Mr. Speaker, with regard to (a), under longstanding Canadian law, mortgages provided by federally regulated financial institutions with a down payment of less than 20 per cent of the purchase price, also called high loan-to-value mortgages, must be insured. This insurance is provided either by the Canada Mortgage and Housing Corporation, CMHC, a crown corporation owned by the government, or by private mortgage insurers, which are supported in large part by the government to ensure that they can compete effectively against CMHC. Recent changes announced by the government are with regard to the rules for these government-backed insured mortgages.
As a result of this market structure, Canadian taxpayers, even if they are not themselves homeowners, have a very significant interest in the long-term stability of the housing market. This is an important reason why we have taken repeated action to ensure the safety and soundness of the housing market and the mortgage insurance sector.
Again, these measures apply only to new high loan-to-value government-backed insured mortgages. They do not apply to mortgages with down payments of 20 percent or more, where mortgage insurance is not required. In these cases, the borrower and the lender can agree to different mortgage terms. Similarly, credit card balances are not backed by taxpayers, unlike high loan to value insured mortgages, and their terms are not dictated by government. However, the government has taken significant steps to promote financial literacy and to ensure that Canadians have all the information they need to make the best financial choices for themselves, for instance by requiring summary boxes on all credit card applications.
With regard to (b), under the current rules for taxpayer-backed insured mortgages, a line of credit secured by the borrower’s home, such as a home equity line of credit, HELOC, cannot exceed 80 per cent of the value of the home. In addition, for federally regulated financial institutions, the Office of the Superintendent of Financial Institutions’ guideline B-20 on residential mortgage underwriting practices and procedures limits the non-amortizing HELOC component of a residential mortgage to a maximum authorized loan-to-value ratio of 65 per cent. Additional mortgage credit beyond the 65 per cent limit for HELOCs can be extended to a borrower; however, the loan portion over the 65 per cent limit needs to be amortized.