance works by covering the lender's loss if the homebuyer defaults on the mortgage loan for any reason other than death.
In terms of our industry, the mortgage insurance marketplace is changing rapidly and is very competitive. There are two established mortgage insurance providers in Canada: the Canada Mortgage and Housing Corporation, or CMHC, and Genworth. Four new private sector companies are now entering the market as a result of federal legislation passed in 2006.
In addition to helping Canadians get into homes, mortgage insurance provides many other benefits. First, mortgage insurance plays an important role in maintaining the safety and soundness of the Canadian financial system. To explain, mortgage default insurance is mandatory under federal legislation for down payments of less than 20%. As a result, about half of Canadian mortgages today are insured, which means that each mortgage application is reviewed both by a lender and by a mortgage insurer before being approved. This second set of eyes is a responsible lending practice that also encourages prudent product development in Canada.
Mortgage insurance also helps small lenders compete against bigger lenders. This competition is particularly important for Canada, where credit unions and regional lenders provide significant services to rural areas and are a major provider of financial services in some provinces.
Mortgage insurance doesn't only help people buy homes, it also helps people stay in their homes when temporary financial difficulties put their mortgages at risk. These difficulties may include job loss, marital separation, serious illness, or accident. Over the past two years, Genworth has helped 580 Canadian households across the country stay in their homes in the face of financial hardship, and it is committed to continue helping more homeowners in the future.
I could provide you with many other benefits of the Canadian mortgage insurance system, but given the limited time, I'll just focus on one more. Mortgage insurers do not exit markets during periods of economic stress. Rather, they help maintain the availability of mortgage loans at affordable interest rates to help smooth market corrections. This is an important point to keep in mind, because as our neighbours in the United States are learning, market conditions can change quickly, and if we do not change with them, we could suffer the consequences.
Let me conclude by saying that Canada has one of the most efficient, safe, and stable housing markets in the world. Our experience elsewhere in the world is that increased competition in mortgage insurance can be beneficial, but it can also be detrimental if it is not properly regulated. Given current economic conditions, it is more important than ever that the federal government ensure that we have a strong mortgage insurance market. To this end, I'll offer the following two recommendations.
First, the federal government's policies in this area should ensure that there are clear rules so that consumers--that is, homeowners who pay for the cost of mortgage insurance--are the true beneficiaries of increased competition in residential mortgage insurance. Consumers benefit from competition, particularly with respect to innovation, competitive pricing, and greater efficiencies, when the market structure has been clearly established.
Second, the federal government's policies should ensure that the rules governing residential mortgage insurance apply equally to all market participants, including the CMHC, so that no artificial advantages for competitors are created or maintained and so consumers are the ultimate beneficiaries of competition.
I thank you for your time. Merci beaucoup.