Mortgage insurance, which is sometimes called mortgage default insurance, is a credit risk management tool that protects mortgage lenders from losses on mortgage loans. If a borrower defaults on a mortgage, and the proceeds from the foreclosure of the property are insufficient to cover the resulting loss, the lender will submit a claim to the mortgage insurer to recover its losses.
The law requires federally regulated lenders to obtain mortgage insurance on loans where homebuyers make down payments of less than 20 per cent of the purchase price of the home. The borrowers are required to pay for the premium for the mortgage insurance, which can be added to the mortgage balance.
Mortgage insurers work with lenders, mortgage brokers, real estate agents and builders to make homeownership more accessible to Canadians. There are currently three mortgage insurance companies in Canada:
CMHC - Canada Mortgage and Housing Corporation
Genworth Financial Canada