Public Accounts committee  Let's just distinguish between the two types of stress testing of course.

Public Accounts committee  Stress testing of our capital is something that we do with a range of scenarios of economic downturns. For example, we would model the U.S. financial crisis as if it were to happen here. We do that as part of our annual work and that's what we publish. Somewhat confusingly the stress test I think you are referring to is the stress test associated with underwriting new mortgages, where we add approximately 2% to the prevailing rate in order to make sure that people have the ability to withstand interest rate shocks.

Public Accounts committee  The second category doesn't pertain to our business. The first does. We witnessed in 2017 and throughout 2018 declines in our volumes of insured activities of 15% to 20%. I should tell the member that was roughly as expected. We estimated it could be 20% to 25% but we thought behavioural factors, for example, people buying smaller homes, might alleviate some of that pressure.

Public Accounts committee  You'll be gratified by the answer. First of all, we do use machines to manage workflow in our homeowner transactional business. It's a piece of software called emili, which we're updating. It's effectively a rules engine that something is either automatically approved—an insured mortgage application—or it's referred to somebody for intervention if it's more complicated.

Public Accounts committee  Thank you, Derek. Thank you, Mr. Chair and members of the committee, and thank you all for the opportunity to be here today. Let me begin by reiterating CMHC's commitment to the aim of special examinations required by the Financial Administration Act. These audits provide the government, parliamentarians and Canadians in general with independent assurance that CMHC has the necessary systems and practices in place to safeguard our assets, that we efficiently and economically manage our resources, and effectively carry out our operations.

Finance committee  Yes, we've thought about loan-to-income. Before I get too far down this path, it's certainly our view that we need to digest the changes that were announced in October, and not to think about the next series of changes. But were the government to ask us about other policies, one such policy that's been enacted in the United Kingdom, for example, is a loan-to-income limit as a way of addressing the concern you mentioned.

Finance committee  We have one of the most admired housing systems in the world—deservedly so—and we've had it for a while. It's our job to make sure we continue that strength. I would say that, in general, we have a healthy market. We just don't want it to be overly healthy. Does that make sense?

Finance committee  I don't know exactly what we've recommended, but certainly those policies have gone both ways over time.

Finance committee  Sure.

Finance committee  Thank you for the opportunity to clarify what I said. I did not, in fact, say that this was something the government should do. I said it was a policy that we should evaluate for the future. It's not a current concern. As we look at a range of different alternatives for the market, which is CMHC's responsibility, that's one.

Finance committee  Thank you.

Finance committee  No. I suggested it is a factor, not the factor. There is certainly foreign investment in all major international cities, in particular in Toronto and Vancouver in this country. I am more concerned about the future of it than the current state of it. It is certainly a factor, but the work we have done on the factors underlying escalating house prices has shown that there are three principle reasons for increased house prices.

Finance committee  First, this question of the balance between access and financial stability is a core concern of CMHC. It sits in our legislative mandate that we're to attend to both. We worry a fair bit about achieving that balance. Go ahead, Michel, if you have it there. Michel Laurence, who just approached the table, is the person responsible for this, and has done a very good job in trying to close what we've identified as these data gaps.

Finance committee  Let me just take a step back and first of all refer to the affordability question. It is an important point that you make, namely that the more we support demand, the higher prices will be, all things being equal. If we make it easier for people to buy a home, that will increase demand, which will increase prices.

Finance committee  Yes, to quality and magnitude. With respect to foreign investment, in fact the data we have suggests that less than 5% of homes in Canada are owned by non-Canadians. I'm not concerned about the status of it now. It's a factor, not the factor. However, the outlook for increased foreign investment and increased immigration is another source of potential demand that will push prices and affordability higher.