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.
9:05 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
No cost to the Canadian taxpayer.
With regard to your first question, we would expect that this funding vehicle will be another option in the suite of funding tools that Canadian financial institutions can consider in terms of funding their operations. We wouldn't necessarily expect their funding would go up dramatically.
9:05 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Given that part of the concern, in terms of the financial crisis of a couple years ago, was deregulation of financial institutions, and perhaps more globalized investment activities of those institutions, is there anything with respect to this change that in any way undermines the security or the regulatory framework that provides stability for Canadian financial institutions?
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I don't believe so. This is moving a model that is currently contractual. As I said, currently approximately $60 billion of covered bonds have been issued by Canadian financial institutions under the existing model. We're creating a legislative framework, so you could argue more structure and more streamlining of that framework.
9:10 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Hopefully we're creating more accountability through the legislative framework. Is that part of it?
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Yes, and more uniformity across the covered bonds that are issued by Canadian financial institutions.
9:10 p.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
You're saying right now it's about $60 billion. Do you expect that to rise significantly? What do you think the impact will be, if any?
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
It would be difficult to say what it could rise to. I don't think I can comment on that.
9:10 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
I wanted to clarify one thing in terms of the covered bond program, Ms. Pearse. Will the covered bond program increase the potential liability of the federal government? My understanding is no, based on what you've said. Am I correct?
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Yes.
9:10 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
I have Mr. Brison, and I don't have any other members.
9:10 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you.
I've been able to pull up several articles on the genesis of 40-year mortgages in Canada. In one of them, on October 15, 2008, CBC says:
In an effort to stop a U.S.-style mortgage meltdown in Canada, less than a year after introducing the government-guaranteed 40-year mortgage, the Department of Finance is tightening the rules that apply to them.
It goes further, and says:
Just over a year ago, Parliament passed a bill changing mortgage insurance by allowing a 40-year amortization period, thereby making the process of buying a home that much easier.
It also quotes the Canadian Association of Accredited Mortgage Professionals estimating that over that period of the year since the legislation was passed, 37% of all new mortgages taken from that one-year period in the fall of 2007 were for periods longer than the standard 25-year amortization. According to a TD Bank representative at the time, 60% of first-time homebuyers were opting for 40-year mortgages.
I wanted to help edify the committee in general as to the genesis of it: there was a legislative change.
We never had 40-year mortgages in Canada with no downpayment prior to 2007, is that right? It's the first time we've had them?
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I believe you're right.
9:10 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Yes, and the decision to reduce that was made during the financial crisis in the fall of 2008, during the U.S. housing meltdown.
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
I'm sorry. The decision...?
9:10 p.m.
Liberal
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Sorry—the decision to reduce the amortization period?
9:10 p.m.
Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
It was made in October 2008.
9:10 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
That's right. So during that period of time between the government's decision to introduce the 40-year no-down-payment mortgages, it continued until there was a crisis. Is that right? I'm trying to establish the timelines here. If it happened in the fall—
9:10 p.m.
Conservative
9:10 p.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
I've been listening intently to the member ask hypothetical questions, and right now I can't even pronounce “hypothetical” properly, because he's going on and on with hypotheticals. Can we have some questions about what we have in front of us, which is Bill C-38? Could we talk about that?
9:10 p.m.
Conservative