The long wait for a verdict in a billion-dollar housing dispute between the Canada Mortgage and Housing Corporation (CMHC) and the government’s largest mortgage insurer Genworth Canada is likely to remain uncertain for weeks, even months. The case will determine the fate of millions of Canadian home buyers and sellers.
At the forefront of the dispute is the issue of lenders requiring buyers to purchase mortgage insurance. Portions of CMHC’s role as a guarantor of mortgage default insurance are being questioned by some lenders who claim the insurance isn’t necessary or is costing them too much.
The case is related to a decision by the Supreme Court of Canada that ruled that CMHC had to reimburse Genworth, a privately-owned insurer, the $233 million it paid to cover a loan with CMHC loan insurance that eventually went bad. Genworth had argued that it had to fully cover the losses, while CMHC said it should not be responsible for Genworth’s losses.
The decision, which ruled in favour of Genworth, could mean changes for home buyers and sellers, who stand to benefit or be penalized should the court side with either of the two industry giants.
If Genworth were successful, buyers of CMHC mortgage insurance would be subject to higher premiums. Home sellers would also be impacted in that they would not be able to pass this higher cost onto the buyer, as they normally do with their closing costs.
For its part, CMHC claims that any decision that decreases access to mortgage insurance would limit the availability of access to mortgage financing. If mortgage insurance premiums increase as a result of the court’s decision, governments across the country may become involved, with the possibility of them providing subsidies or other incentives to help lower the cost of mortgage insurance.
Despite the high stakes involved, neither of the two parties involved in the dispute has offered any insight as to why the court has made no decision on the matter. Observers say that the prolonged waiting period likely means that a decision will take much longer than was previously expected.
It is uncertain how long it will be before a decision is made in the case between CMHC and Genworth, but one thing is clear – the outcome of the case will have wide-reaching implications for home buyers and sellers throughout Canada. Until then, all that Canadians can do is wait and see what the court decides.