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All you need to know about the new mortgage insurance premiums effective May1st, 2014
Questions and Answers
1. What if a purchase and sale agreement is signed prior to May 1st, 2014 and the mortgage insurance application is submitted on or after May 1st, 2014?
In this scenario, the new premium rates would apply. Even though the purchase and sale agreement was signed before May 1st, 2014, the mortgage insurance application was received by Genworth after the effective date of the new premium rate price change, and therefore the new rates apply.
2. What if I have signed a purchase and sale agreement and I require mortgage insurance, however, the closing date is after May 1st, 2014, will the current premiums still apply?
As long as the application was submitted to Genworth prior to May 1st 2014, the current premiums will still apply.
3. I have a mortgage pre-approval from a lender from before May 1st, 2014, will I still be eligible for the current premium rates if I dont have a signed agreement of purchase until on or after May 1st, 2014?
All applications for mortgage insurance must be submitted prior to May 1st, 2014 with a binding purchase and sale agreement in place to be eligible for current premium rates.
4. If I bought a new construction property (i.e. condo) that is not expected to be built for another two years, will the new premium rates apply?
As long as the application for mortgage insurance was submitted to Genworth prior to May 1st, 2014 and the closing date is prior to the expiry of the Genworth commitment, then current premiums will apply.
5. If I have a Progress Draw mortgage that has been submitted to Genworth prior to May 1st 2014 and the draws are occurring on or after the May 1st, 2014, will the new premium rates be charged?
As long as the application for mortgage insurance was submitted to Genworth prior to the May 1st, 2014, the current premium rates will be charged.
6. What if I am thinking about refinancing my home on or after May 1st, 2014, will I be eligible for the current premium rates?
To be eligible for the current premiums, applications must be submitted to Genworth prior to May 1st, 2014. If the refinance application is submitted on or after May 1st, 2014, the new premium rates will apply.Genworth Financial Mortgage Insurance Company Canada
7. How will the new premiums apply to an existing Genworth insured loan if the mortgage is ported to a new property?
For applications submitted on or after May 1st 2014, the new premium rates plus any applicable surcharges will apply when there is a port and increase to the current mortgage amount.
Changes On Or After May 1st, 2014
8. If I submit an application for mortgage insurance to Genworth prior to May 1st, 2014, and the application then gets resubmitted with changes or updates on or after May 1st, 2014, will the application continue to be eligible for the current premiums.
As long as the original application was submitted to Genworth prior to May 1st 2014, and there are no changes to the property, then the current premiums will still apply.
9. If a lender has cancelled (in error / technology issues/ making changes) a file that Genworth received prior to May 1st, 2014 and then needs to re-open or resubmit the application on or after the May 1st, 2014, can they resubmit and still be charged the current premium rates?
Where the submitting lender does not change, and there are no changes to the property, the mortgage insurance application will still be eligible for the current premium rates.
10. What would happen if there was a previous approval with Lender A under the current premium rates and the same application is then submitted by Lender B on or after May 1st, 2014?
New premium rates would apply to Lender Bs application as it was submitted to Genworth after the May 1st, 2014 deadline.
Week in review
Real GDP continued to recover in August, gaining 1.2% m/m, a result above the +0.9% print expected by consensus. This marks the fourth monthly gain in a row for this indicator, however total output is still down 4.6% from its pre-pandemic (February) level. Production rose in 15 of the 20 industrial sectors covered in August, with two others remaining flat in the month. Goods sector output climbed 0.5% on decent rises for construction (+1.5%) and manufacturing (+1.2%). Industrial production edged up 0.1%. Services-producing industries, meanwhile, experienced a 1.5% surge in production, with the steepest progressions occurring in arts/entertainment (+13.7%), accommodation/food services (+7.3%) and educational services (+3.4%). Year on year, total economic output was down 3.8%.
Canadian GDP registered yet another advance in August but the economic recovery remains highly uneven. Some sectors have now fully recovered from the COVID-19 shock and currently stand above their pre-pandemic peaks. That is the case for agriculture/forestry/fishing/hunting (+2.5% compared with February), finance/insurance (+2.1%), real estate (+1.5%), wholesale (+1.3%), retail (+1.2%) and utilities (+0.8%). That said, certain industries continue to suffer. For instance, production in the mining/quarrying/oil and gas extraction segment remains 17.2% below its February level thanks in large part to depressed energy prices. The sectors most affected by social distancing measures are also struggling to recover. Output in the arts/entertainment segment is roughly half what it was before COVID. Production in accommodation/food services, meanwhile, remains 28.2% short of pre-pandemic levels. Transportation and warehousing is also tracking 20.5% below February. While the economic rebound is likely to have extended into September Statistics Canada advance estimate suggests production expanded another 0.7% in the month the steep gap between the best and worst performing industries is likely to endure in a context in which people continue to avoid social contacts. Looking further ahead, the real question remains whether the recovery can be sustained, especially now that COVID-19 cases are surging back up, forcing some provincial governments to reintroduce social distancing measures.
Is the BoC Doing Enough?
There was no shock and awe in the Bank of Canadas overall set of communications this morning (here, here and here). In fact, the overall guidance appears to be well short of crushing it in my opinion. CAD was little changed in the aftermath of the communications, but it had been depreciating ahead of time with the driver being Covid-19 effects on global risk appetite. The Canada curve was also little affected post-communications with less than a basis point rise in the two-year yield.
Here is what they did on policy measures:
Purchases of Government of Canada bonds were reduced to at least C$4B/week which is down by $1B from previously.
GoC bond purchases will now be skewed toward longer-term bonds in the 3, 5, 10, 15 and 30 year segments of the curve but with MPR guidance (page 25) that purchases in the 3- to 15-year maturities tend to have the greatest effect on household and business borrowing rates. Watch for the next statements of operational details ahead of the next secondary market purchases of GoC bonds for elaboration on what they are targeting in what proportions.
Guidance on how long the purchases will continue remains vague and simply states they will continue until the recovery is well underway. Macklem has previously defined that point to be somewhere between the initial stages of recovery and closure of the output gap, though he did not repeat that today or offer anything else. For modelling their balance sheet Ive tended to assume until mid-2021 as a middle ground, but it could be longer.
Forward guidance was moderately strengthened. They did so by now attaching a statement-codified timeline to the closure of the output gap and achievement of the 2% inflation target sometime in 2023 until which rates will remain on hold. Previously they had indicated they would not hike until this was achieved but did not attach a timeline in the statement. This shouldnt really surprise many by way of new information. Its priced, and we had already largely figured this to be roughly the case.
source: Derek Holt, Scotiabank Economics