Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was change.
A recording is available from Parliament.
8:55 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
There was a specific decision by the government in 2006 to introduce 40-year mortgages.
8:55 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I don't think so.
8:55 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
This is a matter of history.
Can you describe the take-up of the 40-year mortgages, which were available until the fall of 2008? What was the take-up of them? Some reports were that half of all new mortgages in the first six months of 2008 were 40-year mortgages.
8:55 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
The data I've seen indicate that the take-up on 40-year mortgages was high. Most new first-time homebuyers use whatever is the longest amortization available. For a period of time, mortgage insurers were offering 40-year amortizations, and most new homebuyers were out at that end. When the government imposed a maximum 35-year amortization, most first-time homebuyers were again at the limit.
What we've also seen, though, is that most mortgage holders accelerate their payments through bi-weekly payments or payments over the course of the mortgage that actually move their actual amortization well off the limit.
8:55 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
So the decision in 2006 to extend 40-year mortgages, with no down payment, did lead to a lot of activity. People were exercising that.
The government's limit for government-backed mortgage insurance through private insurance providers has also increased significantly since 2006, from $100 billion to $300 billion. How close are we to that limit?
8:55 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
That number, unfortunately, is not available to the public, given that not all private mortgage insurance companies are public companies.
8:55 p.m.
Liberal
8:55 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
I can't give the number because some of these numbers are proprietary to privately held mortgage insurance companies.
8:55 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
They are within the limit of $250 billion.
8:55 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
We know what the limit is. I think it's $300 billion, isn't it?Or is it $250 billion?
8:55 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
The current limit that applies to the private mortgage insurance companies is $250 billion.
8:55 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
I understand there's sufficient room for them to continue their business. Unfortunately, I can't give the number because there's a joint limit for all the companies. I can't give the number itself because our numbers are not public numbers.
8:55 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
I just want to clarify this point. I want to make sure I understand it correctly.
The Government of Canada in 2006 decided to move to the 40-year mortgages. My understanding, and correct me if I'm wrong, is that it's not the government that makes the decision to move there. The government either allows it or doesn't allow it, but the government doesn't say “Here's a brand-new 40-year mortgage for you.” The finance minister of the government doesn't do that. It's what is allowed or not allowed.
Am I correct on that? I think we need to really clarify this point so that our committee members fully understand this.
8:55 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
As I understand it, in October 2008 the government introduced the first set of criteria for government-backed insured mortgages, and that announcement in October 2008 established 35 years as the maximum amortization.
9 p.m.
Conservative
The Chair Conservative James Rajotte
So prior to that there was no set of criteria established like that.
9 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
That's right.
9 p.m.
Conservative
The Chair Conservative James Rajotte
So 40 years was allowed, but in 2008, when they established their criteria, then 35 years was set as the maximum allowable?
9 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Yes.
9 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, that's very helpful.
We'll add you to the list later, Mr. Brison. Thank you.
Mr. Caron, you have the floor.
9 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you very much, Mr. Chair.
I would like to clarify something. The proposed changes only apply to the issue of securitization of Canada Mortgage and Housing Corporation shares. We are not talking about daily general activities. We are talking about securing the debt and the guarantees it currently has.
9 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
Yes, the changes proposed in this division provide authority for the government to set criteria and approvals on CMHC's securitization activities, but there are no specific changes being proposed in the legislation on those activities.
9 p.m.
Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance
It's only applicable to CMHC.