Finance Committee on May 29th, 2006

[Dale Ripplinger]

You're looking at the extreme--

[The Chair, Conservative, Brian Pallister]

Perhaps you could give the panellist a chance to respond at this point, Madam Wasylycia-Leis.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Sorry.

[The Chair, Conservative, Brian Pallister]

Mr. Ripplinger, finish your response, and then we have about a minute left for someone else.

[Dale Ripplinger]

Competition may lead to reduced premiums. That's simply stated. What about increased...?

We've talked about product diversification and new products into the market. What about high-ratio financing for construction of new low-income housing, money that might be available to provide low-income housing for people? That part of the market is not being met today because there's no incentive for the private investor to invest in low-income housing.

If high-ratio financing is available for me to build an apartment building in the northern part of Winnipeg, maybe I'll do it. Maybe that competition stimulates those kinds of results. We can't look at it as competition always being the result of the greedy corporate money-hungry person coming in to grab the money. There are some spinoffs that might be quite positive for the kind of people you're looking to help.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

And I'm asking you to give us the proof and the evidence. We should buy a pig in a poke, should we? Nobody is giving us evidence.

[The Chair, Conservative, Brian Pallister]

Madam Wasylycia-Leis, order, please.

The next questioner is Mr. Pacetti.

Proceed, sir. You have five minutes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair.

Quickly, the first question is for Ms. Adams, from the RBC.

I asked this question before, but in terms of the RBC being a lender--you're here as a lender, right?--right now you do business with two institutions. Are you going to do business with more than two, or are you just going to pick one? How will it work if we do open up the markets?

[Catherine Adams]

I think I'm going to have to wait and see what they have to offer. It's a fair bit of work to hook up a new supplier--to put it that way--and roll that out. There has certainly been a lot of interest and a lot of interesting ideas on the innovation they can bring to the marketplace.

But the reason I'm here is to be pro-competition, to at least give them a chance and not to delay that, because I think it will be better for consumers in the long run.

I have looked at the mortgage insurance business in the U.S., the different types of premium structures that exist, and those are interesting and I think they would be very good for consumers to investigate. So I'm in the listing mode, because they're trying to get here.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

But ultimately, you will be the decider of whether you'll have more than one insurer or various insurers, or for what sectors would the--

[Catherine Adams]

The difference, why the lender decides, is because it's the lender who is insured and who makes the claims. It's a very fundamental difference.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So if there is going to be any savings in pricing, will the consumer see any of it?

[Catherine Adams]

They'll see all of it. It's so competitive.

First of all, it's very transparent. They pay exactly the premium. It's not like the lender puts anything overtop of that or around that. They pay purely the premium that's charged.

They're very savvy. They're not unsophisticated at all. They comparison-shop--ruthlessly, I might add.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So the consumer will see it. It won't be factored into the mortgage price. The consumer will be billed separately for the service.

[Catherine Adams]

That's how it's done today, yes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay, and it would continue to be so.

[Catherine Adams]

I expect so. That's what I do.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Good.

Ms. Kinsley, again, I'm not clear. Maybe I missed it, but is the CMHC in favour of opening up the insurance market, or is it not?

[Karen Kinsley]

We believe in healthy competition if it serves Canadians and that competition is committed for the long haul.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay, thank you.

Mr. Ripplinger, just to clear it up, on page 4 of your brief--if I can find it--you spoke about 100% of mortgage insurance, and then in the next paragraph you spoke about a 90% guarantee. Could you explain that to me?

It says, “For this reason, we believe that the Crown Corporation must continue to receive a full 100% guarantee.” It goes on to say, “For this reason, we feel that the current 90% guarantee is reasonable”.

[Dale Ripplinger]

My understanding is that currently CMHC has 100% financial backing from the Government of Canada, whereas the private insurer's limit is 90%.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Is that true, Ms. Kinsley? Is there a difference?

[Karen Kinsley]

Yes, it is true. The difference of 10% recognizes the public policy benefits and costs associated with our mandate that the private sector does not have.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I guess, Mr. Liu, you're the magic person to whom I can ask the next question. How do we make sure that the uninsurable are insured?

[David Liu]

How do we make sure that the uninsurable...?