Human Resources Committee on Oct. 4th, 2011

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Did you find over this last couple of years of the worldwide economic recession that you were required to step in? I certainly remember that from the recession of the nineties, because I was actually in the property management business and CMHC was one of our clients. You were having to move in on properties, on apartment buildings, and take them back, because obviously the mortgage was in default, the insurance kicked in, and you were the temporary landlord, let's say, of the building.

Did you find over the last couple of years with the recession that you were moving in on properties to secure your investment or to take up on your insurance the mortgage on those properties? Or were they pretty much typical years, just like you would normally have in non-recession years?

[Karen Kinsley]

No, they aren't typical years. Certainly not only was the economy going through difficult times, but obviously borrowers themselves were having some difficulty, so our claims did increase. Our arrears rates did increase. But I think it needs to be put into perspective.

First of all, mortgage insurance is expected to go through ups and downs in economic cycles. It's not that we're ever looking for a down cycle, to be clear, but that is built into the premiums we charge. We do expect to pay more out in bad times and less out in good times.

The arrears rate in our portfolio is less than half of 1%. Remembering the recession of the nineties or the eighties, this is still low by those standards. Again, I think it goes back to a lot of what you've seen and heard in the media. We have very strong financial institutions, but we've also kept a very close eye on our prudent underwriting standards.

While homeowners unfortunately do find themselves in difficulty from time to time, especially in difficult economic times, it hasn't been on the scale of what we've seen in the past.

[The Chair, Conservative, Ed Komarnicki]

Thank you.

Your time is up, Mr. Butt.

We'll move to Ms. Hughes.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you.

I want to touch base again on the RRAP program. You said that there have been agreements signed with every province and territory on the RRAP program.

[Karen Kinsley]

The framework was agreed to by all provinces and territories in July. We are now going through the process of signing bilateral agreements with each jurisdiction to implement that framework. At this point, five of those agreements have been announced, and we are concluding the agreements in the other jurisdictions.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

When do you see them being concluded? I'm just wondering because for some of our areas we're running into winter.

The program ended in March, if I'm not mistaken?

[Karen Kinsley]

Correct.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

With that lack of time, people are now actually living with roofs that are leaking and stuff.

So they're not able to get their hands on that assistance?

[Karen Kinsley]

We expect it will be probably no later than the end of November. A number of provincial elections are causing some delay, but provided those clear up fairly quickly.... We don't anticipate any difficulty. It's just a question of the environment we found ourselves in.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Will applying for the RRAP program still be the same process, or will it be different?

[Karen Kinsley]

Again, that's up to provinces and territories. They're responsible for the design and the delivery of programs. We currently deliver RRAP in only five jurisdictions, and in fact two of those jurisdictions have decided to take on the delivery themselves.

So it will be up to them to decide how they want to conduct the program going forward, if in fact they want to continue with that stream at all.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you.

We understand that CMHC bought $66 billion in risky mortgages from the banks during the economic downturn. We all know that the housing bubble collapse in the U.S. was the major contributing factor to the recession that followed in 2008 over there. So I'm just wondering, when you bought these, was there a risk to Canadian taxpayers as a whole?

[Karen Kinsley]

The number actually is about $69 billion.

Just to go back a bit, these were mortgages that were already insured by CMHC or the private sector, that were sitting on the balance sheets of financial institutions. When the economic downturn hit, the banks needed a way to access new funds to continue to allow credit to flow. The government, through the insured mortgage purchase program to which you refer, said, “Listen, we've already insured these mortgages that the banks are holding, so why don't we in fact purchase them, as we're already comfortable with the risk, having underwritten them, and provide the lenders in return with that liquidity, that capital?”

So this program was not only run at no additional risk to government, but we actually charged lenders for that. The government made money as a result.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

I'm going to give some time to my colleague Ms. Crowder. If we have more time, we'll come back, and if not, I'll try in the next round.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Can I clarify something on the RRAP? I'm sorry to keep coming back to this, but it's a major program in many of our ridings.

I understood you to say earlier that Ontario is one of the provinces where you continue to administer the RRAP program. Will that continue?

[Karen Kinsley]

We're currently in the process of negotiating the announcement with Ontario. That is one of the jurisdictions where there has been no announcement made.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

In this current fiscal year of 2011-12, are you administering the RRAP program for Ontario?

[Karen Kinsley]

Again, there has been nothing committed at this point until that announcement between us and Ontario proceeds.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

The fiscal year began April 1. So people who were in the loop, who had applied....

Am I understanding correctly that no money has flowed in the province of Ontario for RRAP since April 1?

[Karen Kinsley]

Correct--for new applications.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

That's for new applications, as of April 1.

So if that agreement is not signed until after, I presume, the provincial election, what happens to the money allocated in this current fiscal year if it can't be all expended because of the late time? As Ms. Hughes pointed out, in many communities winter is coming, and they will not be able to do the construction.

What will happen to the money allocated?

[Karen Kinsley]

What we have done in anticipation of this delay is we have continued.... We have delivery agents who work with the program in Ontario. While we can't commit new funds until this agreement goes ahead, we are encouraging them to accept applications--they are doing this--and to do due diligence work with respect to being in as ready a position as possible the moment the agreements are announced.

So we're doing as much as we can do to ensure that the moment the go-ahead is received, we can act on those applications.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

But what happens to money in this fiscal year if it's not expended?

[The Chair, Conservative, Ed Komarnicki]

Please give a short answer.

[Karen Kinsley]

If we do not spend the money by March 31, it would lapse, or we would request a reprofiling from government.