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December 22, 2010

Hon. Jim Flaherty PC, MP Minister of Finance 21 st Floor, East Tower L’Esplanade Laurier 140 O’Connor Street Ottawa, Ontario K1A OG5

Dear Minister:

Recently there have been media reports suggesting that further changes to the financial guarantee on mortgage insurance is required to reduce the overall debt levels of Canadians.

On behalf of the Canadian Association of Accredited Mortgage Professionals (CAAMP) and our 12,000 members from coast to coast, we would like to comment on this particular proposal. As you know, CAAMP is the national association representing Canada’s mortgage industry. Our members are drawn from all sectors of the industry including lenders, insurers and brokers.

CAAMP shares the concern over debt and the need for Canadians to be prudent when borrowing money. The mortgage industry has a role to play in ensuring that Canadians

do not take on debt beyond their means. That is why earlier this year CAAMP partnered with Credit Canada to produce a mortgage module that credit counselors use when meeting with clients who are experiencing debt challenges. This module is posted on both of our websites. We were also a sponsor of Credit Education week held in November. Further, CAAMP created a consumer specific website entitled mortgageconsumer.ca which contains relevant information to assist borrowers with making informed decisions. We believe that all parties to lending, including financial institutions, have a role to play in ensuring that they mitigate risk and adopt responsible underwriting guidelines.

The federal government has made changes to the rules governing the financial guarantee twice in the last twenty four months. These changes were supported by CAAMP. In particular we welcomed the last series of changes that became effective this past spring. They were targeted and struck the right balance between concern over the impact of rising rates and the overall health of the real estate and housing market. We believe these changes, coupled with the ones made two years ago that reduced amortization periods and required a minimum credit score and down payment for borrowers are working and mitigating risk. We believe the changes to be sufficient to

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offset risks. At this time, CAAMP and its members are concerned that further changes to the financial guarantee would come into force at the very time that the Bank of Canada is likely to start increasing interest rates. These two measures taken together would negatively impact real estate and housing sales. This would not only affect the

housing and real estate markets and the thousands of associated jobs, but also the ability of Canadians, particularly first time buyers, to purchase a home.

CAAMP also wishes to note that changes to the mortgage insurance guarantee only affect a minority of Canadians in the overall credit market. Approximately two thirds of Canadians are homeowners. One third rent. Of the two thirds whom are homeowners, roughly one third have paid off their mortgage. Of the remaining total that have mortgages less than half are insured. We are speaking of a minority of Canadian households. That is why we supported the targeted changes you made last winter which focused on lines of credit and investment properties. We remain concerned about changes that would impact either down payment or amortization levels.

Last January CAAMP provided your Department with a report that examined over $10 billion worth of mortgages that were issued in the previous twelve months. The report entitled “Revisiting the Canadian Mortgage Market – Risk is Small and Contained” is being updated and will be forwarded to your Department in January. We note recent comments by the chief economist for Central Credit Union 1 that Canadian housing prices and debt levels are under control. Our recent spring research report also found that 35% of Canadians with a mortgage either made a lump sum payment or increased their mortgage payment in the previous twelve months.

CAAMP would request that before any changes are made that proper due diligence be followed. As part of that process we would welcome consultation on any options that may be considered.

Should you have any questions please do not hesitate to have your office contact me by e‐ mail at jmurphy@caamp.org or by phone at 416 ‐644 ‐5465.

Sincerely,

Jim Murphy, AMP President & CEO CAAMP

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