38th PARLIAMENT, 1st SESSION
EDITED HANSARD • NUMBER 130
CONTENTS
Monday, October 3, 2005

Mr. Ed Komarnicki (Souris—Moose Mountain, CPC): Mr. Speaker, I too will speak to C-363. There is no question that the objective of the bill is laudable in the sense of social housing, providing quality homes and improving the quality of life.

However, the manner in which it proposes to do it is somewhat problematic when one looks at the composition of the Canada Mortgage and Housing Corporation. Essentially there are two functions to that corporation. One is the insurance and securitization part of CMHC. In that respect it is meant to be a commercial enterprise that competes in the private market with others, like Genworth Financial Canada, that provide mortgage insurance or financial institutions that provide loans.

The other aspect of CMHC relates to assisted housing or social objectives, research and information and international activities.

CMHC's business activities, which are financed from insurance premiums and fees, require it to be competitive in the marketplace. The bill looks at having those fees moved over to social housing.

The other aspect of CMHC, which deals with social housing initiatives like assisted housing, housing repair and improvement, aboriginal capacity programs, Canadian housing market research, emergency planning and so on, is funded by parliamentary appropriations, and rightly so.

Any of those initiatives that CMHC wishes to proceed with would need to go to the Prime Minister, the cabinet and ultimately Parliament for approval. We saw that happen for instance in Bill C-48, although it was ill-conceived and under perhaps trying circumstances. Nonetheless it was a type of bill that dealt with a parliamentary appropriation for a specific purpose and it was debated by the House and all parliamentarians had an opportunity to vote on it.

This bill proposes to have that happen automatically, have it happen without any consultation in Parliament and have it move as the funds develop. When we look at the bill, it indicates that when the ratio of 0.5% of housing loans are attained in terms of profits, they would automatically move to the CMHC reserve fund. At that point, if the reserve fund reached 10% of the equity of the corporation, the funds would automatically get disbursed to the provinces. Although the concept in itself may have some merit in that it is a per capita distribution to provinces, it all together bypasses parliamentary intervention.

The clause as it now reads intends to amend section 29 that establishes a reserve fund. It states that moneys get placed to a reserve fund after taking into account a series of events like bad debts, depreciation and anticipated future losses. We find that some of those are calculable, but the anticipated future losses are dependent in a large part on the economy, on the interest rates and on a whole series of factors. To arbitrarily fix it at 0.5% of the housing loans does not bear a relationship to those factors.

What we have is an independent body, an actuary, that would predict what, in the anticipation of the actuary, ought to be held in reserve to cover potential losses. In my view that is a prudent way to operate. However, in the event we find ourselves in a situation where either the risk that is intended to be covered is over covered or more income is earned than ought to be earned, then perhaps CMHC has charged too much on its commercial side of the business.

No doubt in order for it to be competitive with Genworth or other institutions that are operated privately to provide the same services, it needs to establish a reserve to properly capitalize its assets to ensure if there is an economic turndown that it can cover those losses and it must have a divided of some sort at the end of the day to be profitable. In this case, it would be anticipated these would go to the Receiver General, ultimately to general revenue and disposed of as the House may decide. If we find that CMHC is making too much money or is receiving too much income, we then have to look at those who are paying the moneys into it and who are not receiving the benefit, and they are first time homebuyers.

Currently, to purchase a home at a low of equity ratio of, say, 95%, those loans are insured by CMHC which is insured by the Government of Canada that has a stake in this matter. It can provide housing to first time homebuyers at a very low down payment of 5% in this case. However, they must pay an insurance premium of roughly $2,300 to $2,700 depending on the value of the home. All this goes into the CMHC revenues.

If we find that it is generating too much income, or more than is actuarially sound or more than it needs to, this should be taken into account in the amount that is charged to first-time homebuyers, and there are number of ways of doing that. We could reduce the insurance premium, as has been done the last couple of years, by 15% in each year. We could enhance the benefits of the insurance, as it has with respect to title defects or title defect insurance, whether it relates to unknown easements, or encumbrances or any other defect that might cause a concern to the consumer. There are two ways of dealing with excess revenues.

First time homebuyers should be given every opportunity to acquire a home. Five per cent may even be too much and we should work toward a 0% down payment to encourage people who are unable to get into a home. When we look at first time homebuyers, many of them are young people who do not have a lot of assets or money for down payments. We should look at other ways of arriving at how down payments may be achieved. We need to look at other ways at to reduce what it costs them upfront.

Currently, the CMHC insurance portion is financed through the term of the mortgage, which is 25 years. When we look at a 25-year amortization at current interest rates and an insurance policy of, say, $2,300 or $2,700, it amounts to a lot of money over the term of the mortgage. Profits should be utilized at making a better product, encouraging home buying with less down payment or zero down payment and ensuring that premium rates are low rather than using those moneys to cross-subsidize some other enterprises, such as social housing or any other project.

The minister has reduced the premiums twice now, but perhaps he could reduce them more. He has used the extra funding to waive the premiums on rental buildings in rental projects. He also has put in a program of a 10% reduction if the home is energy efficient or if the home is retrofitted. I worry about that because it is like cross subsidization of an insurance premium for purposes other than for what it was intended.

We would be better served if we operated CMHC as a commercial enterprise with sound commercial practices that could compete with other private sectors on an even keel basis to bring down the rate of insurance that individuals would have to pay.

In respect of social housing programs, it is not the business of CMHC to use commercially generated profits from either the insurance business or from the lending business to make social housing type initiatives. That is something the government as a whole needs to do. It is something that the government would need to project and stand the test of the House and ultimately stand the test of the electorate in the event of an election. It is a policy consideration and that needs to be made at the government level and tested through the public.

There is no question in my mind that these initiatives are important and they need to be proceeded with, but it is something that needs to stand the test of the House and of the public in a general election.

Something like this in Bill C-363 would circumvent all of that. It would arbitrarily assess these moneys to those projects without regard to the circumstances we find ourselves in, without regard to what our future economy may be like and without regard to all the circumstances involved in deciding what should be a safe and proper amount not only in the capitalization of CMHC but in the reserve fund.