Finance Committee on March 24th, 2009

[The Chair, Conservative, James Rajotte]

Just give us a brief response, please.

[Pierre Serré]

The CMHC's surplus already belongs to the Government of Canada. Each time the CMHC earns one dollar, the government, in its books, can write up one dollar in revenue. Therefore, that consideration is not taken into account.

[The Chair, Conservative, James Rajotte]

Merci.

Mr. Dechert.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair, and good morning, ladies and gentlemen.

I have a question for Mr. Rabbior. Mr. Rabbior, I was looking at the “Newcomers to Canada DayPlanner” that you've kindly provided to us, and I want to commend you on assisting new Canadians with becoming familiar with the financial system in Canada. I can only imagine how bewildering it must be for some newcomers to Canada. I wonder if you could tell us a bit about how new Canadians without credit histories obtain mortgages in Canada and if you are aware of any problems they might be facing in that regard.

After you've had a chance to respond, I'll also direct a question on this to Mr. Serré.

[Gary Rabbior]

I'm not terribly informed on that matter. I just know that a lot of the newcomers whom we are working with, and whom we've worked through various agencies to try to assist, struggle with all aspects of getting their financial house in order once they come here, getting their credentials assessed and so forth.

In many cases, they're also concerned about whom to trust for advice and guidance. What we're finding is that, in many cases, newcomers are turning more towards their communities, towards those in their ethnic groups, religious organizations, which in some cases is problematic, because they may be turning to people who, though trustworthy, lack the expertise to provide proper guidance.

I know that the banks are increasingly trying to set up departments within their institutions to deal with newcomers. We've been involved with Scotiabank and also with Royal Bank and others who are trying to attend better to the needs of newcomers.

But your point is well taken, and it's not confined to the mortgage and credit issue, but it bears on various aspects of financial planning here in Canada.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you.

As I understand it, newcomers without long Canadian credit histories are often unable to get mortgage lending from traditional bank lenders and they often have to go to non-bank lenders. In the current situation, although their mortgages may be in good standing, because of the lack of liquidity in the non-bank lending environment, many of them may be facing situations where they are unable to renew their mortgages in the near future.

Mr. Serré, I wonder if you have any knowledge of that. If you do, what might you suggest we do about it?

[Pierre Serré]

I'm not the expert on newcomers to Canada, but I'm fairly certain we have done some research at CMHC.

In terms of timing, it's not right away, upon landing in our country, where they need to access mortgage financing. They will want to access mortgages probably three years or five years from when they come to Canada. By that time it is likely they will have established a Canadian credit history.

From an access perspective--at least I can speak from Canada Mortgage and Housing's perspective--for mortgage insurance, we would treat all Canadians the same. We take a look to see if they have an ability and willingness to pay and manage their debts. Should they not have a Canadian credit bureau history, we are quite okay in looking at credit bureaus from the land they come from. We are also quite flexible--prudently flexible--in terms of looking at other forms of evidence that supports their ability and willingness to repay their debt. There is some flexibility in our underwriting requirements, though I can only speak from a mortgage insurance perspective. But if you're a first-time homebuyer, you're likely to be in the high-ratio world of 80% or more.

Our policy is to try to treat everyone the same, and we try to make sure that different types of evidence of ability to manage your mortgage can be brought forward--not just an employment letter, for example.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Would you say there's more that can be done to assist new Canadians in obtaining these CMHC-insured mortgages?

[Pierre Serré]

One of the important things would be to make sure there's more information in those communities--and I think that was just mentioned.

One of the things we're embarking on is translating. We have a number of information booklets--on mortgage insurance, for accessing housing and buying your first home. We're in the process of translating that into another eight languages and placing those items in the community.

I think it's quite right that newcomers to Canada are looking to their community for support, so that type of information, in their own language, is going to be very helpful.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you.

Ms. Bose, did you have a comment?

[The Chair, Conservative, James Rajotte]

Yes, she wanted to comment on that.

[Anu Bose]

I want to comment, as a returning Canadian. I'm just speaking as an individual now.

I was gone for 20 years, and when I came back my impeccable credit history from Lloyds Bank--which is now Lloyds Bank of Westminster, as opposed to plain old Lloyds Bank--and the UBS, in Switzerland, was not going to be considered by banks here. So I think certain immigrants to this country will need portable credit histories.

I didn't have a community to go to, and in fact I would rather eschew that kind of credit.

[The Chair, Conservative, James Rajotte]

We're over time, Mr. Dechert. We'll have to move on. You might have another chance.

We'll go to Mr. Pacetti, please.

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

Thank you, Mr. Chair.

Thank you to the witnesses for appearing. This is an interesting subject.

I have a quick question for Mr. Robbior.

I think Mr. McKay alluded to this, in the sense that it's great that you put all this material together, but do you think any of the economists or bankers out there have received any of your material? If they can't get it right, I don't see how we can educate--and never mind new Canadians, but Canadians in general.

It's a big challenge when the experts don't know what's happening and they can't give us proper advice. Here we have Mr. Lee, who just indicated he doesn't invest in banks.

Where do we go from here? It's not a criticism, but I'm wondering whether you are educating the wrong people.

[Gary Rabbior]

When it comes to what experts need to know to manage high-level affairs, it is complicated and complex, but when you come down to handling basic economic and financial matters in your life, it isn't extraordinarily difficult. The problem is that we've never put much effort or priority into trying to empower Canadians with the knowledge and skills they need, at even the basic level. It's understandable that some of those in our financial institutions, and elsewhere--in our Parliament and whatever--don't have the background themselves, because we didn't give a priority to making sure this is one of the areas people have a level of competence in.

The resources and whatever are getting used. They're being used in the schools and by newcomers. There is an incredible demand and desire for material.

You have two problems. People don't trust the sources of financial information. You have to win their trust--

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

That's my point exactly. To go back, we trust doctors; we don't necessarily try to learn how to read an X-ray or try to write a prescription.

So are we doing the wrong thing in trying to educate people? Yes, you're right, we are downloading or offloading onto people the management of their own RRSPs, RESPs, mortgages, and these are all complex instruments. As the days follow, more and more complex instruments will come out, but in the end they're probably not worth anything.

So is it up to the professionals? If a doctor fails in surgery or fails in giving you a diagnosis there are repercussions. Here there don't seem to be any repercussions.

[Gary Rabbior]

To draw on your analogy, the doctor often has an ability to try to explain the situation or circumstance you're in and what might be the best medication for you to take. We have a problem here in that often the communication on financial matters from those who are selling financial products is not necessarily clear or understandable by the people to whom they're selling. We have requirements for disclosure that say if I mail you something in the mail, I've disclosed the information. It doesn't necessarily mean you've even seen it, let alone read and understood it.

Part of what we have is no obligation, no commitment to making sure that the Canadians who are desperately trying to make decisions and handle their affairs are being provided with both the capacity and the information and language to understand them. What we have developed as an expertise in being able to explain some of these complex matters in clear language that people can understand.... Unfortunately, so much of the material from the private sector, governments, and institutions is very complex.

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

I know Mr. Arnold and Ms. Bose are both nodding their heads, but I want Mr. Lee to answer. How do we regulate the shadow banking system? You're asking us to regulate it, but it's a huge market. Where do we start and where do we end? What does it include?

[Prof. Ian Lee]

It's certainly going to include investment banks. It's certainly going to include hedge funds, the regulation of credit swaps, derivatives. There are all kinds of proposals being put forward in the States and in England. I think they're going to end up looking more like banks. We're not going to go back to the old days of the 1980s or 1990s after this crisis is over. I think the banks are going to return to the centre as the dominant financial institutions in both Canada and the United States, because the commercial banks--

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

The little guy is always going to need to borrow money somewhere. If the average bank won't lend him money he'll find it somewhere. If he has to he'll go to a Shylock. These are the kinds of things we have to prevent.

[Prof. Ian Lee]

I guess I don't really see that as a problem, and I'll explain why. There hasn't been a lack of access to consumer credit. Unfortunately, I didn't put the slide in showing the indebtedness of consumers in Canada and the United States. They are wildly overleveraged. The problem isn't being able to get credit at the consumer side; it's that they have too much credit in terms of what they can carry.

[The Chair, Conservative, James Rajotte]

Very quickly, please.

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

We have time. Go ahead.

[Michel Arnold]

As regards those who advise us on complex financial products, last year, Option consommateurs carried out an investigation on financial advisers in Quebec. According to this inquiry, half of all financial advisers do not request basic information to advise a consumer. For example, one is not even asked if he or she has children or is separated. I think this sector needs to be regulated.

[The Chair, Conservative, James Rajotte]

Merci.

Mr. Wallace.