Evidence of meeting #3 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cmhc.
A recording is available from Parliament.
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
But the borrower who carries a little bit more risk--will he be more readily insured by CMHC or by the private sector?
10:45 a.m.
Vice-President, Research, C.D. Howe Institute
That's unclear. What is clear, though, is that--
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
And the person who carries larger risk should be paying more, should he not, or she?
June 20th, 2011 / 10:45 a.m.
Vice-President, Research, C.D. Howe Institute
Absolutely; however, Mr. Pacetti, that assumes that the vendors of the insurance product are facing roughly the same cost structure. The fact is that the private insurer has much more costly capital because it is not backed by--
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
But will the lender make money if he utilizes the private sector or CMHC? That's the point.
If you can't tell, perhaps Ms. Londerville would know.
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
The lender makes money on the mortgage. The insurance is separate for them. It's just something they have to do.
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So now it's up to the borrower to negotiate with the insurance company through the lender.
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
No. The lender says that they're going to insure this loan, they have to insure it, here is what the fee is, and it's being sent to CMHC or Genworth or....
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
It doesn't really matter who it gets sent to?
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
No. The fees are basically the same.
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So why are we opening this up? Why doesn't it just get controlled by CMHC? We'll keep the costs down instead of having to open up the market.
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
Well, in my view, the more competition you have in the market, the more--
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
But you just told us there was no competition.
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
Well, but there is--
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
You're not allowing me, as a borrower, to compete. It's not an open market. It's not open....
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
Well, from the lender's perspective, if everybody is the same, then they wouldn't care who it went to, and they would say, “Who do you want to insure with?”
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Right. So how is the lender going to determine whether they're going to use the private sector or CMHC? That's still not very clear.
10:45 a.m.
Interim Chair and Associate Professor, College of Management and Economics, University of Guelph, As an Individual
Well, their risk people are saying that they can only send x percent of their mortgages to the private side because they need capital reserves for this.
10:45 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Ms. Kinsley, does your corporation do any marketing? Do you take these lenders out and say to them that they should utilize you rather than the private sector?
10:45 a.m.
President, Canada Mortgage and Housing Corporation
We certainly are offering in a competitive environment, so we advocate our services. I think it's a little simplistic to say--
10:45 a.m.
Liberal
10:45 a.m.
President, Canada Mortgage and Housing Corporation
Competitors.
Mr. Massimo Pacetti --big players coming in, so your marketing is going to increase. The costs for the three private corporations are going to increase as well, because they're going to have to market. If they're not going to market.... The lenders are going to have to market towards the borrower, and the borrower is going to have to insist that they want their insurance to be backed by private insurance or by CMHC. The costs are going to go up, so in the end the consumer is going to be paying for this.
Nobody has made the point that the consumer is going to benefit from this. There are going to be additional costs. If it's not going to be an open market, the consumer is not going to benefit.
I just want to ask you one quick question, Ms. Bell. At Genome, how is the money you will be receiving going to be separated? Is it going to be separated by region? Is it going to be based on matching, on if one Genome branch is going to be able to attract more money...? Or is it going to be based on sector, be it health sciences, or pure and applied science, or whatever?
10:45 a.m.
Executive Vice-President, Corporate Development, Genome Canada
The majority of the funding that we're going to receive this year will go to human health. It's based on scientific excellence and other criteria that we assess. There aren't amounts allocated to any particular region.
10:45 a.m.
Conservative
