SOR/2012-231201211
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20196
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PROTECTION OF RESIDENTIAL MORTGAGE OR HYPOTHECARY INSURANCE ACTProtection of Residential Mortgage or Hypothecary Insurance RegulationsP.C.2012-1450201211
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His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to paragraphs 41(b) to (e) and (h) of the Protection of Residential Mortgage or Hypothecary Insurance Acta, makes the annexed Protection of Residential Mortgage or Hypothecary Insurance Regulations.S.C. 2011, c. 15, s. 20Interpretation
DefinitionsThe following definitions apply in these Regulations.Act means the Protection of Residential Mortgage or Hypothecary Insurance Act. (Loi)beneficial ownership includes ownership through one or more trustees, legal representatives, agents or other intermediaries. (propriété effective)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
DesignationTo 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).
General criteriaThe mortgage or hypothecary lender must bea corporation whose articles do not restrict its powers to lend in the jurisdictions in which it operates; andone of the following: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,a federal financial institution or an authorized foreign bank within the meaning of section 2 of the Bank Act,a trust, loan or insurance corporation that is incorporated and regulated by or under an Act of the legislature of a province, ora cooperative credit society that is incorporated and regulated by or under an Act of the legislature of a province.Criteria for underwritingTo underwrite mortgage or hypothecary loans, the mortgage or hypothecary lender must, in addition to meeting the criteria set out in subsection (1),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;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; orhave 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.Criteria for administeringTo administer mortgage or hypothecary loans, the mortgage or hypothecary lender must, in addition to meeting the criteria set out in subsection (1),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;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; orhave 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.Exception — designated cooperative credit societiesA 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
Exceptions to reinsurance restrictionsFor the purposes of subsection 11(2) of the Act, an approved mortgage insurer maycause itself to be reinsured against any risk that it has undertaken under its policies only if the reinsurer is also an approved mortgage insurer; andreinsure 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
Restriction — substitutionAn approved mortgage insurer must not replace an insured mortgage or hypothecary loan with another mortgage or hypothecary loan under the same insurance coverage unlessboth 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; orthe 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.Restriction — portfolio insuranceAn 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.SOR/2015-108, s. 1
Persons or Entities in Prescribed Relationship
Nature of relationshipFor 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 andthe 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; oranother 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 totalmore than 20 per cent of the outstanding shares of any class of the qualified mortgage lender’s voting shares, andmore than 20 per cent of the outstanding shares of any class of the approved mortgage insurer’s voting shares.
Acting in concertFor 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 anyshares of a qualified mortgage lender or of an approved mortgage insurer that they beneficially own;shares or ownership interests that they beneficially own of any entity that beneficially owns shares of a qualified mortgage lender or approved mortgage insurer; orshares 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.Veto or consentWithout 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 understandingby 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; orunder 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.ExceptionPersons or entities are not presumed to have agreed to act jointly or in concert solely becauseone is the proxyholder of one or more of the others in respect of shares or ownership interests referred to in subsection (1); orthey exercise the voting rights attached to shares or ownership interests referred to in subsection (1) in the same manner.
Prohibited policies — exceptionFor 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
Method of calculatingThe 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 formulaA × 2.25%whereAis the total amount of direct premiums written by the approved mortgage insurer in respect of policies that it entered into during that calendar year.Fees due and recoverableThe 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
Reduced capital requirementFor 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.
Reinsurance by companyAn 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.
Existing portfolio commitmentSubsection 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.Existing portfolio commitmentSubsection 4.1(2) does not apply in respect of a commitment that is made before that subsection comes into force.SOR/2015-108, s. 2
Coming into Force
S.C. 2011, c. 15These 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.[Note: Regulations in force January 1, 2013, see SI/2012-87.]