Q1 2020 Fixed Income Investor Presentation
Canadian Mortgage Market
Beneficial Mortgage Regulation in Canada
Default
Insurance
Favourable
Legal
Environment
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Under the Bank Act, banks can only advance uninsured mortgages up to an LTV ratio of 80%
Borrowers have to purchase default insurance if the mortgage has an LTV > 80%
Insurance covers the entire outstanding principal amount, up to 12 months accrued interest
and, subject to certain caps, any out-of-pocket costs incurred by the lender (e.g.
foreclosure expenses, legal fees, maintenance costs, property insurance, etc.)
Mortgage default insurance is provided by CMHC and private mortgage insurers (Genworth,
Canada Guaranty)
CMHC is the dominant residential mortgage insurance provider in Canada
In most provinces, lenders have robust legal recourse to recoup losses (e.g. garnishing
wages)
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Taxation
Mortgage interest is generally not tax deductible, which results in an incentive for
mortgagors to limit their amount of mortgage debt
This combination of factors results in consistently low credit losses on the Canadian banks'
mortgage books
CIBC Q1 2020 Fixed Income Investor Presentation
CIBC
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