Finance Committee on Jan. 30th, 2017

[Christopher White]

Thank you.

You heard it on the last panel, and I think the reflection of a lot of the members was, “You have a problem, a challenge in two cities, but you propose this blanket policy or pan-Canadian policy.” I think what you are hearing from this panel is that we understand, and no one is suggesting that the government hasn't acted prudently post-2008, but there comes a point where they need to engage stakeholders more.

When the provisions were introduced last fall, it caught everybody off guard in the marketplace. When we look at the credit union system, for example, we see credit unions across Canada that were implementing policies that had been sanctioned by Finance and the Bank of Canada but now have come back to bite them, and they had no warning. I understand that you need to address the Toronto market and the Vancouver market, but there has to be a way that you can calibrate your policies so they are specifically targeted, much like you do for EI, for example. You have targeted regions, and you have targeted, segmented markets across Canada. Having worked at HRDC on the political side, I know it's a really challenging policy to implement, but it does work. That's where the government has an opportunity.

The last point would be—

[Phil McColeman, Conservative, Brantford—Brant, ON]

Can I just interrupt you? I'm sorry. I'm going to cut you off. I have a certain period of time and I have a lot to cover.

Were you consulted on the changes last fall?

[Christopher White]

No.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Were you consulted?

[A witness]

No.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Were you consulted?

[A witness]

No.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Were you consulted?

[A witness]

No.

[Phil McColeman, Conservative, Brantford—Brant, ON]

So no one in your realm, across the board, was consulted by the Minister of Finance on bringing in those changes. Am I correct? Thank you for that.

The realtors weren't consulted, by the way. The Canadian Home Builders' Association was not consulted. We're talking about internal government bureaucratic decisions that are flowing up from the bureaucrats, who, in their wisdom, seem to see how they need to cool the market. They tell the minister, through the deputy minister, “Oh, here is something we should do to cool these markets.”

Do you think it's going to work? Do you think it's going to work in Brantford? Do you think it's going to work in Simcoe, Ontario? Do you think it's going to work somewhere in Calgary, when the market is going down the tubes? No, it's not. It's only going to harm the market. I like your idea of a pause. I'd rather see a pause and three steps backwards, frankly, to get this market healthy in most of the country and out of the hot market. Those are my personal comments.

[The Vice-Chair, Conservative, Ron Liepert]

Mr. McColeman, one more quick question and then you will equal Mr. Grewal in time.

[Phil McColeman, Conservative, Brantford—Brant, ON]

I'll actually stop there. Thank you.

[The Vice-Chair, Conservative, Ron Liepert]

All right.

Mr. Caron, go ahead.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

I will continue along the same lines. I am really curious about that, because I'm not familiar with the usual practices when it comes to CMHC or government decisions.

I would like to know if you were consulted on the latest changes. From what I can see, 10 different changes have been made since 2006, generally to restrict accessibility.

Are you consulted about these changes, normally? Were you consulted on the changes that were made in 2011, 2012, 2013 and 2014?

[Robert Martin]

I can take up that one. What CMHC...and I think the finance officials call them sandbox measures. They tend not to consult when they implement them, and they usually play with the parameters around eligibility and things that are already in place. When they do move to actually change the structure of the regulatory regime, whether it's through OSFI or..., then they tend to consult on their guidelines and there's time there. But the sandbox measures all the way along have tended to surprise us.

[Alex Ciappara]

I would say that as federally regulated financial institutions, we speak to government stakeholders often—the Department of Finance, CMHC, OSFI. As regulated entities, we let them know what's going on in the marketplace. But to Rob's point, they don't present us with “Hey, this is what we're doing. What do you think?” But we do have regular consultations and dialogue with federal stakeholders as we are federally regulated financial institutions.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

That's why I'm asking you. You still have these kinds of meetings on a regular basis. Whether decisions are made by the Department of Finance or not, you have that kind of regular communication, don't you?

[Alex Ciappara]

The federally regulated financial institutions such as banks provide them with our views. It's really up to the government to determine how to utilize those views.

[Stuart Levings]

I would just add that we certainly consult regularly with the Department of Finance and, to Alex's point, provide a lot of data. Because we're specifically in the high-ratio space, we often get a sense from them on areas that they're exploring and can guide on potential impacts from that. This example in October of last year was one where we were absolutely caught off guard in terms of the interest rate stress test and the elimination of the refinance from the low-ratio product.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

What about relatively big changes, such as a reduction in the amortization period, which could be a maximum of 40 years in 2006, and is now a maximum of 25 years? Gradual changes have been made, but they are still significant: the maximum amortization period has been reduced by 15 years in less than 10 years.

As for changes that have had a direct impact on your business, have you been consulted in the past, or are you simply asked, at the time, what impact these changes had on your business?

[Stuart Levings]

No, I would say that those original changes through the years of 2009, 2010, 2011, 2012, and 2013 were items that we absolutely supported and were in discussion once again with the government along the way. We were certainly not told, “We're going to do this”, but there was discussion around “We're evaluating potential changes along the lines of this”.

Again, those are changes that have contributed to the the overall strength of the market today. I think our point now is that the most recent change actually generated an incredible amount of confusion in the market, has had probably the most impact of any of the changes to date, and was something that caught the industry pretty much off guard.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Would I go too far by saying that for all these changes that we have witnessed since 2006, this is really the first time that you're not in support of the announcement that was made?

[Stuart Levings]

That is correct. We believe it went too far.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Right.

I have another question.

In many cases, I hear people say that they don't have the information. In fact, I remember that one of your colleagues, Mr. Tal from CIBC, had criticized the lack of reliable information in the housing market, the residential market in particular, across the country.

I would like to know if you think this issue is being corrected. I would also like to know what the needs are now. If changes of this magnitude are made without the right data, what guarantees do we have that the desired effect will be achieved?

[Robert Hogue]

There are still gaps in the data that are made public. Efforts have been made, and CMHC should be congratulated for putting additional information on its portfolio into the public domain, which is fairly representative of the market, in many cases. However, there are indeed still holes.