Genworth Mortgage Insurance Australia has taken a stake in OSQO, a start-up that hopes to fill home buyers’ deposit gaps.
OSQO is developing a platform that raises funds from a range of sources, including private investors, to lend to home buyers.
It claims its fees will be cheaper than the cost of lenders mortgage insurance would be if the borrowers took out a loan with a loan-to-valuation ratio over 80 per cent.
OSQO will pay investors quarterly interest at prevailing mortgage rates, which is passed through from the home buyers, and advise home buyers on the best time to refinance and pay out their OSQO loan.
The OSQO investment is one of a number of product and service developments Genworth has made in the past year.
In December, it launched a family assistance program, which reduces the LMI premium paid by a lender when the cost of LMI is funded by the home buyer’s family member and paid upfront at the time of the loan settlement.
By reducing the cost of LMI, the program removes the barrier to taking out high LVR loans and reduces the time needed to save a deposit.
Early last year it started offering lenders the option of paying their LMI premiums monthly.
Monthly premiums address a longstanding criticism of LMI. Borrowers typically pay their full LMI premium upfront by having the premium capitalised and added to the loan. If they refinance and change lenders they will pay LMI all over again, adding to the cost of their property purchase.
Genworth said other benefits of monthly LMI are that it will reward borrowers who pay down their loans faster, reduce barriers to refinancing and reduce the cost of entry into the residential property market.
Genworth chief executive Pauline Blight-Johnston said the clearest evidence that this “enhancement strategy”, combined with better customer service, is producing results is that Genworth has retained all lender customers whose contracts have come up for renewal over the past year.
This includes Commonwealth Bank, Genworth’s biggest customer, which renewed its contract for three years in January.
Genworth released its result for the 2021 year on Friday, reporting a net profit of A$192.8 million, compared with a loss of $107.6 million in 2020.
The 2020 loss was due to the company’s decision to strengthen reserves and also lower returns on invested funds.
Investment income was down again last year, as rising interest rates caused the bond-heavy portfolio to lose ground.
The year’s highlights included a net claims write-back. Paid claims fell from 1254 in 2020 to an “unusually low” 524 last year, with $40.2 million paid out. Reserves were reduced by $48.4 million to reflect low delinquencies, resulting in an $8.3 million contribution to the bottom line from claims.
Net earned premium rose 18.8 per cent to $370.5 million.
In March last year, US insurer Genworth Financial cut its ties with Genworth Mortgage Insurance Australia, when it sold its 53 per cent stake.
GMIA is independently capitalised and the sale had no balance sheet implications.
Blight-Johnston said the company would complete the separation of commercial arrangements with the US company this quarter, with the project expected to come in on budget.
It will launch a new brand later this year.