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Genworth Tightens Credit Requirements

April 30, 2009

Genworth Financial Canada tightened several of its credit rules for insured mortgages in mid-April and cut both its credit assist and high-ratio rental programs - further signs that non-A borrowers might have bigger challenges in the current market.

"Genworth's portfolio may be scrutinized a bit more because of having only 90% government backing and that scrutiny is probably why they're tightening up their guidelines," said Marty Coubrough, broker/owner of VERICO One Link.  "They have to prove to the investor market that what they're putting in the market is something investors can feel secure with."

Among the new guideliens is a beacon score requirement for people buying units in highrise condos (more than four floors), as well as increased credit scores for self-employed borrowers (for example, a beacon score increase from 650 to 700 for 85% to 90% loan-to-value ratios).

In a statement, Genworth said it "is committed to insuring quality loans that make sense for everyone... Our recent product and guideline changes are a direct response to this and are intended to help Canadians purchase and refinance homes they can afford now as well as in the future.

This move could bring more business to CMHC, which has not announed similar measures.  But, if the federal agency introduces similar guidelines, more borrowers may be left behind.  "If CMHC follows Genworth's guidelines, the market will be rightened as far as liquidity is concerned, which is not good," said Coubrough.  "People that probably deserve to get into the housing market won't qualify, and that's not good for economic recovery."