Final Mortgage Insurance Guarantee Parameters

Those of you who are following this blog may remember my tirade a few weeks ago about the changes to CMHC insurance rules, particularly in regards to fixing a minimum credit score at 620 and removing all discretion from lending institutions in working with people on the "bubble" as it were.

The following is extracted from an email delivered to me by the Canadian Association of Mortgage Professionals in regards to this issue which answers a number of these issues.

On Friday, September 19, 2008 the Department of Finance issued its final
mortgage insurance guarantee parameters and accompanying explanatory notes.

The final guidelines follow the initial announcement on the
financial
guarantee for mortgage insurance providers issued July 9, 2008 by
the Department
of Finance.

There are two noteworthy changes from the draft parameters:

1. Elimination of reference to a Total Debt Servicing (TDS) number, replaced
by a
principles based approach;

2. Reduction in minimum credit score to 600 from 620. Three percent "basket"
for flexibility remains;

These modifications follow discussions with stakeholders, including CAAMP.
CAAMP through its submission focused its comments on the minimum credit score
and welcomes the decision by the Department of Finance to adjust the credit
score. For more information on the mortgage insurance guarantee parameters click
here for Schedule A and click
here for Schedule B. All of these changes come into effect October 15,
2008.

If you have any questions please contact jmurphy@caamp.org; 416-385-2333 ext. 31Jim Murphy, AMPPresident & CEOCAAMP/ACCHA

This is an example of how concerted effort on behalf of an industry can help to protect the public from a poor legislative or regulatory change.

More importantly, it leaves the job of evaluating credit risk in the hands of the industry as a whole, justifiably in my opinion, given the record of the Canadian credit granting industry in maintaining stability while the rest of North America goes to hell.