The socio-economic disruption brought about by the COVID-19 pandemic brought deferrals to the fore as a vital support system for Canadian households that suddenly found their purchasing power severely restricted.
Data from the Canadian Bankers Association indicated that deferrals since March represented approximately 16% of bank-based mortgages, amounting to more than 760,000 borrowers.
However, Genworth Canada said that it forecasted a “vast majority” of six-month deferrals shifting to regular payment schedules very soon – with a significant caveat.
The private-sector residential mortgage insurer “expects that a subset of insured mortgages with payment deferrals will likely end up in default after the deferral period ends,” Genworth said. “As a result, the company and its lenders have plans in place to increase loss mitigation activities to address the increase in reported delinquencies that is expected starting in the fourth quarter of this year.”
Canada Mortgage and Housing Corporation recently said that an extension was not on the table.
“In developing the COVID-19 Default Management Playbook, the insurers did not feel that further extensions were a viable option on a global basis,” CMHC said. “If the borrower cannot be helped with the existing (default management) tools (stable source of some revenue), then there are few options as there are no government programs currently available.”
MBN
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