Evidence of meeting #29 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was need.
A recording is available from Parliament.
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
It's $115 million so far: 6,000 participants, as of our current numbers, and 6,300 applications.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
Right, yes.
In your testimony, you mentioned that there could be as many as one-fifth of mortgages that could be in arrears.
Did I hear you correctly?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
It could get there by September if this continues. Right now it's 12%, sir.
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
It's 12%. Okay. That's a staggering increase.
To clarify, in terms of some of the numbers that you provided in an answer to Mr. Poilievre, I think you provided a figure as to how much CMHC could stand to lose as a result of mortgage defaults.
Did you provide a figure to that question?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
I said that with regard to our stress testing, which is stress beyond the current environment, we could lose up to $9 billion in [Inaudible—Editor]
Conservative
Michael Cooper Conservative St. Albert—Edmonton, AB
It was $9 billion. That's what I heard too. Okay.
Mr. Poilievre, do you want to wrap up?
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you.
Mr. President, as you know, under the Basel agreements, Canadian banks, like their international counterparts, have to keep a certain buffer of liquid assets on hand.
I understand that banks have been selling you their mortgages and then buying them back and claiming that those repurchased and now government-backed mortgages count as their liquid assets. Is that the case?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
That is, and they pay a fee for that, sir.
Conservative
Pierre Poilievre Conservative Carleton, ON
Do you think that is consistent with what we intend when we require, for regulatory reasons, that a bank have a buffer? I typically think of that as being cash or highly liquid treasuries. It seems like a bit of an accounting trick that the bank would send those mortgages over to you, you'd give them a stamp, send them back, and then they'd claim that those are their liquid assets counting toward their buffer.
I'm not a banker or an accountant, but it does seem like it's not in keeping with the regulatory purpose of that policy.
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
We want them to insure mortgages for the purpose of securitizing, as I think you would remember. We are monitoring that activity right now.
We assume that what's happening is an adjustment period and that what we're seeing is temporary. However, as you would know, within the OSFI rules and the Basel rules, converting a credit from a person's mortgage credit to a government credit, which is what an insurance policy does, makes it more creditworthy to the banks.
Conservative
Pierre Poilievre Conservative Carleton, ON
Yes, that is true, and the taxpayer is backing it up.
In conclusion, one alternative, as I mentioned in my opening remarks, would be to move towards covered bonds. Instead of having a taxpayer backing for all of this debt, the debt would be backed up by a strong and even excessive collateral, which is widely practised in Europe. In Canada, it only represents 9% of Canadian mortgages. According to a report by the Bank of Canada, the reason is, “Instead, banks have been relying primarily on cheap government-guaranteed mortgage funding options.”
Is it possible that CMHC, and the backing of Canada Guaranty and Genworth by the government, is actually pushing out this market mechanism that could give us a secure form of backing up our mortgages without putting the liability on the backs of taxpayers?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
Chair, in response to the question, we are very careful to make sure, with the benefit of private competitors, that this is being priced in a market way. We charge significant premiums, and that's the reason we've returned $17 billion to the federal government over the last 10 years. It's a market function; it's a commercial function.
Liberal
The Chair Liberal Wayne Easter
Okay, we'll have to end it there. That was a very interesting discussion. I learned something, too.
We'll go to Ms. Koutrakis, and then we'll have a single question from Ms. May and a single question from Ms. Dzerowicz.
Ms. Koutrakis.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you, Mr. Chair.
Thank you, Mr. Siddall and Ms. Bowers, for this most interesting discussion this afternoon.
I'm going to go back to the CECRA. I've heard from many small businesses in my riding that lot of the landlords, as many of us have said this afternoon, are not participating in this very important program. In fact, I've heard that some landlords are saying they have been advised by their lawyers not to participate in this program.
Why do you think this is?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
That's self-serving misinformation, frankly. It's not a smart thing to do. It's going to cost them more money. I don't know if people think they can negotiate a program with us, but that's not the way the world works.
Liberal
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
When we will be publishing information on our website, we will make sure it gets to all members. Please share that widely.
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
We will, of course, promote it on social media.
Liberal
Annie Koutrakis Liberal Vimy, QC
Moving forward with our new reality, which is Zoom meetings and working from home, with many employees currently finding success in working from home, there has been some speculation that businesses may choose to maintain a work from home policy, even after the pandemic has passed.
In your opinion, can we expect a decline in the number of businesses deciding to rent or purchase physical workspaces?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
Well, that would require conjecture.
I will tell you that at CMHC before this crisis, as a result of investments we made in IT and mobility for employees, and also to give them the opportunity to work more closely with their clients, we did have a reduced footprint of folks at the office, and we were compressing from four buildings to one. That's our experience.
It seems to me there could be reduced demand for office space, especially as people try to protect their health in the near term.
Liberal
Annie Koutrakis Liberal Vimy, QC
Right. Do you think this is an issue that may need to be addressed through federal policy or not?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
I'm probably outside of my territory here. The government standing in front of economic forces tends to be a battle that's hard to fight. We tend to address market dislocations and market failures pretty effectively. That may not be in the category of market failure.