Evidence of meeting #6 for Finance in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was competition.
Conservative
Diane Ablonczy Conservative Calgary Nose Hill, AB
If all these new products are already coming on the market, why do we need more entrants into the industry to provide new products? They're already coming in with the players we have.
Chief Operating Officer, Canadian Home Builders' Association
We believe that this vigorous competition has got us this far. Others who are entering the business have said they have new products, ideas, and so on that they can introduce to Canada and its mortgage insurance system. We believe that should be allowed to happen. Let there be more competition.
Conservative
Diane Ablonczy Conservative Calgary Nose Hill, AB
Do you think some of the new products have been brought onstream against the backdrop of apprehension that there will be more competitors coming into the industry?
Chief Operating Officer, Canadian Home Builders' Association
I don't know that for sure. It certainly has been suggested, and if that suggestion has any viability at all, it shows that competition does work.
Conservative
Diane Ablonczy Conservative Calgary Nose Hill, AB
Mr. Liu, I have a question for you. You mentioned in your brief that your research shows that more products could be brought onstream that would assist first-time homebuyers, particularly those who are self-employed, and particularly new immigrants. I don't know if you know this, but I worked in the immigration portfolio for a while, and this is a problem for a lot of newcomers to Canada because they don't have the Canadian credit rating history that others might have.
Could you expand on that a little bit for the committee? How do you believe that new immigrants and some of the under-served part of the market could benefit from the entry of a company such as your own?
Vice-President, International Markets, PMI Group, Inc.
Sure. This really addresses that cherry-picking issue as well. We think there is an opportunity to better serve these additional segments of the consumer marketplace, in particular first-time homebuyers who are self-employed, new immigrants, or those who may have some credit blemishes they're recovering from.
Mortgage insurers internationally, and particularly in the United States, have a great deal of experience in working with these customer segments. They can be served effectively by working in strategic partnerships with lenders to design appropriate products that can support sustained home ownership for these segments. These are people who may have very good asset bases, good jobs, and the willingness to pay. They may have had an unfortunate incident at some point along the way.
So we have a great deal of experience, as do some of our new potential competitors here in the Canadian marketplace, in working in these sectors, and we believe we can ultimately add real value for consumers here in those segments.
Conservative
The Chair Conservative Brian Pallister
Thank you.
Madam Wasylycia-Leis, it's your round for seven minutes.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Thank you very much.
I'd like to begin by asking Karen Kinsley about her estimate of what market share the CMHC might lose if this goes through.
President, Canada Mortgage and Housing Corporation
We don't actually have an estimate of that. We very much believe it's dependent on how many competitors and the type of competition they come in with. Are they going to come in, as some might have suggested, with more niche products or more mainstream, or a combination of both? We don't know at this stage.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Is it your understanding that there will be a set market share for CMHC, or is it left that this is a wide-open proposition, so there's no guarantee that you'll be left with 50% of the market or not?
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
So it's really wide open. Anything could happen. This is being recommended without any kind of oversight body in terms of problems in terms of the competition.
To follow up on Diane Ablonczy's questions to Mr. Ripplinger, you have made strong recommendations that there be some sort of criteria, but you have said if that doesn't happen you're going to let it be. You don't care then if there are any safeguards put in place to prevent someone who might enter the field and decide to just take advantage of the marketplace when it's on a high and abandon it when it's on a low. You're not worried at all about the impact on the consumer and public policy.
Director - Chair, Federal Affairs Committee, Canadian Real Estate Association
First of all, it's not in our brief; we did not recommend, you're absolutely correct, that safeguards be put in place, but we do have some reservations, absolutely.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
I'm referring to page 3, where you actually talk about making sure a decision is not taken if there's any possibility of weakening the soundness of our system, and you make another recommendation.
Director - Chair, Federal Affairs Committee, Canadian Real Estate Association
Yes, absolutely.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Those were important contributions, but now it seems that you're prepared to just let them go. We've had similar recommendations from Desjardins. Again we're here today with no recommendations to do anything but give a holus-bolus blanket approval to something for which there are no safeguards.
Director - Chair, Federal Affairs Committee, Canadian Real Estate Association
No. I think when I answered Mr. McCallum's question, I said on balance, if we had to decide one way or another, we would say that we prefer competition. That's not to say that we would say there shouldn't be--
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Okay, but we're left with this choice today, so that's why it's important, and that's why your answer is important. We could be giving approval today without any safeguards in place or any protections for consumers.
Director - Chair, Federal Affairs Committee, Canadian Real Estate Association
That's up to you.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
You're right, and it's a tough decision, and it's something that I don't accept.
I want to ask Catherine Adams a question, since she suggested in fact that the lenders will just automatically take care of this, protect the marketplace, protect consumers, and protect us from any mortgage insurers who might want to be selective in their approach or take advantage of consumers.
It's a pretty hard thing for us to sit and accept when in fact the lenders themselves and the banks, like the Royal Bank, have chosen to abandon certain communities holus-bolus as it is. In fact, it rings very hollow to hear that kind of assurance, for our committee to suddenly go ahead and give this blanket approval, when the Royal Bank can pull out of a community like Winnepeg's north end—every single one of its branches—and not have any kind of care or concern when a whole community is abandoned, making a mockery out of this whole session, because in fact there are no lenders. This is a low-income community. And you are going to suggest that this community is going to be suddenly served?
Mr. Liu, you're going to suddenly serve the 20% of aboriginals in my community who are low income and would like to own a home? Are you going to put some money on the line? Are you going to do what CMHC does and ignore the premiums if they can't afford them or if there are certain segments of the population not served?
Mr. Kenward, are you going to ensure that there are still some protections in the system? Who is going to do that? If we open this up, nothing is left. Have you an answer to that?
Ms. Kinsley, why isn't CMHC taking a tougher line on this? Why are you sitting back and letting it happen? Through the mortgage insurance you're able to actually get some money that you can plough back into the system to meet the objectives of affordable housing. We're prepared to throw that to the wind. Is someone telling you that you have to do this? There does not seem to be any rational basis for any of this. We have no studies. The finance department has given this committee not a single study. The CMHC didn't even come with a written brief today. There has been no documentation about the need for competition in this area, no evidence that consumers are now not being served.
We know that in fact the CMHC increased its mortgage insurance by 15% in one year. It's doing a fairly significant business. No one has told me that they're not able to do the job.
So I would like to know what is really behind all of this. Is it that mortgage insurance is trying to get into the lending field by the back door? Is it some attempt for the financial corporate sector to control it even more and wipe out services to more communities like Winnipeg north? What gives here?
Conservative
The Chair Conservative Brian Pallister
There are, by my count, nine questions. Who would like to take those on?
Mr. Ripplinger.
Director - Chair, Federal Affairs Committee, Canadian Real Estate Association
Just to respond in general, I think you can also look at the argument that premiums for lower-income Canadians may be reduced. This may in fact increase competition, may in fact make it easier for people to buy houses.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Did you mean to say some of the mortgage insurers will actually forgive premiums--
Director - Chair, Federal Affairs Committee, Canadian Real Estate Association
Oh, not at all. Of course not.
Judy Wasylycia-Leis NDP Winnipeg North, MB
--like CMHC does when there's a real need? Will they?
So who's going to do that, then, when we're meeting dire needs in certain communities, communities that are remote or inner-city communities that desperately need affordable housing? Who's going to make that happen?