Okay. I'll stop there.
Evidence of meeting #208 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was payment.
A video is available from Parliament.
Evidence of meeting #208 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was payment.
A video is available from Parliament.
5:25 p.m.
Liberal
5:25 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
You're going to be able to acquire an interest or, let's say, shares—up to 10%—in housing projects. Is that correct?
5:25 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
I'm sorry; I didn't catch that.
5:25 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Under these two subsections of section 57, you'll be able to acquire an interest and shares in housing projects in Canada?
5:25 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Thank you for the question.
The program provides up to 5% funding for an existing property and 10% funding for a newly built property.
Yes, the amendments allow CMHC the authority to deliver on the program and to provide that funding.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I see.
How can the purchaser take advantage of the program in question?
Will it be automatic, or will it be up to you to determine in each case whether it's worthwhile to invest in the project?
5:30 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
As the budget announced, there are certain eligibility criteria that the prospective buyer must meet in order to qualify for the program. This includes an annual household income limit of $120,000, as well as a mortgage loan-to-income limit of both the first insured mortgage and the incentive of four times income. Beyond that, there are still terms and conditions to be released by the Minister of Finance in the coming month.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Let's talk about a scenario in which the program would be developed. Will the arrangement be decided at the time of purchase of the property and of the signing of the mortgage taken out at the financial institution, or will it have to be done in advance?
In other words, will a certain form of agreement have to be reached before the buyer goes to the financial institution to proceed with the purchase?
5:30 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Those types of application process issues are still being sorted out and will be announced with the terms and conditions in the coming weeks.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I see.
That's unfortunate because we're being asked to vote on this provision without having the details. You're telling us they'll follow, but in what form? Will they be transmitted to us by regulation or simply by an announcement and a policy published on a website?
5:30 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
It will not be by regulation. There will be an announcement. The government hasn't determined how it wishes to make that announcement, but I imagine it would be released by CMHC on its website.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Has anyone determined the cost of this measure to the Canada Mortgage and Housing Corporation, or CMHC?
Do you have enough cash to take part in this kind of program, which will potentially require substantial funding?
5:30 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
As the budget announced, there's a program cap of $1.25 billion over the three-year program. Beyond that, terms and conditions will provide more information about the program risks and how they're being managed.
The program parameters announced in the budget are one example of how they limit the risk to CMHC and the taxpayer. For example, the borrower would still need to qualify under mortgage rules for the insured mortgage in order to be eligible for the program.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
You say you'll also talk later about the risks inherent in this kind of undertaking, in the event you acquire an interest in housing projects in Canada.
However, according to the scenario, what would happen if the owner of a housing project could no longer make his payments or became insolvent and the bank or financial institution virtually took possession of the property?
What would happen to your interest in the financing—5% or 10%—of that housing project?
5:30 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Those types of specifics will be outlined in the terms and conditions to follow. It would depend on the conditions under which the buyer is required to repay CMHC and the repayment amount, and those things still need to be specified in the terms and conditions to follow.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Will the buyer then have to make payments to both the financial institution and CMHC.
5:30 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
The idea is that the first-time homebuyer incentive has no ongoing monthly payment, so no ongoing principal or interest payments. Because there are not those payments on the incentive, it will allow the borrower to potentially reduce their monthly mortgage costs.
5:30 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I read somewhere that it will be payable on the sale of the property. So that's when CMHC will be able to recover the invested money.
Perhaps you have shares in housing projects that present a risk. Will you assess the number of people who may wind up in default of payment? Have you conducted risk assessments on the number of cases or the number of housing projects that present a risk?
5:35 p.m.
Michel Tremblay Senior Vice President, Policy, Research and Public Affairs, Canada Mortgage and Housing Corporation
I can answer that question.
We obviously don't assess every case individually. However, we consider various scenarios to determine what might happen. But it's difficult. We don't know where the buyers will be. The market may vary from one region of the country to another.
As Ms. Leach mentioned, we develop scenarios and assessing risks, but not on a case-by-case basis. It's more of an analysis.
5:35 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I see.
It's unfortunate we don't have more details, Mr. Chair, since we're being asked to approve these provisions in the act.
5:35 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Dusseault.
We'll turn to Mr. Poilievre and then Mr. Viersen.
5:35 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you, Madam Leach, for your presentation.
In the event of mortgage default loss, who would first take the hit, the Canadian taxpayer through CMHC or a bank?
5:35 p.m.
Director, Housing Finance, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
It depends on the structure of the program, the exact legal structure of the first-time homebuyer incentive, and that has not been announced yet. It will be something announced as part of the terms and conditions.
5:35 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
What is the highest price of a home for which a buyer would qualify for this kind of incentive?