Finance Committee on Feb. 13th, 2017

[Rob Stewart]

Yes, I'll get to your questions, if you don't mind.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Stewart. You have the floor.

[Rob Stewart]

Thank you.

We were looking at it from this point of view: what is a right amount of support to provide, by the taxpayer, to the marketplace? In this case we were aligning the same profile of risk for the high- and the low-ratio mortgages.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

What evidence of risk—?

[Rob Stewart]

Overall levels of non-performance in mortgages are low across Canada generally.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

So what evidence of risk was present?

[Rob Stewart]

The risk here is that you have a situation wherein marketplaces and in markets where they're fuelled by low interest rates, you have a growth in the market and a provision of credit backed by the taxpayer, which leads people into situations of undue risk and ultimately threatens the stability of the lender.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

What evidence was there to suggest that high-ratio restrictions were needed to be applied to low-ratio mortgages?

[Rob Stewart]

I would not put it that way. I would say what we were doing was making the rules and the access for low-ratio to portfolio insurance the same as for high-ratio.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay.

[The Chair, Liberal, Wayne Easter]

Mr. Boulerice.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

I want to thank the witnesses and the parliamentary secretary for being here today.

I'll go back to the question I asked earlier this afternoon.

You spoke a great deal about the need to help the middle class and those who want to join it. I think homeowners and those who are trying to own a home should be helped. In our communities, many people are concerned about this. It's the case in Montreal and in my constituency.

As members, we're invited to visit schools, which is a very pleasant activity. Children ask us questions about a range of topics. Surprisingly, the issue of house and condo prices often comes up. Since they hear the issue discussed at mealtimes, they ask us what we can do to help their parents purchase a house or condo. It makes me sad to think I'll need to tell them, when I return to the schools, that the federal government has taken measures that will make it more difficult for their parents to own homes.

How can you justify these measures to all the young families whose dream is to purchase their first home?

[Ginette Petitpas Taylor, Liberal, Moncton—Riverview—Dieppe, NB]

First, I wouldn't say the situation is being made more difficult for them. Instead, I would say we're trying to help them manage a debt level that's very high in the country. We want to make sure they'll be able to keep the home they purchase. The first home may be slightly less expensive, but they'll be able to remain there.

In the end, we're taking into consideration the overall nature of the situation over the short term and long term. We want to protect Canadians from this debt level, which is really very high and getting higher.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

The debt level of Canadians could be dealt with another way. I think it would be worthwhile for your government to create regulations for credit card interest rates.

Many witnesses who appeared before the committee said they were surprised to see the measures implemented recently because they weren't consulted. I find this surprising, given that you've been in the habit, for the past year and a half, of conducting many consultations, which is good. However, that didn't happen in this case.

Can you explain why?

[Ginette Petitpas Taylor, Liberal, Moncton—Riverview—Dieppe, NB]

Again, as indicated earlier, and as you've indicated, our government has taken a lot of pride in consulting with Canadians on different issues over the past year and a half. I know personally, I've done a number of consultations in my riding.

However, when it comes to this specific issue, we have to recognize that there are sensitivities to the information, and also we have to treat this information very much in a confidential way. We could see that with a leak of some of this information, there could be material commercial impact. People could benefit from this. We really want to make sure that this information is treated in a confidential type of manner.

All this to say that confidentiality must be taken into account. The Department of Finance, the Bank of Canada, CMHC and the Office of the Superintendent of Financial Institutions regularly hold discussions.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

All this still leaves me a bit dissatisfied. I have the impression that things were done behind closed doors to keep people from reacting and to prevent young families in particular from knowing how a property purchase would be affected.

In concrete terms, I want to know whether you have a strategy for helping and supporting co-operative housing communities. Co-operative housing is a very good option that facilitates access to housing for families who, in many cases, are less fortunate than others. I'm very familiar with this situation in my constituency.

[Rob Stewart]

I can't comment on that at this point in time. I can, however, point to the fact that the national housing strategy, which is under way under Minister Duclos, is looking at support for forms of social and affordable housing. The consultations have taken place and the decision is to be announced.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair.

Thank you all for being here.

My first question is for the officials.

Can you, perhaps, speak to what happened in the past, with regard to consultation on items that could potentially have market implications? As we just heard from the president of CMHC, in the past, previous governments have also implemented changes to affect the housing market or mortgage market.

Can you as officials comment on whether there were consultations at the time, or has this been a policy of protecting market sensibilities? I don't mean attributed to one government but in terms of a department policy.

[Rob Stewart]

I can, by all means.

We have now made six changes, six adjustments to the rules for mortgage insurance since the crisis in 2009. In all of those cases, the announcements were made without consultation, in a formal sense, with the marketplace.

Having said that, I can assure you that we have a very active dialogue with the marketplace and we continuously ask them about their views with respect to housing risk and access to mortgage insurance. Furthermore, I can say that in this particular case, the change in the stress test, which was a modest adjustment to an existing rule, was being supported by most of the stakeholders we spoke to before we made the decision.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

I want to go back to the comments of Ms. Petitpas Taylor to clarify something.

I understood you to say that these policies were not focused on hot housing markets, but in fact I heard that your comments were exactly in sync with what we just heard from the previous testimony, that the object of these changes was related to debt load. We can see in the reports and in the testimony, in fact, that it's not just Vancouver and Toronto. We heard testimony—and I believe you were here for that, too—that Montreal was on that list, not because of high property prices but in fact because of consumer debt load.

Can you clarify for me whether your comments were in sync with what we just heard in the earlier testimony, that the object of these changes was not related to hot markets?

[Ginette Petitpas Taylor, Liberal, Moncton—Riverview—Dieppe, NB]

Yes, I acknowledge that the situation in Vancouver and Toronto is acute. However, the borrower vulnerability is not limited to those areas. If we look at the debt load from coast to coast to coast in all different cities, towns, and villages across this country, the concern is the debt load, absolutely.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

This is for whoever can answer. This follows on my colleague's question about competition and the mortgage lender models. I asked this question to some of the witnesses who were concerned about competition. Could those same models exist if they didn't have this, as we heard in earlier testimony, something like a trillion dollars in back insurance?

Could these models exist without taxpayer and government intervention, and is this not more of a protection of that investment?

[Rob Stewart]

In large measure, the development of the lenders in the marketplace relying on portfolio insurance was a product of the fact that the risks associated with the lending could be transferred to the government.

[The Chair, Liberal, Wayne Easter]

I think, Mr. Stewart, you wanted to come in on that earlier question that Ms. Petitpas Taylor answered.