Under what circumstances might a conventional mortgage (with 20% or more down payment) still be covered by mortgage default insurance?
Correct Answer
B) When the lender chooses to securitize the mortgage
Lenders can buy portfolio (bulk) insurance on pools of low-ratio mortgages so they can be used in government-backed securitization, such as NHA mortgage-backed securities and Canada Mortgage Bonds. Under the Insurable Housing Loans Regulations, an insured low-ratio loan placed in a pool must be in NHA-guaranteed securities. This insurance is acquired after origination and is typically paid for by the lender, not the borrower.
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An Ontario mortgage agent arranges a mortgage for which the lender will pay the agent's brokerage a fee. Under O. Reg. 188/08 made under the Mortgage Brokerages, Lenders and Administrators Act, 2006, what must the brokerage disclose in writing to the borrower?
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