Finance Committee on March 24th, 2009

[Anu Bose]

Yes. We sent it.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I did not receive it, and was unable to retain your recommendations, which are surely important. I would therefore like to receive a written copy.

Perhaps the following was not in your recommendations, but do you feel that the Canada Mortgage and Housing Corporation is fulfilling its role as a guarantor, with respect to consumers? In the past, it has been a very significant reference.

[The Chair, Conservative, James Rajotte]

Okay.

[Michel Arnold]

I believe that the Canada Mortgage and Housing Corporation is playing its role. Of course, the various roles played by the various crown corporations can always be improved. Our second recommendation is very significant with respect to accountability mechanisms that financial institutions need to build in to their own lending accountability criteria when assessing a borrower's ability to pay back credit.

If you will, Mr. Chair, I will mention briefly that in January, 14,024 Canadian families were unable to make a mortgage payment. This represents an increase of 29% relative to October. Therefore, 3,158 families were unable to pay back their mortgage loan.

[The Chair, Conservative, James Rajotte]

Thank you.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

We were told that the written document was sent. Did we receive it?

[Anu Bose]

Our statement was sent to your office this morning, but you were not there.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Is it possible to obtain a copy?

[The Chair, Conservative, James Rajotte]

We said this morning, so we will get it translated.

Mr. Rabbior, can you e-mail the clerk explaining the contact information for your organization in order to get copies of those books so that the members can forward them to the schools? I know there are certain groups like the Mennonite Centre for Newcomers in Edmonton that would appreciate these documents. If we can get that sent to the clerk, we will distribute it to all members of the committee.

[Gary Rabbior]

I brought a handout, but unfortunately the French version is out of print right now. It has my business card and whatever on it; it is a resource too. I will certainly provide that to the clerk.

[The Chair, Conservative, James Rajotte]

Thank you.

We will go to Mr. Wallace, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I have just a couple of quick questions.

I think it was this past week that the banking institutions indicated that they're not as in need of support as they thought. Their credit seems to be easing up.

Does that affect the auction? Does that affect the bundling of mortgages and the availability of CMHC to buy bundles of mortgages from them? Has that slowed down? Do you think we'll use up all the $125 billion or whatever is in the kitty?

[Mark Chamie, Treasurer, Canada Mortgage and Housing Corporation]

You're quite right. In the last couple of auctions we've seen it hasn't been 100% full take-up on the auction. I think it was fully expected at the outset of this program that sometimes we'd see full take-up of the auction and at other times we wouldn't. It really depends on the needs of each financial institution and the level to which they want to participate. That is very dependent on each individual situation at that particular time.

What we've committed to is to deliver this program that the government has put forward in which we will purchase up to $125 billion of these NHA mortgage-backed securities. By doing that we'll offer regular auctions in which they can sell those NHA MBSs to us.

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that clarification.

Mr. Lee, thank you for your comments about the securities regulator, that it is voluntary and that provinces can opt in and out if they want. Let's hope they will all opt in when it actually happens.

You talked about leasing and banking and automotive. I happen to be sitting in on a subcommittee on the automotive industry for the industry committee, and there's one individual who keeps blaming the banks a little bit for the automotive business being in trouble. But the banks are not in the leasing business; they're in the business of loaning money on car loans, and they would be evaluating those car loans based on the credit risk of the individual asking for them. Is that not correct?

[Prof. Ian Lee]

In fact, I did that. It was called a floor plan or a dealer plan, where the bank would go in and finance the entire dealership on the business side. We would provide the loans to the business, because every car on that lot and every dealer in Canada is financed by a bank somewhere.

Then they would feed the individual deals to us in the bank and we would approve them on a one-by-one basis if we were floor-planning that dealership.

[Mike Wallace, Conservative, Burlington, ON]

There's a facility offered through this budget that's been passed for $12 billion. Basically, the car manufacturers and the dealers are saying that 40% or 50% of their business used to be leasing. It depends on which company you talk to, but it's gone to near zero.

That $12 billion is really for those leasing arms of those manufacturers to be able to move, as they like to say on the commercial, iron or steel off their lots--actually, to move cars. It's not a bailout. It's not an option for the bank to gather this money for leasing purposes.

Would you agree with that statement?

[Prof. Ian Lee]

Yes, because the banks are prohibited from leasing directly.

[Mike Wallace, Conservative, Burlington, ON]

And that's in the Bank Act?

[Prof. Ian Lee]

It certainly is.

I'm not saying it would solve their problems, but it would certainly alleviate their problems if some additional capital was provided to leasing by allowing the banks to come in. The acceptance companies can't because they're broke.

[Mike Wallace, Conservative, Burlington, ON]

Right, and even if the banks were in the leasing business, do you think there would be an opportunity for them to be competitive? They would compete on interest rates because they're interested in making money on the financial product of a lease, not on moving a car off a lot. Is that correct?

[Prof. Ian Lee]

I realize this is speculative. I don't have data, and I'm a very data-driven kind of person. But we have never tested this. I think you will see, if it was approved, that the acceptance companies would be working side by side with the banks. Some will go through the acceptance company: the Honda acceptance company, GMAC, and so forth. Some will go through the bank. Some like going with banks; some like dealing with acceptance companies. It's about consumer choice in the marketplace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Pacetti.

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

Thank you, Mr. Chair.

I have some quick questions, Mr. Serré. Are you also buying mortgages from credit unions?

[Mark Chamie]

Yes, we'll purchase an NHA MBS from any approved NHA MBS issuer, which includes credit unions.