May 29, 1984

NDP

Ian Deans (N.D.P. House Leader)

New Democratic Party

Mr. Deans:

Mr. Speaker, I believe that I am speaking on behalf of the entire Party, but I certainly believe that to begin with, mortgage financing must be treated quite differently from any other kind of financing. That is not unusual, and I say to the Parliamentary Secretary to the President of the Privy Council (Mr. Evans) who is looking at me quizzically, that it is not unusual to treat certain kinds of financing differently from others. He knows that as well as I do. For example, we in Canada have made money available to certain fields of endeavour at a variety of different interest rates with different structures and different time periods of repayment. The Government has pursued that as a matter of practice and as a matter of principle. I suggest to the Hon. Member that that is necessary in this case.

We must look at the benefits of putting money into housing and weigh them against those of putting money into other things. When money is put into housing, the risk of loss is considerably reduced. When money is put into housing, the asset or the house itself is always in existence. It is not an asset that one can put under one's arm and take away. Therefore, the risk to the collateral is much less for homes than it is for a number of other purchases which might be made.

I believe that you can appreciate, Mr. Speaker, as can others, that there is a greater risk involved in financing certain luxury items that can be purchased at interest rates that are in some instances lower than the interest rates that are now being charged for mortgages. I begin by recognizing that in the field of mortgage recovery, the actual loss ratio is very small. The overwhelming majority of mortgage holders continue to make their mortgage payments. More important than that, even those who default on their mortgage payments cannot take the asset with them and, therefore, the asset is available for resale.

We must recognize that every penny invested in housing is returnable in a number of different ways and is perhaps returnable even far in excess of the actual dollar value itself. The money is returned first through the mortgage payments themselves, plus whatever the interest is or the money is returned through rents, depending on whether the home is a rental accommodation or a purchased accommodation. The money is returned through taxes that are paid at the municipal level on the appreciated value of the property as a result of an apartment or single-family dwelling having been built. The money is returned in the form of income taxes that are charged against those who build the accommodation.

Workers who are presently unemployed could be building these accommodations and would be paying perhaps 30 per cent or 35 per cent of their income back in taxes to the federal and provincial Governments. The money is returned through corporate taxes, paid by the corporations, which enter into the business of building the homes that we require. The money is returned through the sales taxes that are applicable, where they are applicable, on materials that go into the building of the homes. When money is invested in a home, an overwhelming benefit is derived. Not only is every penny returned that is put into building a house, but there are tremendous spin-off effects as well.

May 29, 1984

National Housing Act

That is one of the reasons why we argue with the Govenr-ment that it must address the problem of affordable accommodation in a way far different from the way it is presently being addressed. For example, the Minister of Public Works (Mr. LeBlanc) knows that there have been dramatic cutbacks in funding for co-operative housing at a time when we need more housing. We will deal with that issue on another day in another way.

I would say to my colleague yes, we must establish that pool of finance that will enable us to meet the social need that can be met by the production of homes at an affordable price. If all of the other benefits to which I have referred are taken into account, housing is probably the single greatest economic motivator available to us. I do not have to tell you this, Mr. Speaker, because I know that you are an expert in the field, but for every one job that is created on-site when building a home, almost three jobs are created for the people who must make the various component parts that go into that home.

When a publicly financed, privately financed or a combined publicly and privately financed pool is established in such a way as to open up the field so that more people can afford to buy homes, thus holding interest rates down, then you can see that the evidence is abundant to show that we benefit in many ways. My colleague's question pertains directly to the subject before us and I think she is absolutely correct in saying that we must do that.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Jacques Guilbault (Assistant Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Guilbault):

The Hon. Member for Prince Albert (Mr. Hovdebo) has time for a short question.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
NDP

Stanley J. Hovdebo

New Democratic Party

Mr. Hovdebo:

Yes, Mr. Speaker, it is a very short question. The Government would not have put this Bill forward if no one were to benefit from it. I wonder if the Hon. Member for Hamilton Mountain could indicate to us who will really benefit from the passing of this Bill?

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
NDP

Ian Deans (N.D.P. House Leader)

New Democratic Party

Mr. Deans:

Mr. Speaker, I will answer the question in lieu of making a 40-minute speech on the matter. I think that my colleague is probably aware and I think that most would agree that it is only the financial institutions that will benefit from this Bill. The financial institutions will be able to increase mortgage interest rates by 3.5 per cent and the-

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John Leslie Evans (Parliamentary Secretary to the President of the Privy Council)

Liberal

Mr. Evans:

Oh, Ian!

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
NDP

Ian Deans (N.D.P. House Leader)

New Democratic Party

Mr. Deans:

My colleague, the Hon. Member for Ottawa Centre (Mr. Evans), disagrees. They will be able to increase mortgage interest rates by 3.5 per cent and every single penny of that increase will be charged back to the home owner. That is the problem.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John Leslie Evans (Parliamentary Secretary to the President of the Privy Council)

Liberal

Mr. Evans:

You think they will raise interest rates right out of thin air?

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
NDP

Ian Deans (N.D.P. House Leader)

New Democratic Party

Mr. Deans:

I do not blame my colleague for asking if I think that they will raise interest rates out of thin air. I think that financial institutions fail to distinguish between their obligation to provide affordable capital for absolutely essential works

and their right within the free market system to expand additional capital on other than necessary works.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

Jacques Guilbault (Assistant Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Guilbault):

Resuming debate.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

William James Kempling

Progressive Conservative

Mr. Bill Kempling (Burlington):

Mr. Speaker, to say that I am disappointed by this Bill would be an understatement. I had hoped that we would have had something more substantial than what is before us today.

The only way we are going to have competitive interest rates in the mortgage field is by having real competition in the mortgage field. That is the only way we are going to do it. In order to do that, we must have a good supply of money from a variety of sources; not necessarily just from banks and trust companies. We must have more sources for mortgage funds.

In looking at the minutes of the hearings which were conducted by the Finance Committee in 1968, I discovered that the Canadian Bankers' Association appeared before the committee. I was not a Member at that time, however, I read the minutes of the hearings which were held from 1978 to 1981. It was through the Bank Act Amendment of 1968 that banks were allowed into the mortgage field. Representatives of the Canadian Bankers' Association said that if they were allowed into the mortgage field, mortgage rates would drop. They indicated that there would be increased competition because of the amount of money that would be available to place in the mortgage field.

However, the rates did not drop. The rates increased. I am not saying that they should not have increased, but they did increase. The drop which we were supposed to see did not happen. When the Canadian Bankers' Association came before the Finance Committee for the next revision to the Bank Act, I made a point of asking the Chairman of the association why the rates had not dropped as the association had said they would in 1968. The Canadian Bankers' Association had left the committee, the House and the country with the impression that by allowing the banks into the mortgage field, the amount of money available for mortgages would vastly increase. Therefore, according to the supply and demand theory, mortgage rates would drop. If that had happened, the consumer would have benefited, the mortgagee would have benefited, housing would have benefited and the appliance industries and the spin-off of that tremendous, invigorating industry would have gone to the people of the country.

I asked the Chairman of the Canadian Bankers' Association why the rates had not dropped. His reply was interesting. He said: "If we had reduced the rates, we would have been accused of forcing the trust companies out of business." That was his reply. It is on the record of the Finance Committee meetings. He said that the banks would have been accused of lowering the rates and putting the trust companies in jeopardy because of their actions. His answer bothered me. It was not very satisfactory, but he was not about to give us something else.

May 29, 1984

I recall not too many months ago rising in this House time and time again to ask questions of the Minister of Consumer and Corporate Affairs, the Minister responsible for housing, who is in the House today, and the Minister of Finance about mortgage rates. I especially recall the 1981-82 period when mortgage rates were rising very rapidly and the subsequent actions of some of the trust companies. I was concerned that some of the trust companies-in fact, the larger ones were the major culprits-seemed to be able to circumvent the laws of the country and get away with it. I was concerned about the 750,000 Canadians who were trapped into high interest rate mortgages.

I heard various Ministers tell us to wait. They would bring in some relief. Legislation would be brought in to sort out the problem. That is what I was looking for. I remember the Minister of Consumer and Corporate Affairs telling the House that if we would be patient, legislation would be forthcoming. The Minister responsible for housing expressed similar views. He was concerned, and I appreciate that. The Minister of Finance stated that the rates were high enough and that he would speak to the banks and the trust companies to see what he could do about getting them down. Well, we know that in that 1981-82 period interest rates rose to 21.4 per cent. I think that is the highest official record which we have. There may have been a few rates which were higher than that, but the listing which the Bank of Canada provides indicates that 21.4 per cent was the maximum rate. There were, however, interest rates at 20 per cent, 19 per cent, 18 per cent, 17 per cent and so forth.

Thousands of letters came to my office. I was amazed as I had never experienced it as a Member. Obviously, my questions on interest rates had hit a responsive chord across the country. I received letters from every province in Canada. People told me about their mortgage problems and asked whether we could not do something about them. They indicated that they were trapped into high mortgage rates. The rates were dropping, but they could not renegotiate their mortgages. They were also concerned about the interest differential penalty which they would have to pay in order to renegotiate their mortgage.

I began to think back about what had been done in the House during that period. I recall that in late 1974 and early 1975 legislation was before the House which was passed by House and by the Senate. However, I do not believe it was ever put into operation. That legislation would have established mortgage investment corporations and a mortgage bank.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
PC

John Raymond Ellis

Progressive Conservative

Mr. Ellis:

That is right.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
PC

William James Kempling

Progressive Conservative

Mr. Kempling:

As my colleague said, "That is right". He remembers this, as we all do.

At that time pension funds were in financial jeopardy because the yield on the securities in which they traditionally invested was dropping. The idea was that we would put together mortgage investment corporations. Those corporations would invest in residential mortgages and would sell the mortgage portfolios to pension funds. If the pension fund

National Housing Act

wanted to cash in that portfolio and put the money into something else, it would come to Ottawa and go to the mortgage bank where it would negotiate. The mortgage portfolio then would be turned into the mortgage bank in Ottawa, the pension fund would get the money and go on with whatever other investment it had in mind. That mortgage portfolio would then be recirculated through the mortgage investment corporations and placed with another pension fund or another institution. That was the theory. It was not original. It had been done in the United States for years. The Bill was one of the best drafted pieces of legislation which I have seen. Witnesses from the United States, who had similar legislation, looked at our legislation. Those witnesses liked some of our features and informed us that they would amend their legislation to make it equal to ours. It was that good in their minds.

We waited with a good deal of anticipation to see the results. It passed the House and it passed the Senate. We rose regularly and asked the then Minister of Finance, who happened to be John Turner, when the legislation would go forward. His reply was that the Government could not find a suitable person to head the mortgage bank. I do not want to be political, but even in those days I am sure that there were a few defeated Liberals around who could have been put in charge of a federal mortgage bank. Mr. Turner used that excuse for a number of months. Then, as we all know and as history has recorded, he departed the hallowed halls of the House of Commons and went to other climes. Then we asked his successor, Donald Macdonald, who now heads a royal commission, what was happening to the legislation.

He waffled on it several times but finally he said, "Well, we have discussed this matter with the financial institutions and they have convinced us that this sort of legislation is not required". Can you imagine that, Mr. Speaker? A Bill was passed by the House of Commons, it went through debate and into committee, back into debate, then to the Senate, was passed by the Senate, and was all set to go, then the financial institutions told the then Minister of Finance it was not necessary, and the whole thing was dropped. The tragedy is that that Bill had in it a "truth in lending" section which I thought might have been in Bill C-37 and in the subsequent parallel Bill on amendments to the Interest Act. That legislation had it all there and I wonder now if we had just gone ahead with it, whether we would be in the mess we are in today.

I took some interest in that Bill. I recall going to the Library of Parliament and it was not even on the computer. I have one of the few copies of the Bill, I am sure. In fact, I drafted a Private Members' Bill of my own by lifting sections out of that Bill because it was such a good piece of legislation. If we had only gone ahead with it, we would not need this legislation today.

I believe the difficulties that many mortgagees faced in 1981-1982 would not have had to be faced. We would not have had this terrible argument about interest differential charges

May 29, 1984

National Housing Act

and all the nonsense surrounding that. We would not have the trust companies spouting such terrible rhetoric as, "You see, we have some money out there and we only have it in a GIC for a year or for five years and that is the money we are going to give you on a three-year or five-year mortgage". That is nonsense. Anyone who knows anything about GICs and how they are invested knows that that is just nonsense. However, that excuse is still being used today. I talked to a banker the other day and he gave me the same story.

Therefore, when I say to the Minister that I am disappointed in this Bill in the way it has been presented, 1 am serious. We are going to pass it on into committee, I am sure, and I hope that we can make some changes to it in committee which will give it at least a bit of life. However, I am terribly disappointed that it is not going to do what I thought was the intent of the Minister and his colleagues, the Minister of Consumer and Corporate Affairs (Mrs. Erola) and the Minister of Finance (Mr. Lalonde). It just does not address the problems with which many people are still faced. I am still receiving letters from people who are trapped in five-year mortgages with interest rates at 17.5 per cent or 19.5 per cent which they cannot get out of.

I talked to the Minister of Consumer and Corporate Affairs and the Minister of Finance at various times about this. I was particularly incensed at some of the verbiage in the mortgage renewal contracts. I do not see anything in Bill C-37 or Bill C-36 which is going to stop similar verbiage from being put into new mortgage renewal contracts. I was incensed that these institutions would put in their mortgage renewal contracts clauses which made the granting of mortgages conditional upon the mortgagees waiving rights which had been established for them by the Parliament of Canada and by the legislatures of at least two provinces in this country. It cut me to the quick to think that a corporate body could insert a clause into a renewal contract for a mortgage which says, "You waive your rights under Section so and so of such and such an Act", or that they could change the dating of a contract and thereby wipe aside a judgment of the Supreme Court of British Columbia.

I am at a loss for words to describe what I think of that. It is beyond credibility that these institutions would do that. I took the two particular clauses in the mortgage renewal agreements to people who I thought were very learned counsel, who practised in the high court, and asked their views on it. Their view was that it would not stand up in court. That is fine, but it is no consolation to a person who has signed the mortgage renewal agreement. It is no consolation whatsoever.

As late as a couple of weeks ago, the Superintendent of Insurance was before a committee of this House and I asked him about this. He agreed with me that these clauses should not be in there, but they were in there. The legal opinion he had received from his authorities was that those clauses, if they went to court, would not stand up. What a terrible thing to put a mortgagee through. If someone goes into the investment community and asks what is the best thing to invest in, he is told, "If you own a home, pay off your mortgage. You

cannot have a better investment", and here we are allowing corporate bodies, trust companies, banks and others, to put these kinds of clauses in contracts and we do nothing about it.

We are allowing corporate bodies to take an Act of Parliament and just brush it aside. They can take an Act of the provinces and just brush it aside. They can take a judgment of the Supreme Court of British Columbia and brush it aside. This Parliament, the Government, the Ministers and the officials who are charged with that responsibility, do nothing whatsoever about it. They say it is too bad. They say it will not stand up in court. However, that is no consolation to the person who takes the mortgage. That is my point. We have failed the Canadian home owner. Some of the trust companies,

I must say some of the smaller ones, have recanted. A couple of the larger institutions, when pressed to the wall with court action, recanted and allowed mortgages to be rewritten at a lower rate of interest in payment of penalties as prescribed in our legislation.

However, this legislation falls far short of what I thought it was going to do. I cannot really see anyone going out on the basis of this legislation and buying a five-year mortgage. I just cannot believe that they are going to do that. There are some other features in this legislation which we are going to get into in committee and I will tell the Minister now that he had better be well primed and briefed, as I know he usually is. I am sure he will have his officials there. There are going to be some pretty hard questions put to the Minister at that time because I am not at all convinced that this legislation is really going to do that much. It will generate a good deal of publicity if people do not read beyond headlines such as, "Government introduces a mortgage protection plan". It sounds great until you read the fine details, and when you do, you find it is really not going to help that many people.

I will conclude by saying that I believe our intention is to let this legislation pass on to committee at the appropriate time in the hope that at that point we can convince the Minister that some changes should be made in the legislation which will give a break and a benefit to the mortgagee and not just give the mortgagor more and more protection.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
LIB

Jacques Guilbault (Assistant Deputy Chair of Committees of the Whole)

Liberal

The Acting Speaker (Mr. Guilbault):

Are there any questions or comments?

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
LIB

John Leslie Evans (Parliamentary Secretary to the President of the Privy Council)

Liberal

Mr. Evans:

Mr. Speaker, I was reading something here for a moment when the Hon. Member was speaking and mentioned a Bill that he was quite taken with. I believe it was in the Thirty-first Parliament?

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

William James Kempling

Progressive Conservative

Mr. Kempling:

The Thirtieth Parliament.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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LIB

John Leslie Evans (Parliamentary Secretary to the President of the Privy Council)

Liberal

Mr. Evans:

In 1976? Was that the Bill of the Minister of Consumer and Corporate Affairs called, "The Borrowers and Depositors Protection Act"?

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
PC

William James Kempling

Progressive Conservative

Mr. Kempling:

I do not believe it was called that.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
LIB

John Leslie Evans (Parliamentary Secretary to the President of the Privy Council)

Liberal

Mr. Evans:

C-69?

May 29, 1984

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
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PC

William James Kempling

Progressive Conservative

Mr. Kempling:

No.

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink
LIB

John Leslie Evans (Parliamentary Secretary to the President of the Privy Council)

Liberal

Mr. Evans:

Did it come from the Department of Consumer and Corporate Affairs?

Topic:   GOVERNMENT ORDERS
Subtopic:   NATIONAL HOUSING ACT
Sub-subtopic:   MEASURE TO AMEND
Permalink

May 29, 1984