Mr. HEAPS:

Under this legislation, adjustments will be made at one-half of one per cent more than under the Dominion Housing Act. except for such adjustments as may be made with regard to the reduction of amounts.

Mr. DUNNING:

Mr. HEAPS:

If I understand the amendments correctly, adjustments in the rural area will be made at the rate of five per cent.

Mr. DUNNING:

Right.

Mr. HEAPS:

And in the urban sections it is to be 5i per cent?

Mr. DUNNING:

Quite.

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Mr. HEAPS:

As one of the representatives of urban districts, I assume that many people will come to me and say that there is discrimination against urban mortgagors as contrasted with rural borrowers, and I may find it very difficult to explain. Not being a member of the banking and commerce committee I was not at the meetings. It is hard for the ordinary person to understand why the interest rate in an urban centre should be higher than in a rural area. Obviously it costs less for a mortgage company to do business in an urban district; at any rate that is the general impression. Perhaps the minister would put on record the reasons for this change in committee in the rate of interest on urban mortgages from 5 to 51 per cent, and why there should be this discrimination against urban mortgagors.

Mr. DUNNING:

I have given at least the major reason-our desire to secure cooperation. Of course one reason is that under the monthly payment amortization plan, which applies under the National Housing Act and also under this act to urban dwellings, the cost of operation is higher than it is with respect to farm mortgages bearing annual repayment provisions. But really the committee was faced with this choice; we could see it quite plainly. Mortgage companies showed us that their amounts in default or behind in payments in urban properties represented a much less proportion of the whole than in the case of agricultural mortgages, which have been hit by ten years of adverse conditions. They said quite frankly, "You are asking us to go to all our borrowers in the cities who are in good standing, who have kept their contracts, and say to them, 'In future you will not pay us 6 per cent, or 61 per cent, or 7 per cent; just as a free gift we are cutting your interest down.' " They argued also that we must consider the situation as a whole from the standpoint of companies becoming members of this bank. For instance, company A has, say sixty per cent of its investments in urban properties and forty per cent in farm properties; company B's investments might be seventy per cent urban and thirty per cent rural, and so on down the scale. Obviously each company is going to look at the obligation it assumes with respect to the whole of its properties. It was the design of the legislation to make that possible, otherwise the legislation would have been impracticable; and we gathered the impression in the committee from the representatives of the companies that, at 51 per cent for urban loans, we should have a very good chance of getting the great bulk of the companies to join, and thus extend to all urban and rural dwellers

who are borrowers from member companies the benefits of that very considerable cut in interest.

Mr. HEAPS:

How is the distinction made in the bill between rural and urban loans? Is it a question of the mortgage being on either a farm or a house, or is it according to areas, irrespective of what kind of property is involved?

Mr. DUNNING:

It is not according to area. It is either a farm home or a non-farm home. That is why we adopted that language,-because of the difficulty in respect of area which my hon. friend has indicated. Under section 31 there is power more closely to define these terms. But the distinction, broadly, is between a farm which is an operating entity as such and a non-farm home.

Mr. MacNICOL:

Has the minister a record of the percentage of private homes upon which mortgages are held by companies, and the percentage upon which mortgages are held by private individuals?

Mr. DUNNING:

We had before the committee, from the census, the total dollar mortgage holdings for the dominion, but there is no means of distinguishing from the census returns between a private mortgagee and a corporate mortgagee.

Mr. MacNICOL:

Does the bill make any provision for the home owner upon whose property a mortgage is held by a private individual?

Mr. DUNNING:

We were unable to work out any method of dealing with the private mortgagee.

Mr. MacNICOL:

Then the small home owner upon whose home a mortgage is held by a private individual will not have any redress under this bill?

Mr. DUNNING:

As the bill now stands

he cannot secure any direct advantage from it, but there is no doubt that the competitive influence brought to bear by virtue of the entry into the scheme of a large number of the lending institutions will have an effect upon what private mortgagees will be able to get for their funds. But there is no means of arranging for dealing by the bank with private mortgagees. Everybody, on all sides of the house, who was interested in this great social and economic question endeavoured to find some machinery which could be made to apply; but we were quite unsuccessful, all of us. As a matter of fact this plan is made possible by the fact that a company brings in all its mortgages of the classes mentioned,

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good and bad, those in good standing and those in arrears. Of course the private mortgagee would only bring along the bad ones to the bank. We have not been able to work out any solution, but the problem is such in some parts of Canada that a year's operation may indicate a channel through which, by cooperation among private mortgagees or by some other means, they also may be dealt with. At present, however, we cannot devise such machinery.

Mr. PELLETIER:

I should like to get

clear in my mind the reason for the increase from 5 to 51 per cent. The minister has said that there are companies with two types of investment, some urban and others rural.

Mr. DUNNING:

They all have.

Mr. PELLETIER:

So that in order to

extend the benefits of the act to the rural mortgagors it was necessary to give a more satisfactory rate of interest to urban mortgagors. Is that correct?

Mr. DUNNING:

I would not put it in

that way. I do not care to alter my language. It is hardly correct to put it in that way.