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New mortgage insurer enters Canadian market

AIG CEO suggests 50-year mortgages on the way

AIG United Guaranty became the third company to provide mortgage insurance in Canada in mid-October. Canada Mortgage and Housing Corp. currently handles 70 per cent of the mortgage insurance market in Canada, while private insurer Genworth Financial Canada covers the remaining 30 per cent. Two additional companies are expected to enter the market in 2007.

“We have seen significant activity in the Canadian mortgage insurance industry over the past six months in anticipation of increased competition,” said AIG United Guaranty President and CEO Andy Charles.

Included in AIG United Guaranty's current product offering is insurance for no down payment mortgages, and a “more affordable” insurance product for borrowers whose credit scores have been affected by adverse conditions.

Investors with a 10 per cent down payment will be able to get insurance on rental properties of one to four units. The company is also offering products with 30, 35 and 40-year amortization periods, as well as identity theft insurance coverage.

Charles predicted in an interview that 50-year amortization periods for mortgages would be offered in the Canadian marketplace. He added that AIG United Guaranty has no immediate plans to insure mortgages amortized over 50 years.

A recent report by CIBC World Markets shows that Canada's sub-prime mortgage sector increased by 50 per cent during the first half of 2006, and grew by almost five times the rate of traditional lending. CREA cautions that the report did not provide the actual number of sub-prime mortgages used to generate the statistics.

Sub-prime or "non-conforming" mortgages are often assumed to be inherently riskier than more traditional forms of borrowing. Lenders provide home loans to new immigrants who don't have a Canadian credit history, mortgages for the self-employed who can't easily prove their income, or loans for people who have a bad credit rating. Borrowers are often offered longer repayment periods or lower down payment options, and pay higher rates of interest.

Posted on Tuesday, December 12, 2006 at 01:59AM by Registered CommenterElaine | CommentsPost a Comment

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