Finance Committee on June 20th, 2011

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

I actually need to quickly go back, because I think my colleague was sort of leading down a different path.

This system has been in place and we are just actually clarifying it in legislation.

Ms. Londerville, do you want to have the opportunity to quickly clarify how this benefits consumers? I don't think you got a chance to respond to some of the previous questions.

[Dr. Jane Londerville]

I think that the more competitors you have in a market, the more competition there is. The fact that CMHC has been able to provide the government with $12 billion over that period of time...it's coming primarily from first-time homeowners paying their mortgage insurance. Is that who should be paying down the deficit?

I think a competitive market could likely change fee structures, for one thing. In some countries you pay an upfront fee and a monthly fee, or just a monthly fee, or just until your mortgage gets down below the 80%. There are other options out there that maybe we haven't considered in Canada.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

We talk about backstopping these mortgages and the government being responsible. To what degree have we ever had to draw down on that 100% versus the 10%? How much are we talking about?

That number of less than 1%, Mr. Poschmann, you talked about that. You talked about less than--

[Finn Poschmann]

That was Ms. Londerville.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Oh, I'm sorry.

Ms. Londerville?

[Dr. Jane Londerville]

Yes, these are mortgages that are in arrears. Mortgages three months in arrears are less than half of one percent.

We do a very good job in the private sector and in the public sector in Canada in underwriting mortgages, and we don't lend to people who can't pay it back. Some people get into trouble. Some people do default. But even of those mortgages that are three months in arrears, some of those will come back and be paid off.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

So there really isn't...?

[Dr. Jane Londerville]

The risk is very low, I would say.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Okay. I just had to sort of head into that point.

I actually intended to talk to Dr. Bell about Genome Canada.

You talked about many different areas of work. I know you have a lot of regional centres. I would presume that if you're doing competitions it's for the private or the university researchers. Could you talk a little about what your regional centres do, versus how your competitions work in terms of research dollars?

[Dr. Cindy Bell]

We launch national competitions in which scientists from across Canada can apply to us for funding.

The primary role of the regional genome centres is to work with the scientists in a centre's region, focusing usually on areas of priority for that region, to prepare them for the competition at Genome Canada, and also to secure the co-funding. As you know, we receive funds from the federal government, which we match dollar for dollar with other funding. A lot of that comes from the provinces. That is one of the main roles of these centres.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I'm from Vancouver, so I'll use Vancouver as my example. Could you talk specifically about what might be happening in that community, where the partnerships are?

[Dr. Cindy Bell]

British Columbia happens to be one of the provinces that has contributed greatly to the genomics environment in Canada, in that they have given specific funding to Genome British Columbia. Not only is that used to co-fund Genome Canada projects, but it also has allowed Genome British Columbia to launch competitions regionally to build up capacity and expertise in areas of priority in British Columbia. For example, the city of Vancouver is home to one of the leading science and technology innovation centres in Canada. It primarily is focusing on DNA sequencing and the technologies that go with it. This allows all of the Canadian scientists to have access to this technology for their research. It's housed in the B.C. Cancer Agency, but projects in forestry, fisheries, environment, and agriculture all have access to the same technology.

This group of scientists has participated in a number of key studies. One, for instance, concerned an individual who had a tumour of the tongue. The appropriate type of treatment could not be identified. Nothing was successful. They sequenced the tumour and identified that the individual had a mutation very similar to a kidney tumour. There is a drug that could treat that and they have now used that to treat the tumour in the tongue. This is something that has come out of the research in Vancouver.

[The Chair, Conservative, James Rajotte]

Okay, you have about 20 seconds.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Have you any other great examples, in 20 seconds?

[Dr. Cindy Bell]

I have lots, actually.

[The Chair, Conservative, James Rajotte]

Give one more brief one.

[Dr. Cindy Bell]

There are great salmon projects that are going on in Vancouver. We have been able to contribute to the sequencing of the salmon genome, which is a key resource to allow us to create a healthier aquaculture industy and wild fisheries industry with all salmonids.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. McLeod.

We'll go to Mr. Marston, please.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you, Mr. Chair.

Thanks to our guests for being here. It has been a very interesting conversation so far.

It seems the private lenders have a way of limiting their liability by selecting particular mortgages they want to protect. Another comment was made that they all should be the same. Prior to 2006 they all were under CMHC.

Two of the presenters talked about 100% backing for private mortgage firms, but I didn't hear anything about moral hazard in that part of the discussion.

A more specific question is if the private sector pays more for capital, why would we want to make the public sector pay more, and how would that benefit consumers in Canada?

I will just throw that out there.

[Finn Poschmann]

Mr. Chairman, if I may take that question, I don't think anyone would recommend that private mortgage insurers be backed 100% by the Government of Canada, or certainly not without appropriate risk compensation in the form of risk adjustment premiums paid to the Government of Canada in a reinsurance model.

What is relevant here is establishing a more level playing field. An important question is why we have significant government involvement, a significant government role in the mortgage insurance business. Certainly you don't need to have a large residential underwriting business to underwrite lending with respect to low-income or social housing properties. These could be addressed through other means. If you are going to have major backing for the private sector essentially as a reinsurer, which is not a bad model, there should be adequate compensation for it.

Let's not forget there are risks going the other way. Back in the 1970s, CMHC ran aggressive home ownership programs, low-income rental housing programs specifically designed to bring low-income people into rental arrangements or ownership arrangements. When the 1981 downturn came, these lending arrangements, insurance arrangements, absolutely went to pieces. By 1984, the actuarial deficit that CMHC was running was $800 million. That represented a significant draw in numbers of the day on the public purse.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Why do Canadians need a 50% increase in the liability insurance--you know, from $200 billion to $300 billion?

[Finn Poschmann]

We're simply talking about expanding the maximum amount that can be underwritten by the Government of Canada. If the marketplace is willing to support that, under prudent underwriting terms there's really no reason it shouldn't.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

You spoke of the downturn in the 1970s and into the 1980s. I was one of the people who went from 10.75% interest to 21.75%, so I know what it feels like.

Ms. Londerville, you've done a study, a report. Do you know of how many industrial countries actually have policies where they back non-governmental mortgage money?

[Dr. Jane Londerville]

I know there are private insurers in many other countries. I don't know to what extent they are government-backed.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Could you qualify “many other countries”? Are you talking half a dozen, or...?