Finance Committee on May 19th, 2020

[Romy Bowers]

The answer is yes, definitely, and it's great that we're able to act so quickly, but fundamentally we need to attack the source of homelessness. This is a bit of a temporary solution. We need to respond to the COVID crisis and deal with that, but we need to look long term at how we address the homeless situation in a permanent way so that we don't have to be in this situation again if we were to face another pandemic.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Morantz.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

Mr. Siddall and Ms. Bowers, thank you for being here. It's a very interesting discussion.

Mr. Siddall, I'm just going back to some of your opening remarks. You had indicated that 12% of insured mortgage holders had elected to defer.

[Evan Siddall]

Yes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Presumably, that means a large percentage of those mortgage holders would have been in default had that not happened.

There's also the issue of the uninsured mortgage market, which you don't have anything really to do with. I don't know the number, but there is likely a similarly high level of defaults in that market as well.

Also, you mentioned it's a temporary deferral, which means presumably these borrowers are going to have to pay at some point.

What effect do you think that is going to have on the foreclosure and mortgage sale numbers going forward?

[Evan Siddall]

It's a complicated question. Mercifully, I get to think about it all the time.

The 12% I gave you in terms of deferrals is for insured and uninsured mortgages, so it incorporates numbers that we publish and those from the Canadian Bankers Association. I wouldn't associate even half of that with losses or foreclosures. This is people dealing with uncertainty and conserving cash, just like they hoarded toilet paper, because they could and because banks were offering, and we were. Basically, if you said you were having a hard time, we said, “Take a deferral.”

That compassion is what has happened, and I have to give the banks credit. They've done that on uninsured mortgages, in addition to insured mortgages, and our two private competitors were lockstep with us: Canada Guaranty and Genworth Canada.

The impact is going to be that those mortgage-deferred payments are added to the principal outstanding, so it increases our indebtedness. That's one of the costs behind the numbers I gave you.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Has that been agreed to by the banks? Is that what's going to happen, that they'll be—

[Evan Siddall]

That's contractually what happens.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

They'll be capitalized.

[Evan Siddall]

Yes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I want to circle around to a couple of things, a few topics around costs.

In the last number of meetings, we had the opportunity to talk to both the Governor of the Bank of Canada and Mr. Giroux, the PBO. Both have said that they think interest rates are going to go up. I'm curious to hear your thoughts on that as well.

I know no one has a crystal ball, but the governor—

[Evan Siddall]

I wouldn't substitute my views for those of the governor.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Yes, those were pretty strong views.

You did mention in your opening remarks that you wanted to look at adjusting your underwriting policies. I presume you meant to make them more strict, but I want to hear from you just to get clarification on that; and also whether you anticipate CMHC premiums will go up for consumers as well. In other words, is it going to become more expensive and more difficult for Canadians to attain the dream of home ownership, or is it going to become more difficult because of these factors?

[Evan Siddall]

You can see my bodily reaction when I hear this “dream of home ownership” thing come up, because that view.... Unfortunately, trees don't grow to the sky, and what's going to happen is the musical chairs game is going to come to an end and young people, who are very highly leveraged.... In fact, if they get an insured mortgage, they're borrowing at something like 83:1 or 85:1, and that's before they borrow their down payment from their parents or from their RRSP or something like that.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Let's extract the dream of home ownership from my question so that you're not stuck on that. Could I just get an answer from you with respect to the substance of the question?

[Evan Siddall]

We can look at a bunch of things. We can look at pricing, certainly. We can look at down payment requirements. We can look at credit score requirements. All of those things are on the table.

We're actually doing some work right now. Because we're doing that work right now, I didn't want to keep that information from the committee, so I included it in my statement. We're talking to our board of directors this week about all those variables and what we can do.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Do you think CMHC fees might go up?

[Evan Siddall]

Not in the short run, because our pricing work actually takes a long time and we have to look at an economic cycle, but we may restrict the business we do in the short run.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

With regard to the $2-billion dividend, is that an annual thing? Do you give a dividend every year, or is it unusual?

[Evan Siddall]

It's unusual, or it used to be unusual. Over the last 10 years, we've earned about $17 billion of profit that goes to reduce the deficit. That's incorporated into the federal government accounts. Off to the side, we accumulate cash, and if that cash doesn't go back to the government, we'd sit on the cash and invest it. That's dumb, because it can be used to repay debt, so we paid a special dividend—someone will correct me—two years ago, I think, of $4 billion. Maybe it was last year. We were scheduled to pay another $2 billion. In addition to that, we pay a regular dividend, and that's basically just to make sure the money goes to retiring debt instead of sitting in my pockets, if you will.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

The government would have received a $2-billion dividend, and you've maintained that instead of keeping it for liquidity purposes.

[Evan Siddall]

That's correct.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Mr. Chair, I have just one other quick one, if I might.

[The Chair, Liberal, Wayne Easter]

Go ahead. We've got time.