Lenders and Insurers
Lenders
Candidates should understand lender categories: chartered banks, credit unions, trust companies, monoline lenders, private lenders, and mortgage investment corporations (MICs). Each has different underwriting criteria, rates, and risk appetites. Federally regulated lenders follow OSFI guidelines, while provincially regulated entities may differ.
Insurers
Mortgage default insurance protects the lender if the borrower defaults; it is required for high-ratio mortgages. In Canada, the main providers are CMHC (a Crown corporation) and private insurers. Insurance premiums may be added to the mortgage balance. Note the distinction between mortgage default insurance (lender protection) and mortgage life insurance (borrower protection) - they are not the same.
Traps
A common trap is confusing default insurance with title insurance or life insurance. Another: assuming the borrower directly benefits from default insurance - it protects the lender, though it enables high-ratio borrowing. Also, private lenders are subject to different rules and generally higher rates; suitability and disclosure are still required.
Worked example
Rule of thumb: if LTV > 80%, default insurance is typically required; the premium is often capitalized into the loan, increasing the mortgage amount. If a question asks who is protected, the answer is the lender, not the borrower.