Finance Committee on Oct. 24th, 2024

[Paul Cheliak]

I'm not suggesting we expand our methane emissions, certainly. I'm suggesting we expand the use of natural gas in Canada.

[Don Davies, NDP, Vancouver Kingsway, BC]

Isn't that the same thing?

[Paul Cheliak]

No.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can you expand the amount of natural gas we're using without expanding the amount of methane we're releasing?

[Paul Cheliak]

Yes.

I guess the way we look at it is that if you take a community from oil or propane and move them to natural gas, you have an emissions benefit there. If you produce and use more natural gas in Canada, yes, inherently there will be a slight increase in methane emissions, but when you take someone off a higher hydrocarbon fuel, the net benefit is a positive.

[Don Davies, NDP, Vancouver Kingsway, BC]

Have you ever done a calculation of what the impact of the climate change impacts of that may be?

I just came from Vancouver, where we had an atmospheric river last Saturday. I don't have to tell you about the forest fires, the wildfires, the droughts and those impacts, and the problems facing Canada's agriculture sector as a result of dealing with droughts and floods.

Do you have any kind of estimate of the cost of an increase in greenhouse gas emissions, which, of course, your product would contribute to?

[Paul Cheliak]

What I would say is that if we're looking at greenhouse gas emissions and climate change as a global issue, there are many things Canada can do to help the world. The export of our products to nations that use coal, for example, has a net benefit to global emissions. The resulting effect may be an increase in Canada's domestic emissions but a decrease in the global emissions.

If we're tackling climate change from a global perspective, then I'd suggest that this is something that we should look at, quite clearly.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

[The Chair, Liberal, Peter Fonseca]

It's now over to MP Morantz, please.

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

Thank you.

Mr. Simser, you've written in the past about unexplained wealth orders. I'm wondering if we could get into that a little bit.

Could you talk about what they are, how they can be implemented in both the civil and legal and civil and criminal contexts and what role the federal government might play in encouraging provinces to bring this type of legislation forward or whether or not the federal government is well placed to do it itself?

[Jeffrey Simser]

That is an excellent question. Thank you for it.

With regard to unexplained wealth orders, or UWOs, we have two jurisdictions right now that use them. Those are Manitoba and British Columbia. British Columbia has been the most aggressive with their use of the tool. The UWO is an information-gathering tool. About 100 jurisdictions worldwide use UWOs.

As to what the UWO is, it's a court order saying to someone who's implicated in crime, “You have more assets than your known income and assets could support. Where did the money come from?” If there's a legitimate explanation—your grandmother died and you inherited the wealth—that's fine and that's the end of the matter, but more often than not, there isn't one. That's the stuff that's kind of playing out.

In terms of the role of the federal government, UWOs right now are mostly a civil tool. There are some places where the federal government could think about this. Take sanctions, for example; we have a very poor forfeiture regime under the Special Economic Measures Act. That might be a tool, because we do have oligarch money. It's tied up. We don't know what the legend is behind it. The oligarchs have used very effective advisers to hide the sources of their money.

The other thing the federal government could do is encourage the jurisdictions that don't have civil forfeiture, such as P.E.I. and Newfoundland, to adopt it.

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

Are there civil liberties issues around the use of unexplained wealth orders?

Could someone argue, for example, that it's really none of your business how they got their money, and you can't assume it's legitimate or illegitimate based on how they might respond to the inquiry?

[Jeffrey Simser]

Yes, there are. I personally think that they'll be overcome.

Those are playing out right now in the courts in B.C. For example, money from an investment fraud was placed in the trust account of a lawyer, Mr. Pelletier, who's been disbarred for money laundering— and I love the irony of that—so there's a UWO: Where did that money come from?

The first challenge is that this is a civil liberties issue, but Cullen's report said that on balance, when it comes to these things, it is charter-proof. It will survive a charter challenge.

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

Thank you for that.

I want to go to Ms. van den Berg.

I want to see if I can get you to expand a little bit on the issue of digital income verification and why it's so important, from your perspective.

Part of what I'm thinking about is that I recall that last spring, Sam Cooper wrote an article about money laundering that had gone on through HSBC. There had been falsified mortgage applications showing basically fake income letters, which allowed these mortgages to proceed.

Is that one of the reasons you'd like to have this digital income verification? How would it work?

[Lauren van den Berg]

We've been actively working with both the Department of Finance and the Canada Revenue Agency to propose solutions for a digital income verification tool that would work securely within the CRA systems. Our goal is to facilitate access to income verification while maintaining strong boundaries, efficiency, security and all that fun stuff. We think the tool should be free to access in order to guarantee neutrality and accessibility for all Canadians, regardless of their financial situation.

Frankly, prioritizing income verification for mortgages is essential. Mortgages are the largest financial commitment that most Canadian families will ever have to make, and mortgage fraud is on the rise. It has been for a while. A digital income verification tool is critical to combat that while maintaining data privacy.

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

We're dealing with people's private information, which they're providing to CRA on the basis that it will be kept private.

On what basis would a bank be entitled to receive that information? Would it need the consent of the mortgage applicant, for example, to get that information, or would the bank have to obtain it?

[Lauren van den Berg]

Ideally, yes.

I will issue the caveat that I am not the IT genius who has the capacity to design what the system would look like.

I would speak to the fact that the Canadian Anti-Fraud Centre processed more than 63,000 reports of fraud in 2023 alone. This is in excess of $560 million of loss for Canada's economy.

How the digital income tool is designed to ensure that the most confidential information of Canadians maintains its confidentiality I am happy to leave up to the wizards, whether that's internal to the CRA or if it goes out as an RFP to the leading-edge technology companies that we have right here in Canada.

The reality is that mortgage fraud is on the rise. The pressure to own a home, which is something that many see as a key milestone of success, is pushing people to desperate measures. I think the expression is, “Build a better mousetrap and the mouse gets better at committing fraud.”

It's becoming a costly problem for lenders. Research is showing that for every dollar lost to fraud, Canadian financial services require over $3.78 to recover.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

We'll go MP Sorbara, please.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair, and welcome to all the witnesses.

I will start off with Mortgage Professionals Canada.

It's great to have you with us this evening. I've interacted with your organization for a number of years.

One of the changes that we brought forward with regard to Canada's mortgage market dealt with the stress test. There had been a stress test for insured and uninsured mortgages. With the ones for insured mortgages, upon renewal you did not have to undertake the stress test as a borrower. For uninsured mortgages, that was not the case.

I believe that the change we made greatly enhances competition and choice for consumers.

I want to hear your thoughts on that change and the other changes that we have made with regard to the mortgage market, please.

[Lauren van den Berg]

I think, frankly, that the changes that were made to the stress test are essential to maintaining an open market, which allows mortgage renewers to shop around for better rates and better conditions when their term is up. It doesn't keep them held hostage to the lender that they're currently with.

Frankly, we're not in the same situation as we were during the 2008-2009 financial crisis. The economic climate has evolved. Current conditions didn't justify those overly restrictive stress test rules, so we were very grateful to see those changes made.

We believe that stress test rules should be reviewed at the time of renewal to ensure that homeowners are not unduly penalized and can access those competitive rates in a competitive market. I think maintaining flexibility in the market for renewers is vital. It's vital for fostering a competitive mortgage environment and it's vital for fostering an environment that will benefit consumers and Canadians across the country.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, and I also think we should note that doing this in no way increases any sort of systemic risk within the banking system or the financial system here in Canada.

I want to talk about 30-year amortization mortgages. We've made some subsequent changes there, and the way I look at it is that if you're able to get buyers into the market, the first thing that happens very quickly is that people realize they can build up equity, and building up equity in your home is a great thing.

Have you heard feedback from your members? There are many members in my riding and in those of all my honourable colleagues here who work very hard and serve their clients. Have you heard their feedback on these changes that we've made?

[Lauren van den Berg]

I have, absolutely.

The feedback that we've been hearing has been exceptionally positive to date. When we meet with our members across the country in our regional committees, and they in turn report back on what they're hearing from clients, from Canadians from coast to coast, people are really excited about this. They're relieved about this.

Extending the 30-year amortization mortgages provides relief for those first-time homebuyers by lowering those monthly payments. I think it's a great step. We believe that extending it to not just first-time homebuyers but all buyers would give families more flexibility in managing their monthly payments. It would make home ownership more attainable in the current market.

It's not going to solve all the housing issues. As I said, there's no magic wand that we could wave. If there were, I would have a much easier time at places like a committee like this—thank you for having me—and it would provide essential relief for families facing high mortgage costs.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Yes, and I would like to add that with the reductions that we've seen in the key Bank of Canada rate of 125 basis points, millions of Canadians are saving a lot. Effectively, it's a tax cut for Canadians. They're saving a lot on their home equity lines of credit and their variable rate mortgages. It's great to see, and we saw 50 basis points this week.

As an economist, if I focus purely on an economic basis, I think we'll see further rate cuts in the months ahead as inflation has been tamed.

I will quickly go to the Canadian Gas Association—and Chair, please let me know when my time is up—and the Ontario system.

If you go to the IESO website—the Independent Electricity System Operator website—with regard to the electricity supply and our energy supply in Ontario, natural gas is a component. A lot of homes in Ontario are heated by natural gas, and it will remain a substantial component of our energy supply system for many years to come as we decarbonize our economy. I would like to add how important it is that natural gas remain in the mix for the temporary period for the upcoming years, and I would like to ask about the investments that your members are making into the grid, please.

[Paul Cheliak]

Are you asking in terms of investments in the gas grid or the electric grid?