Protection of Residential Mortgage or Hypothecary Insurance Regulations (SOR/2012-231)

Interpretation

Marginal note:Definitions

1 The following definitions apply in these Regulations.

Act

Act means the Protection of Residential Mortgage or Hypothecary Insurance Act. (Loi)

beneficial ownership

beneficial ownership includes ownership through one or more trustees, legal representatives, agents or other intermediaries. (propriété effective)

voting share

voting share means a share of any class of shares of a corporation carrying voting rights under all circumstances or because of an event that has occurred and is continuing or because of a condition that has been fulfilled. (action avec droit de vote)

Designation of Qualified Mortgage Lenders

Marginal note:Designation

2 To be designated as a qualified mortgage lender, a mortgage or hypothecary lender must meet the criteria set out in subsection 3(1) and, as applicable, subsections 3(2) and (3).

Marginal note:General criteria

• 3 (1) The mortgage or hypothecary lender must be

  • (a) a corporation whose articles do not restrict its powers to lend in the jurisdictions in which it operates; and

  • (b) one of the following:

    • (i) a financially sound institution with at least $3,000,000 of unencumbered paid-up capital that is incorporated by or under an Act of Parliament or of the legislature of a province,

    • (ii) a federal financial institution or an authorized foreign bank within the meaning of section 2 of the Bank Act,

    • (iii) a trust, loan or insurance corporation that is incorporated and regulated by or under an Act of the legislature of a province, or

    • (iv) a cooperative credit society that is incorporated and regulated by or under an Act of the legislature of a province.

• Marginal note:Criteria for underwriting

  (2) To underwrite mortgage or hypothecary loans, the mortgage or hypothecary lender must, in addition to meeting the criteria set out in subsection (1),

  • (a) have at least three years’ experience underwriting residential mortgage or hypothecary loans in Canada and the capability and resources to underwrite such loans and make loan commitments;

  • (b) be a subsidiary of a parent corporation that is a qualified mortgage lender and that meets the criteria set out in paragraph (a), if the parent corporation undertakes to fulfil the task of underwriting residential mortgage and hypothecary loans in Canada for the subsidiary and to be accountable to the approved mortgage insurer for the subsidiary’s performance in relation to those loans; or

  • (c) have paid-up capital of at least $5,000,000 and employ at least two mortgage officers who each have a minimum of ten years’ residential mortgage or hypothecary underwriting experience and who are responsible for underwriting the lender’s residential mortgage and hypothecary loans in Canada.

• Marginal note:Criteria for administering

  (3) To administer mortgage or hypothecary loans, the mortgage or hypothecary lender must, in addition to meeting the criteria set out in subsection (1),

  • (a) have at least three years’ experience administering residential mortgage or hypothecary loans in Canada and the capability and resources to administer such loans and meet all insurance conditions;

  • (b) be a subsidiary of a parent corporation that is a qualified mortgage lender and that meets the criteria set out in paragraph (a), if the parent corporation undertakes to fulfil the task of administering residential mortgage and hypothecary loans in Canada for the subsidiary and to be accountable to the approved mortgage insurer for the subsidiary’s performance in relation to those loans; or

  • (c) have paid-up capital of at least $5,000,000 and employ at least two mortgage officers who each have a minimum of ten years’ residential mortgage or hypothecary administration experience and who are responsible for administering the lender’s residential mortgage and hypothecary loans in Canada.

• Marginal note:Exception — designated cooperative credit societies

  (4) A cooperative credit society referred to in subparagraph (1)(b)(iv) need not meet the criteria set out in subsection (2) to underwrite mortgage or hypothecary loans or in subsection (3) to administer them if, before the coming into force of these Regulations, it was designated as a qualified mortgage lender under an agreement as defined in section 43 of the Act.

Reinsurance

Marginal note:Exceptions to reinsurance restrictions

4 For the purposes of subsection 11(2) of the Act, an approved mortgage insurer may

• (a) cause itself to be reinsured against any risk that it has undertaken under its policies only if the reinsurer is also an approved mortgage insurer; and

• (b) reinsure any risk that another insurer has undertaken under that insurer’s contracts of insurance only if those contracts of insurance are, or could be deemed under section 19 of the Act to be, policies.

Conditions on Approved Mortgage Insurers

Marginal note:Restriction — substitution

• 4.1 (1) An approved mortgage insurer must not replace an insured mortgage or hypothecary loan with another mortgage or hypothecary loan under the same insurance coverage unless

  • (a) both loans are made to the same borrower and the purpose of the new loan is to discharge the outstanding balance of the loan being replaced; or

  • (b) the new loan is made in relation to a loan workout whose purpose is to reduce or avoid losses on a real or potential mortgage or hypothecary insurance claim in respect of the outstanding loan being replaced.

• Marginal note:Restriction — portfolio insurance

  (2) An approved mortgage insurer that makes a commitment to insure a portfolio of mortgage or hypothecary loans up to a specified total value must not insure a mortgage or hypothecary loan in accordance with that commitment later than one year after the day on which the commitment is made.

Persons or Entities in Prescribed Relationship

Marginal note:Nature of relationship

5 For the purposes of paragraph 13(1)(c) of the Act, a person or entity is in a prescribed relationship with an approved mortgage insurer if that person or entity is a qualified mortgage lender and

• (a) the mortgage insurer and any entities controlled by that mortgage insurer within the meaning of section 3 of the Insurance Companies Act beneficially own in total more than 20 per cent of the outstanding shares of any class of the qualified mortgage lender’s voting shares; or

• (b) another person or entity and any entities controlled by that other person or entity within the meaning of section 3 of the Insurance Companies Act beneficially own in total

  • (i) more than 20 per cent of the outstanding shares of any class of the qualified mortgage lender’s voting shares, and

  • (ii) more than 20 per cent of the outstanding shares of any class of the approved mortgage insurer’s voting shares.

Marginal note:Acting in concert

• 6 (1) For the purposes of section 5, two or more persons or entities are deemed to be a single person or entity that beneficially owns the total number of shares or ownership interests that are beneficially owned by them if they have agreed, under any agreement, commitment or understanding, whether formal or informal, verbal or written, to act jointly or in concert in respect of any

  • (a) shares of a qualified mortgage lender or of an approved mortgage insurer that they beneficially own;

  • (b) shares or ownership interests that they beneficially own of any entity that beneficially owns shares of a qualified mortgage lender or approved mortgage insurer; or

  • (c) shares or ownership interests that they beneficially own of any entity that controls any entity that beneficially owns shares of a qualified mortgage lender or approved mortgage insurer.

• Marginal note:Veto or consent

  (2) Without limiting the generality of subsection (1), two or more persons or entities are deemed, for the purposes of section 5, to be a single person or entity that beneficially owns the total number of shares or ownership interests that are beneficially owned by them if they have entered into an agreement, commitment or understanding

  • (a) by which any of them or their nominees may veto any proposal put before the board of directors of the qualified mortgage lender or approved mortgage insurer, as the case may be; or

  • (b) under which no proposal put before the board of directors of the qualified mortgage lender or approved mortgage insurer, as the case may be, may be approved except with the consent of any of them or their nominees.

• Marginal note:Exception

  (3) Persons or entities are not presumed to have agreed to act jointly or in concert solely because

  • (a) one is the proxyholder of one or more of the others in respect of shares or ownership interests referred to in subsection (1); or

  • (b) they exercise the voting rights attached to shares or ownership interests referred to in subsection (1) in the same manner.

Marginal note:Prohibited policies — exception

7 For the purposes of section 14 of the Act, an approved mortgage insurer may be a party to a policy under which the beneficiary is a person or entity referred to in paragraph 13(1)(c) of the Act if, at least 60 days before that occurs, the Minister has been notified that the insurer is or expects to be in a prescribed relationship with that person or entity.

Fees for Risk Exposure

Marginal note:Method of calculating

• 8 (1) The fees that an approved mortgage insurer must pay under section 9 of the Act with respect to a given calendar year are to be determined in accordance with the formula

  A × 2.25%

  where

  A

  is the total amount of direct premiums written by the approved mortgage insurer in respect of policies that it entered into during that calendar year.

• Marginal note:Fees due and recoverable

  (2) The fees are due and payable on March 1 of the following year and may be recovered as a debt due to Her Majesty.

Transitional Provisions

Marginal note:Reduced capital requirement

9 For a period of one year beginning on the day on which these Regulations come into force, the amount of unencumbered paid-up capital required under subparagraph 3(1)(b)(i) is at least $1,000,000.

Marginal note:Reinsurance by company

10 An approved mortgage insurer that caused itself, before the day on which these Regulations come into force, to be reinsured by a company within the meaning of section 2 of the Act against a risk that it had undertaken under its contracts of insurance may, despite paragraph 4(a), continue to be reinsured against that risk by that company for a period of no more than three years beginning on the day on which these Regulations come into force.

Marginal note:Existing portfolio commitment

• 10.1 (1) Subsection 4.1(1) does not apply in respect of insurance coverage resulting from a commitment to insure a portfolio of mortgage or hypothecary loans up to a specified total value that is made before that subsection comes into force.

• Marginal note:Existing portfolio commitment

  (2) Subsection 4.1(2) does not apply in respect of a commitment that is made before that subsection comes into force.

Coming into Force

Marginal note:S.C. 2011, c. 15

Footnote ^*11 These Regulations come into force on the day on which section 20 of the Supporting Vulnerable Seniors and Strengthening Canada’s Economy Act comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

• Return to footnote ^*[Note: Regulations in force January 1, 2013, see SI/2012-87.]