NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 25, 1999

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Seeing that we have a reasonable number of members here, I'd like to call to order this Thursday, March 25 meeting of the Standing Committee on Natural Resources and Government Operations.

We are commencing work on Bill C-66, an act to amend the National Housing Act and the Canada Mortgage and Housing Corporation Act. We're pleased to have with us today our witnesses, led by the Honourable Alfonso Gagliano, Minister of Public Works and Government Services Canada. He has a number of officials with him, most particularly Marc Rochon, president of Canada Mortgage and Housing, and there are couple of vice-presidents and a marketing director.

So without any further ado, in view of the time restrictions, I'll invite you, Mr. Minister, to begin your presentation on Bill C-66.

[Translation]

The Hon. Alfonso Gagliano (Minister of Public Works and Government Services and Minister Responsible for Canada Mortgage and Housing Corporation, Lib.): Thank you, Mr. Chairman. Dear colleagues, I want to thank you for the invitation to meet with you today to discuss bill C-66.

First, I would like to introduce the CMHC officials here with me today: Mr. Marc Rochon, President; Douglas Stewart, Vice- President for Policy and Programs; Karen Kinsley, Vice-President, Insurance; and André Asselin, Director, Strategic Planning and Policy.

I know that you have some issues you would like to raise today, so I will make a brief statement, then we can go directly to your questions.

[English]

As many members have stated in the House, this proposed legislation will have a positive impact on the lives of Canadians. The benefits of this bill are threefold.

One, Canadians will benefit from these changes because CMHC will be able to respond to shifts in consumer demand and market conditions. They will also benefit from the availability of low-cost funds and access to mortgage financing, no matter where they live in Canada.

Two, CMHC will be able to better promote Canadian housing products and services abroad. This will result in job opportunities for Canadians.

And three, CMHC will be able to provide better service to Canadians.

[Translation]

We are all aware that CMHC is a highly respected organization dedicated to helping Canada and Canadians. Bill C-66 is designed to strengthen the Corporation's public policy role by providing it with the tools needed to achieve the objectives of the Government of Canada. These objectives are to provide access to a choice of housing in all regions of Canada. It also provides the support to ensure an innovative housing industry.

One of the most important aspects of CMHC's mortgage loan insurance is its public policy mandate to provide access to mortgage financing at the lowest possible cost for all Canadians, regardless of where they live in Canada.

[English]

Here are some examples of how the corporation has fulfilled its public policy mandate.

When the Government of Canada introduced the mortgage insurance program to help first-time homebuyers, CMHC effectively implemented the program at no cost to government and made it available to all Canadians, no matter whether they live—in Toronto or in Jonquière. Since the program began, over 600,000 Canadians have been able to access financing to buy their first home.

[Translation]

The Corporation also supports rental housing by ensuring rental mortgages. With this insurance, providers of rental housing have access to financing requiring less down payments and at low costs.

As well, the Corporation's Canadian Centre for Public-Private Partnerships helps community groups develop affordable housing. One of the many tools used by CMHC is mortgage insurance, to allow these groups to secure low down payment, private sector financing at competitive interest rates.

[English]

CMHC also works to increase the supply of low-cost funds available for homebuyers through mortgage-backed securities. MBSs are one way to attract investors into the mortgage market and make more money available for lending. The MBS guarantee fund provides timely payment guarantees so that individual mortgages can be pooled by financial institutions and sold to investors. The pooling of individual mortgages provides lenders with a lower-cost source of funding and ensures an adequate supply of mortgage funds.

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[Translation]

In 1996, as part of our efforts to redefine federal roles and responsibilities and modernize the operations of government, we decided that the Corporation should continue to fulfil its public policy role but operate overall on a more commercial basis. This bill will implement that decision by providing CMHC with the tools it needs to compete on a level playing field.

Passing this legislation will help insure that Canadians continue to have access to housing, have a choice of housing and benefit from new housing research. The result of that research has been improved housing quality, affordability and choice for Canadians.

[English]

Before I conclude my remarks, Mr. Chairman, let me be very clear about one thing. We must address the need for housing for aboriginal people, low-income persons with disabilities, low-income seniors, victims of family violence, and the homeless. This has to be through specific housing programs, and we are doing that. We have already announced additional renovation funds to help provide more housing for the homeless, low-income seniors, and persons with disabilities.

While this legislation is not intended to deal with the needs of specific groups or specific housing problems, the parameters of this legislation will enable us to address a range of housing needs.

[Translation]

The Government of Canada has a role to play in ensuring that Canadians can obtain mortgage insurance in every part of the country. This legislation will enable us to continue to provide that access to homeowners.

At the same time, we will continue to spend about 1.9 billion dollars annually in support of some 645,000 social housing units.

Every Canadian will benefit because of this legislation. Consumers will benefit in the area of mortgage insurance. The housing industry will benefit through increased promotion of Canadian products and services abroad, and Canadians in general will benefit from new jobs created by the housing industry and enhanced service from CMHC.

Mr. Chairman, I want to thank you again for the invitation. I now look forward to the members' questions.

[English]

The Chairman: Thank you, Mr. Minister.

We'll start with Rob Anders, then Carmen is next.

Mr. Rob Anders (Calgary West, Ref.): Thank you very much, Mr. Chairman.

The question I'll start off with is this. There's a protection against interest rates either rising or falling with regard to Bill C-66, and I'm wondering whether or not the minister feels that's a direct interference in the marketplace, whether or not it's a benefit for the banks, and what type of liability it exposes the CMHC to.

Mr. Alfonso Gagliano: That's a very technical question. Maybe the vice-president responsible for finance can give you the details, and then if necessary I will complete.

Mr. Douglas Stewart (Vice-President, Policy and Programs, Canada Mortgage and Housing Corporation): I should clarify first of all that there already exists a CMHC product that provides mortgage interest rate protection. This amendment to the act would take away that particular program design and enable the corporation to introduce mortgage interest protection products of different sorts.

I should also say that at this point, though, there is no plan to do so. This act would simply give us the authority to provide this type of protection if the market demanded it.

I should also say that right now no such product is being offered by the private sector, so there would be no direct competition even if we were to introduce a new product at this point.

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Mr. Rob Anders: All right. There was no mention of the liability and the cost. We'll move on.

How does the government ensure that CMHC carries out its policies? By allowing CMHC to determine the regulations governing its mandate, doesn't Bill C-66 remove the government's role in setting policy, and in fact therefore isn't CMHC actually setting the government's policy?

Mr. Alfonso Gagliano: The affairs of the CMHC are run by the board of directors where the government appoints such a board of directors. The corporation will continue to respect and be under Treasury Board guidelines. Also, through the minister, the corporation will continue to table its annual report in both Houses, the House of Commons and the Senate. So all the mechanisms are there to ensure the corporation responds to the government and is responsible to the taxpayers of Canada.

What we are doing in general in this legislation is making sure the corporation can respond to the demands of consumers and to the demands of the financial sector.

We are living in a very competitive world. We're also living in a very high-tech information era. Therefore we're making sure that changes in the day-to-day management can be improved to the benefit of consumers, the taxpayers.

The role of the CMHC remains always to serve Canadians better and to make sure Canadians are housed. No matter where you live, you have the possibility to have access to decent housing. That's the major role.

I don't know if my officials would like to add more specifics to that.

A witness: No, that's fine.

Mr. Alfonso Gagliano: Okay.

Mr. Rob Anders: I'm sure the reports will tell Parliament what CMHC has decided to do after they've already done it.

Another question I have is with regard to home mortgages in foreign countries. As far as I understand it, clause 29 as proposed permits CMHC to establish branches and employ agents pretty much anywhere. Can CMHC insure mortgages outside Canada, and does Bill C-66 permit it to do so?

Mr. Alfonso Gagliano: No, I don't think the provision does give the power to CMHC to insure mortgages outside Canada. What we are doing through our export development agencies....

For example, our mortgage insurance system is the envy of a lot of countries around the world. As a matter of fact, as the minister responsible for CMHC, I have the opportunity to meet some government representatives and ministers from other countries who come to see me, and they ask our advice on how they can put in place a similar mortgage insurance system so that their people can have the kind of property accessibility that we have in Canada through this program.

To be clear, there is no authority here for us to insure mortgages outside Canada.

Mr. Rob Anders: All right.

Another question I have is, why does Bill C-66 give approval of the capitalization of the corporation to the Governor in Council? Why is this not the authority of Parliament?

Mr. Alfonso Gagliano: The authority of Parliament remains always there, through not only its annual reports but the five-year planning that's presented to Treasury Board.

Before, you said the government has no control. Through the Order in Council, the government makes sure the policy of the government is the policy of the corporation and is respected.

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Mr. Rob Anders: Is CMHC subject to the terms and conditions of the Minister of Finance, and does Bill C-66 change this in any way?

Mr. Alfonso Gagliano: No, I don't believe so, in the sense that we still have to respect Treasury Board guidelines, and I don't think the Minister of Finance would like to give anybody any delegated power to spend his money in the budget. But I might be wrong. I didn't see it that way.

We still have to go through the Financial Administration Act.

Mr. Rob Anders: What proportion of CMHC-insured mortgages are accompanied by an independent appraisal of the property?

Mr. Alfonso Gagliano: I'm going to let our vice-president of insurance give a more detailed answer, but before I ask her to do so, I'll say this. We introduced a modern system where we accelerate in a very fast manner. We can give answers so that people can know as soon as possible whether they have their mortgages insured.

We do not work with individual owners, but with the financial institutions that we have an agreement with. When a project is being implemented, we make sure, through the financial institutions, that all the guarantees are there and the individual consumer knows exactly what he's getting.

Technology will reduce the cost if we continue to do individual appraisals, but also, that individual owner might, at his own expense, ask for an individual appraisal of the house he's buying.

So far, in the experience we have with the new system, we feel we have been giving better and faster service to consumers, and the liability, whether it's by the consumer or by us as the insurer, has not shown an increase.

Karen, would you like to add to that?

Ms. Karen Kinsley (Vice-President, Insurance, Canada Mortgage and Housing Corporation): Yes.

As the minister said, we have a number of options open to consumers and to lenders in looking at the risk.

We do have a basic service option, which allows the consumer to get an appraisal on their property and submit that to the lender and ultimately to us at a reduced cost—a $75 fee plus the appraisal.

In addition, if consumers or lenders don't feel they want to have an appraisal, they can send it electronically to us, and we have safeguards built into our electronic system that will look at the sale price of the home and compare it to sale prices of homes in that marketplace.

In terms of your specific question about the percentage, I don't have that statistic off the top of my head.

Mr. Rob Anders: Can I get that at some point?

Ms. Karen Kinsley: Yes.

Mr. Rob Anders: Okay, good.

The Chairman: Rob, you have time for just a really short question.

Mr. Rob Anders: I'll ask one more, but I hope I get another turn.

The Chairman: We'll come back to you.

Mr. Rob Anders: Okay, I'll ask one more.

What percentage of a mortgage issued by GE Capital is guaranteed by the federal government?

Ms. Karen Kinsley: The Government of Canada guarantees 90%.

Mr. Rob Anders: Okay. This is just a short follow-up. Are they guaranteed through the CMHC? And if not, how are they guaranteed?

Ms. Karen Kinsley: No, they're not. This is an arrangement, we understand, with the Minister of Finance.

Mr. Rob Anders: Okay.

The Chairman: Thank you, Rob. We'll do our best to get back to you.

As a point of information for colleagues, I understand we may have a bell at 12.15 p.m., and I understand it may be a half-hour bell, so I'm going to try to keep everybody moving along as best we can.

Carmen, it's your turn.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): Mr. Chair, I thank the minister for his concise and informative presentation.

Mr. Minister, you also administer other programs through your ministry that could be affected by this bill. I'm thinking of programs such as the residential rehabilitation assistance program. I would think this bill would have some implications for that kind of program. Could you indicate to the committee what those implications might be?

Mr. Alfonso Gagliano: Yes. This program is a program from CMHC, and once this bill becomes law, it will allow a flexible administration of the same program. Right now there are certain things we cannot do. The administration section of the act and the authority the corporation has are more strict.

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Also, it's not just here in the national capital, but across the country. The needs of people are different and might be different from one region to another, and we want to give enough flexibility to a program such as the RRAP program.

From sea to sea to sea, everybody is praising the program. As a matter of fact, last year, when the program was finishing, I announced that we were extending the program for another five years, at $50 million a year. And just at the beginning of December, we invested another $50 million, because we felt the needs were there. As soon as we could foresee that some money was available, we put it in that program—a program where we're working with the provincial governments and with municipalities. It's a good program, and the legislation improves the program.

Mr. Carmen Provenzano: So what you're saying, Mr. Minister, is Bill C-66 would not have negative implications for the RRAP program.

Mr. Alfonso Gagliano: No, it will have a positive implication.

Mr. Carmen Provenzano: Okay, thanks.

The Chairman: Thank you, Mr. Provenzano.

Réal Ménard and then Roy Cullen.

[Translation]

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Mr. Chairman, I want to thank you for having organized a briefing session for opposition members. I also wish to thank Alfonso for his participation.

Generally speaking, we are not opposed to the idea of your placing the Canada Mortgage and Housing Corporation's action in the context of international export markets. However, I would like to raise three possible repercussions that might eventually have a very negative impact on Quebec.

I would like to hear your interpretation of subclause 58(1). It appears to us that the text of that subclause will allow for a generalization of subsidies and allowances for housing. You know that this government can sometimes be devious, and it is not unthinkable that you may be tempted to put in place a national housing allowance. If today you give us the guarantee that that is not your intention, we would feel better.

There is another problem we need your reassurance about. That is the possibility that pursuant to subclause 28.1 you might be able to deal directly, with no restriction or obstacles, with intermediate entities such as municipalities, community groups or housing contractors. I know that your president has already told you that you could do so, but it seems to us that proposed subclause 28.1 has a scope that is unprecedented. If you want the opposition to cooperate, if you want us to be happy and if you want everything to go smoothly—it seems to me that we are not asking for the moon—you must take your inspiration from the provisions contained in proposed subclause 88(2).

Why do the first two clauses I mentioned not contain the obligation of obtaining the province's consent, while subclause 88(2) does? You are a reasonable man, and so am I. I'm asking that the provisions in those two clauses be subject to the same assessment provided in subclause 88(2). I would like to hear your point of view and your interpretation on this. Afterward, I would like to discuss negotiations with Quebec.

Mr. Alfonso Gagliano: First, I want to point out that we are already applying all of the provisions contained in those clauses. The clear and classic example is the RRAP program which some provinces have already decided not to join for reasons that concern their jurisdiction. Quebec has for its part agreed to participate and has set up a similar program that it administers itself. Under this program, we transfer funds to Quebec for its administration. This agreement functions very well and we have no intention of changing it.

Mr. Réal Ménard: Mr. Minister, what you are saying isn't quite consistent with the bill. Why are you then proposing subclause 58(1)? How can you conciliate the two clauses you have just referred to with the 1996 Throne Speech? I was happy when I read that Throne Speech. You seemed to want to disengage, but the seeds of the housing allowance were sown there. You have to have copies of the Throne Speech distributed to the Canada Mortgage and Housing Corporation. It's a document that absolutely must be read.

Mr. Alfonso Gagliano: They haven't read it. Listen, I repeat that this clause contains the same powers the Corporation had even before the bill was tabled. We are only maintaining them.

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As you may verify with Quebeckers, the RRAP program works very well and has proved very satisfactory. It does however have some shortcomings where Aboriginals are concerned. Since I am the Minister responsible for this Corporation, I extended the RRAP program for five years, much to everyone's satisfaction.

Mr. Réal Ménard: You could have invested more. No one can say that you went overboard by investing only 50 million dollars.

Mr. Alfonso Gagliano: We must not be deprived of the tools that allow us to reach our objective, which is to ensure that all Canadians wherever they may live have access to decent housing. We must not forget the social union agreement and the fact that housing is now subject to—

Mr. Réal Ménard: Ah, be careful, Mr. Minister, because the social union—

Mr. Alfonso Gagliano: We have no intention of encroaching upon provincial powers, unless the—

Mr. Réal Ménard: I'm glad you raised the matter of the social union, because it would indeed allow transfers to provincial governments. But that agreement does not provide for any transfers to individuals, which this bill would make possible.

In any case, I want to warn you. It seems to me that you should take my request into account. I have never exaggerated and I think that my demands, like those of my party, have always been reasonable; we are not going to change now. I'm asking you to study the possibility of extending the provisions contained in subclause 88(2) to the two clauses I mentioned.

I want to broach another topic with you which is related to the bill—since I want to respect the Standing Orders—and that is the negotiations. I learned with regret that negotiations with Quebec had slowed down a bit and the guidelines given to your negotiators were not clear. Your proposal, as opposed to yourself, is totally unreasonable. You have proposed the transfer of a sum that is inferior to the general expenditures of the Canada Mortgage and Housing Corporation for 1995-96.

I want it to be clear to our colleagues that no one could take this sum of 289 million dollars being offered to Quebec seriously, while the total expenditures in 1995-96, as the figures I have in hand indicate, figures which in fact come from the Canada Mortgage and Housing Corporation, were of 362 million dollars. Moreover, if we take demographic factors into account, you should be providing 480 million dollars to Quebec.

So, Mr. Minister, you will have to direct your negotiators to submit a slightly more reasonable offer. We can't truly fight poverty in Quebec without a real housing policy, which will be based among other things on what you will be giving us. We are currently paying for things that are being done elsewhere. Indeed, you know that the Canada Mortgage and Housing Corporation spends two times less per person in Quebec than it does in Ontario. I'm asking you, then, to intervene.

Do you agree with the figures? Do you subscribe to my analysis?

Mr. Alfonso Gagliano: If you want us to put our cards on the table and clarify things, I'm ready to do that.

First I want to say that I have already met with Ms. Harel, which I know fairly well since she is a member from the East End, as we are, you and I. Overall, I can say that we had a good meeting—you can verify this by speaking to her—and we agreed to conduct some serious negotiations. I am confident that we will conclude a satisfactory agreement.

It goes without saying that we have to take every aspect of the issue into account. In 1996, the federal government established a social housing program which Quebec decided not to participate in. I don't want to discuss the grounds for that refusal by Quebec, nor the parties of the various governments involved at the time. As Minister responsible, I cannot transfer what I don't have. Today, if I assess the situation, I see that I can only transfer a lesser sum to the province of Quebec, even though this does not correspond to the needs or to the number of inhabitants. That to me is the very source of the problem. Quebec wants to claim an amount to catch up for the years during which it did not participate in the program.

As Minister, I don't have additional sums of money at my disposal; I have to find them. Ms. Harel and myself have agreed to begin negotiations, to examine the situation issue by issue and to come to an agreement. I am confident that we will succeed. Let us negotiate.

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Mr. Réal Ménard: I have confidence in you and I know that your heart is in the right place, but there is one thing. It's not just Quebec's history of lagging behind in this area. You can't offer less than the expenditures agreed to for instance for 1995-96. If the Canada Mortgage and Housing Corporation spends 362 million dollars and you give it 289 million dollars, there is a problem.

Do negotiate, but please agree that you cannot give less than what is spent at this time by the Canada Mortgage and Housing Corporation.

Mr. Alfonso Gagliano: We are transferring social housing, but we are not transferring the Canada Mortgage and Housing Corporation. The CMHC will continue to function in Quebec with its insurance programs, etc. I explained the challenges as well as the problems. This is the social housing envelope. There is some catching up to do. Allow us to negotiate how we will do it.

[English]

The Chairman: Thank you, Réal.

Roy, please.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you very much, Mr. Chairman.

Minister, thank you for your presentation on the bill.

I have two questions, one having to do with export markets for housing and the other having to do with affordable housing stock.

I'm very interested in export markets for housing, because if you look at the wood products industry, I know that housing export markets are not limited, in your parameters, to wood products, but it seems to me any way we can find to diversify the markets and diversify products....

Housing, whether it's panellized housing, manufactured housing, prefabricated housing, or even site-built housing, creates markets for building materials that are made in Canada. And some of it is in the realm of what we call value-added.

What specifically will this bill allow CMHC to do to expand the export markets for housing? What particular markets would you be looking at? For example, it seems there are housing deficits in South Africa, eastern Europe, and other markets. What markets and what product lines will you be pursuing, and how will this bill provide CMHC with more tools to get that job done?

Mr. Alfonso Gagliano: Thank you.

First of all, in the National Housing Act and the CMHC Act, the CMHC has no mandate to export products or services or to promote exports. In 1996 the government gave three new mandates to the CMHC: one, to continue to commercialize the mortgage insurance products; two, to continue to research transferring social housing to the province; and three, to create and promote exports.

CMHC is part of Team Canada, and I have to say we are doing very well in that sense. Last September I led a delegation; some members of this committee who are not present today were with me in Chile. Just a few days ago we all read in the newspaper that one Quebec company that makes prefabricated houses got a major contract. We're doing very well in Asia. We'll be meeting another delegation in Korea in the month of May. I know that a delegation of officials and some people from the industry went to eastern Europe not long ago.

And as we speak, we have the export development councils. CMHC created a meeting today in Ottawa to discuss how the corporation can improve. I've been meeting, as I said before, different ministers or officials responsible for housing in other parts of the world, who are very interested in our products, our services, and our system. We will continue to work with them.

The creation of an export development division in CMHC will help too, and that means jobs for Canadians.

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Mr. Roy Cullen: Thank you. Yes, I would agree.

Where do you see the biggest potential for growth? Is it in wood products, steel, or concrete? Is it in site-built housing or manufactured housing? What are the key areas?

Mr. Alfonso Gagliano: We're promoting all the systems and products you mentioned, and any other. The amount of research and development that is going on in the housing industry is very good for Canada. We are a leader in the world, and we want to continue to lead. So for me, it would be very hard to say.

Naturally wood frame is one of the products that is dear to Canadians, and there are some countries demanding it. In housing in different countries there are some cultural patterns that we have to look at and be sensitive to.

We're going in there and we're definitely working together with the local industry. That's where it works. In Chile I saw Canadian firms with Canadian products and Canadian technology in a joint venture with local contractors, so the prefabricated houses and all the materials were sent there with our people—experts and technicians—and they installed it per the requirements.

We're also participating with some other countries, helping them to build their own building codes.

Mr. Roy Cullen: I wish you good luck with that.

Mr. Alfonso Gagliano: Thank you.

Mr. Roy Cullen: That's very worth while.

Can I have one more?

The Chairman: Go ahead.

Mr. Roy Cullen: It has to do with affordable housing stock. We know that in different cities in Canada, there are different scenarios. In Toronto, the city I come from, the mayor has been quite outspoken about the need for affordable housing.

You mentioned in your comments that the Canadian Centre for Public-Private Partnerships will help community groups develop affordable housing. I wonder if you could elaborate a bit on how that will help to create more affordable housing stock in Canada.

Mr. Alfonso Gagliano: Last year, through that program we have within CMHC, the Centre for Public-Private Partnerships in Housing, we were able to create over 2,500 units, and this year we expect to create 3,000.

As for how we do it, we act as a catalyst. We give a little bit of money for a group that comes forward with a good project to continue the project. We help them, for example, get the land and some private sector money. We also help, through our insurance program, to encourage the financial institutions to fund the mortgage, and we also encourage the municipalities and other levels of government to participate.

Through this program, we help groups that have good projects to create affordable housing, and it's working very well. Naturally, because of this success, we would like to continue.

Mr. Roy Cullen: Thank you.

The Chairman: Thank you, Roy.

Rob, then Ben, then Gilles.

Mr. Rob Anders: Hmmm, encouraging private financial institutions to fund projects they otherwise wouldn't fund....

Anyhow, moving along, the purpose of this bill is to put CMHC on a more commercial and competitive footing. Does the bill propose to reduce CMHC's guarantee to 90%, as is the case with GE Capital, CMHC's only competitor? If not, how is the private sector expected to compete, at 100% versus 90%?

Mr. Alfonso Gagliano: Maybe you can give some details.

Ms. Karen Kinsley: To answer your first question, no, the bill does not propose to change CMHC's status. We will continue to be a crown corporation and the responsibility of the Government of Canada.

With respect to GE, the arrangements they have with the Minister of Finance perhaps should be addressed to him. I wouldn't feel comfortable commenting on what they've arranged.

Mr. Rob Anders: So the buck passes over to the Minister of Finance. Okay, there we go.

Did CMHC insure the mortgages of B.C.'s leaky condos, and if so, were those condos appraised before the mortgages were issued?

Mr. Alfonso Gagliano: Not only did we insure them, but we offered to British Columbia leaky condo owners the possibility, even if their mortgage was not insured with us originally, to come forward if they wanted to refinance their property so that they could do repairs. Some have come forward; some have not. It depends on the need.

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Naturally, with the extra money we put into the RRAP program, we've tried to use it as much as possible in the leaky condo situation. I believe 42 owners came forward, and we were able to help.

We continue to work with the private sector, the different owner associations, and even with the provincial government in a certain sense. We had a disagreement on the way we answered the Barrett commission report. We put $75 million into a fund so that people could come forward, and the provincial government put in the same thing, $75 million. But the Barrett report advised that those moneys were at the current Bank of Canada rate, and now the province is asking that we give it interest-free. I asked the minister in my last meeting to come forward with a report, because it doesn't seem there are too many requests from that fund.

We work very closely. As a matter of fact, we even insure the mortgage money they take from this created special fund. They're all insured by CMHC. So we are very active in insuring those mortgages and making sure they have the financial resources to repair those properties.

For the other part, do you want to add something?

Ms. Karen Kinsley: Sure, thank you.

In terms of the issue of the construction and the subsequent problem with B.C. leaky condos, this isn't particularly an issue of appraisal. This is an issue we researched, and we discovered that the way the buildings were being constructed at the time, and the industry standard at the time, has subsequently proven to create water penetration problems.

This is not unusual. As standards change over time, we find that what was the standard of the day at one point becomes a problem subsequently.

To answer your question on whether some of those homes that may be experiencing problems today were appraised, I would say yes, they would be.

The Chairman: If I may interrupt, that's a 30-minute bell, so I'm going to try to get everybody in the next 23 minutes.

Do you have a short concluding question, Rob?

Mr. Rob Anders: I'll try to get in a couple more, if I may.

The Chairman: And then, just for the record, I have Ben, Gilles, and Ghislain.

[Translation]

Mr. Ghislain Lebel (Chambly, BQ): I have a question of privilege, Mr. Chairman. I think we have a lot of questions for the Minister, but the bells are ringing and he also must go to the house. We have to find out about the vote that will be held. Could we not ask the Minister to appear at a future meeting, as soon as we come back, because we have many many questions to ask him and we will not be able to put them in the 23 minutes remaining?

[English]

The Chairman: Okay, Ghislain, rather than take up time with the question, let's see how far we get. Then I'm sure we can discuss something with the minister after.

So Rob, please ask a short question, and then we're going to continue.

Mr. Rob Anders: Okay. I'll jump to the next one.

You can check out page 8 along with me if you so choose. I'm referring to proposed subsection 21(2), which touches on proposed subsection 21(1). How much, in dollars, would CMHC have had to pay the consolidated revenue fund if that proposed change had been in place in 1993, 1994, 1995, 1996, 1997, and 1998? And if you don't have a number for 1998, I'd like a projected amount.

Basically, the change going on there is about the Financial Administration Act, and the key phrase for me is, “...not credited to a fund established under subsection (1)...”. It deals with capitalization, payment of dividends, and all the rest of this good stuff. What I'm wondering is, if that change had been in place in 1993, 1994, 1995, 1996, 1997, and 1998, how much would CMHC have had to pay to the consolidated revenue fund?

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Ms. Karen Kinsley: The issue of capitalization really has only come about as a consequence of the mandate change we were given in 1996 to operate the fund on a more commercial basis. So the question you raised about what it would have been over a period of time before that perhaps is somewhat irrelevant, since that wasn't the mandate for CMHC at that time. We were mandated to operate on a break-even basis.

As for the question about what it would be subsequently, we don't have the numbers at our fingertips today, but we do have an estimate of them.

The Chairman: Let's leave it at that for the moment.

Ben, please, then Gilles, then Ghislain.

[Translation]

Mr. Benoît Serré (Timiskaming—Cochrane, Lib.): Mr. Minister, ladies and gentlemen, welcome. Thank you for appearing before our committee.

Mr. Chairman, before I ask my question, allow me to say a special hello to my old friend Mr. Rochon, a native of Sturgeon Falls in my riding, and a good friend of the family. I congratulate you on your appointment as President of the Canada Mortgage and Housing Corporation. I must however say that you are very sorely missed at Canadian Heritage. It's an ill wind that blows nobody any good.

My question is probably best directed to Mr. Stewart. There are several reservations in my riding. As you know, housing for our First Nations on reservations is far from adequate.

How could bill C-66 contribute to improving housing on our reservations?

[English]

Mr. Douglas Stewart: Thank you very much for that question.

Let me give you one very good example. Right now the NHA allows us to insure a mortgage loan. Bill C-66 will allow us to insure mortgages, but it will allow us to insure a wider range of housing loans.

One of the restrictions for providing mortgage insurance on first nation reserves is the ability to get security for that loan. The new act will permit us to take other forms of security, other than a strict mortgage. So, for example, whereas right now we would have to get a ministerial guarantee in order to insure a mortgage on reserve, we may be able to in the future take the guarantee of the band itself.

Mr. Benoît Serré: Why “may”? Why is it not clear?

Mr. Douglas Stewart: The act will allow us to take something of that nature. We just haven't worked out the details of what this product will look like.

Mr. Benoît Serré: Thank you.

The Chairman: Thank you, Ben, for your cooperation.

Gilles, then Ghislain.

Mr. Gilles Bernier (Tobique—Mactaquac, PC): Thank you, Mr. Chairman.

I want to thank everybody for being here this morning and Mr. Minister also.

My big problem is with affordable housing for Canadians. We know we have a crisis. It's not just a small problem. It is a crisis in Canada. I know it's a business that the crown corporation is trying to run, and I appreciate that 100%. What you're trying to do abroad and all that is all fine. I also believe charity starts at home, though.

What I'm saying is, whatever your surplus is in a year, right now we have a real crisis. I'm not asking you to take 100% of that surplus and put it into social housing. You have to keep some kind of reserve for whatever is going to happen next year, and we don't know what's going to happen from year to year. But would it be too much hassle to take some of that surplus, a big chunk of that surplus—let's say 75% or 80% of that surplus—for the next two or three years and put it back into social housing so that we could help those people?

I was never a homeless person, but I was close to one, so I know what they're going through. Right now, it's not because I'm a Progressive Conservative, but we're going through a task force, and I'm leaving for Windsor tonight. We're seeing it firsthand. Some of them even offered to have us spend a day outside with them, and I expect to do that. I do expect to do that, because I feel for those people.

We're all Canadians. We all pay an arm and a leg in taxes. The thing I'm worried about is the backing from the government. Let's say we insure this mortgage. If they don't pay, we have the backing of the government. Now we're not going to have that backing.

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This means that before, you would take bigger risks to insure that mortgage, because you knew the government was there. Now, if that extra shoulder is not there, a lot of those people who come for mortgages you will not take the risk to insure, because of being afraid of not getting your money back. That's going to hurt people who live in rural or remote areas of the country. How can we tackle that problem?

Mr. Alfonso Gagliano: Mr. Bernier, I thank you very much for that question.

On the first part of your question, we all agree that there is a lot to be done. The homeless problem and affordable housing are problems that have to be worked on together with provincial governments and municipal governments. One government alone cannot solve the problem. We're doing that. We're talking to provincial colleagues across the country and we're raising these issues.

Part of your question was, does CMHC put money back into housing? Yes, we do, and the proof is there. We are committed to putting $50 million into the RRAP program. That's CMHC money. We were able to extend that program for five years, because we estimated that we had some surplus, and we spent it there.

Let me finish. I listened to you very carefully. If you want an answer, you have to let me give you an answer.

In November, when I realized and they told me we had some money, we were able to put in another $50 million. So in the fiscal year 1998-99, which is ending March 31, we put back $100 million. That's quite substantial, whatever surplus you think the CMHC might have.

Secondly, we, for example, had a program for first-time homebuyers. In that program, we guaranteed 95% of the mortgage. That's part of the accessibility. If you buy a house in rural Canada for $100,000, you can get a $95,000 mortgage, and for the $5,000, with the different programs the provinces and the municipalities have, in some cases, in some provinces, people buy a home without putting a cent of down payment, because of existing programs.

That guarantee on the mortgage is to make sure that everybody, not only first-time homebuyers.... Last year I extended it to every buyer. A family might buy a smaller house at the beginning, and then the family grows and they might need a larger home, or they may be moving from one place to another. That program is not only for first-time homebuyers. We're guaranteeing insurance. When you go to the bank and say 95% of your mortgage is insured by the CMHC, a crown corporation—that is, the government—the bank is more open. That program is working very well.

We're not refusing insurance for aboriginal homes. There is no intention in the bill, or on the part of management or the minister, to refuse. Our public policy role for affordable housing and accessibility to Canadians is restated in the bill. As a matter of fact, it is probably even more strongly stated than in the existing act.

In general, yes, we need to do more. I agree that we have to put in more money. But again, this is not just for one corporation. It's for government in general and all the other governments.

The Chairman: Please ask a very short question, and then we'll go to Ghislain.

Mr. Gilles Bernier: You only answered part of my question. I never said Canada Mortgage and Housing was not putting money into social housing. I appreciate everything Canada Mortgage is putting into social housing.

My question is this. Now that the government is not going to be there to back you people, that means by the year 2002, you're going to have to give the government $200 million. That's $200 million less for social housing than if you had used that for social housing.

Again, as for the RRAP program, I appreciate the RRAP program, but I'm from New Brunswick, and I was talking to some people I used to work for through the New Brunswick Housing Corporation, and they told me this. The $50 million you gave in December was very well taken; don't get me wrong. But for the Province of New Brunswick, the few dollars they got were just a drop in the bucket, because there was already a hole in the bucket. In a week, it was gone.

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There is a crisis. I like what you said in your last paragraph, that we need to do more. Yes, Mr. Minister, we need to a lot more. So I just hope....

This week the Prime Minister appointed the Minister of Labour. I have great respect for her. She's a good minister, and she knows all this. She's been working with it. I'm sure she's going to do a good job.

Yet there's no money available. Your department has downloaded to the provinces. There was a problem, and you downloaded to the provinces. Now what's going to happen at a crisis level? Are you going to blame the provinces and not take the responsibility here in Ottawa? That's my question.

Mr. Alfonso Gagliano: First of all let me say we agreed to transfer social housing to the provinces to avoid duplication. We can continue investing those savings in social housing. That's where the money came from for the RRAP program, and some other savings we had in the management of the insurance program.

The Minister of Labour, who now has responsibility for the homeless, today is in Toronto listening to people. She is engaged to even tour the country to really find out and discuss. The CMHC financed part of the forum today in Toronto, not to rent the hall in the hotel, but to make sure that people who work in the sectors where there are homeless can go to the conference, can pay the subscription fees and the hotel room to stay there, so that they can participate. That's a signal.

We will definitely be working with all the stakeholders, but we want to make sure whatever we do in the future addresses the problem, because just putting in money without knowing what you're really addressing.... We know in the past there were programs into which we put a lot of money, but we were not very well aware of the results.

So we want to make sure. I can assure you we are concerned, but before we move and put in money, we want to make sure.

The Prime Minister's appointment of the minister for the homeless involves a lot of departments. Probably 10 or 11 departments, just on the federal level, are involved. So we need a coordinating minister. I'm not devolving my housing responsibility. I still have it, and I will be working together with Mrs. Bradshaw.

I agree we have to do more, but we'll have to do it smarter and better, and we'll have to address where the problem is.

The Chairman: The rest of the time goes to Ghislain, and then we'll go over to the House.

[Translation]

Mr. Ghislain Lebel: This won't be very long, Mr. Chairman. I have about two minutes. I must go to the House.

Does the CMHC now pay dividends to the government on a yearly basis? Does it provide money to the government as do other Crown corporations? Such as Canada Post?

Mr. Alfonso Gagliano: We do not pay dividends. Certain Crown corporations such as Canada Post do pay dividends, but not the CMHC; but with the commercial mandate, you do pay taxes to the government.

Mr. Ghislain Lebel: Does the Corporation not reimburse a certain part of the capital the government initially provided to it?

[English]

Ms. Karen Kinsley: The Government of Canada hasn't put any capital funding into the mortgage insurance fund. The mortgage insurance fund is self-financing. All the premiums paid in by homeowners for the insurance are pooled in the fund, and all the claims are paid out of the fund, and at the end of the day, the fund is on a self-sufficient basis. So the Government of Canada hasn't put capital in.

[Translation]

Mr. Ghislain Lebel: That answers my question. I suppose that the Canada Mortgage and Housing Corporation has several sources of income. There is the loan insurance activity which generates its own funds, etc. Does the profit generated by that activity go into the consolidated fund of the CMHC and can it be said that the CMHC's insurance activities finance some of its other activities?

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Mr. Alfonso Gagliano: One thing must be understood. If there were a terrible crisis and if no one could pay their mortgage, the bank would turn to our insurance. So we have to pay in advance. These funds are guaranteed by the government. As with any other insurance fund, we have to have reserves. Things are not systematic. One year interest rates are very low, the economy is going well and there are fewer people losing their jobs. People can make their payments and generally do not lose their homes. Other years, more people lose their homes. There have to be reserve funds, because this is a real insurance fund.

Mr. Ghislain Lebel: Basically, Mr. Minister, you are coming to the assistance of young homeowners who are acquiring their first house by financing 95% of the purchase price and getting them to pay an insurance premium. We don't have a financial statement and I want to know whether that fund which you have set up by asking for money from small players, from first-time home buyers, is so substantial that it would allow you to make other investments in society, in social housing or elsewhere. May we know the extent of the income that comes strictly from insurance activity?

Mr. Alfonso Gagliano: We could send you the annual report which contains all of the financial statements.

Mr. Ghislain Lebel: I want the figures for insurance activity.

[English]

Ms. Karen Kinsley: All of the premiums go into the fund, and as the minister said, the fund needs to pay all the claims, good times and bad.

If there is at the end of the day a surplus in the fund, what happens? Unfortunately, to date we are not in the luxurious position of having to debate that in a practical sense. The fund has been at a fairly break-even surplus level to the end of 1997.

But the fund is a segregated fund, which means it sits within CMHC, but as a fund, separate, to ensure all of the premiums are available to pay the claims. At the end of 1997—and our annual report, which we can make available if you don't have it, will show this—we were at just about the break-even point.

The Chairman: We have five minutes left, Ghislain. You can have those five minutes if you want, and then we can go.

[Translation]

Mr. Ghislain Lebel: Yes, I need it.

Madam, I insist. Yes, I would like to have that report.

Now, you were talking about the evaluation. I believe you made a mistake because you talked about the property evaluation that is carried out when a purchaser asks for a loan at a financial institution that sends the file on to you. You mentioned a figure of $75. I think it is more than that. It used to be $235 and was recently reduced to $175. You say that this is to evaluate the property. The Minister has already told the Ordre des évaluateurs agréés that this was not to evaluate the property but to evaluate the file. That is not the same thing, the borrower's credit history and the evaluation of the property. I would like to know what is what.

[English]

Ms. Karen Kinsley: I can answer that.

The $235 fee is one method by which the lenders can send us the dossier. It is an application fee. It is intended to be for our management of the file. There is another choice, however. The lender can send to us a file at the $75 fee, but also include an appraisal that has been done by a third party.

So there are two ways and two separate fee structures for how a file can come to CMHC: without an appraisal, at $235, which we call full service; or with an appraisal, at a $75 fee. The fee to CMHC is—

[Translation]

Mr. Ghislain Lebel: Madam, the amount of $235 or $75 is not used to evaluate the home the consumer is thinking of buying. You don't go on the premises to visit the building.

Ms. Karen Kinsley: No.

Mr. Ghislain Lebel: You don't go and check whether the amount you are going to lend is fully guaranteed by the nature and state of the property. That is not what the $235 is used for.

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[English]

Ms. Karen Kinsley: The fees paid to CMHC are the application fees for us to assess the risk of the file and to do our management of the file. Part of the assessment of the risk is looking at the value of the home.

[Translation]

Mr. Ghislain Lebel: Let's talk about risk evaluation. I discussed this with Mr. Asselin the other day. When someone has defaulted on payments, the Canada Mortgage and Housing corporation repossesses the property. Since it guaranteed the loan, it takes possession of the property. In most cases, and perhaps even in all cases, the Corporation loses large amounts in such repossessions. The property is always resold for much less than the amount of the loan that had been authorized for the purchase.

Can the fact that you do not carry out a scientific evaluation of the property have unfortunate consequences when you repossess a building and must sell it at a loss?

Mr. Alfonso Gagliano: I'm not sure, Mr. Lebel, that that is the reason. You know that there are differences in the repossession market. Proceeds depend on the state of the property, on the former owner and on the current situation. There is the whole repossession procedure. I have met evaluators on many occasions. We try to find other ways of helping the industry and consumers and of helping ourselves without necessarily having to do individual evaluations.

I'll give you an example I already gave to the evaluators' leaders. In the past, when someone asked for a life-insurance policy, insurers used to go to see the person. Today, they look at the person's age and the work he or she does, they put all of that into their computers and make a decision without checking whether the person is sick. There is technology and several other factors that come into play. I am concerned by these factors as much as you are. Today, immediate answers can be provided. Some offices are even open on Sundays.

Mr. Ghislain Lebel: I had many other technical questions to ask them.

[English]

The Chairman: If you'd like to walk over to the House with the minister, I'm sure he'd be glad to chat with you as you go over.

On that note, we'll adjourn. Thank you, everybody. We'll rendezvous over at the House.