Thank you, Madam Chair. I am pleased to introduce Bill 16, An Act to Amend the NWT Housing Corporation Act. This amendment will allow the corporation to meet some of the objectives of Plan 2000. Specifically, it will allow the corporation to encourage more private sector lending for home ownership by being able to guarantee loans for housing purposes from private financial institutions. This amendment will also require a regulation to be approved to set the maximum cumulative value of all loans which may be guaranteed. Thank you, Madam Chair.

Thank you, Madam Chair. On behalf of the Standing Committee on Social Programs, I would like to report on our review of Bill 16, An Act to Amend the NWT Housing Corporation Act. This Bill allows the corporation to make loan mortgage guarantees to support the programs in Plan 2000. The committee originally reviewed the legislative proposal for this Bill in April. We were comfortable with the intent of the Bill, however we did agree that there should be a maximum on the amount of guarantees the Housing Corporation can make. On June 2, 1997 we held a public hearing on the Bill with a presentation with the Minister for the Housing Corporation. No public stakeholders expressed concerns with the Bill. Since this Bill is closely tied to Plan 2000, Members asked the Minister for clarification on the work of his staff to close the potential loopholes in the program. He gave the committee satisfactory information on the efforts to revise and refine the plan to ensure it can meet its objectives. The Standing Committee on Social Programs has completed its review and has no major concerns with the proposed Bill. Thank you, Madam Chair.

Agreed.

Thank you, Madam Chair. With me is Dave Murray, the President of the Housing Corporation, Jim Nelson, the Vice-President responsible for Finance and Administration and Rebecca Veinott, legal counsel with the Department of Justice.

Thank you, Madam Chair. Madam Chair, my concern here is with the Bill or any type of legislation that provides for an exemption to the Financial Administration Act and the guarantees made by the Housing Corporation. Now I am wondering in the drafting of the legislation, did legal counsel or the Department of the Housing Corporation or the Housing Corporation itself, speak to any of the Auditor General's staff or anyone from the accounting field which would have given them any indication that, indeed, this would be standard accounting practices to exempt the Housing Corporation from the Financial Administration Act in regards to sections 86 and 87 of Bill 16?

Thank you, Madam Chair. The draft legislation was reviewed by our own Department of Finance, the Financial Management Board Secretariat, and of course Justice. The section that the Member refers to merely exempts each and every application from going to Cabinet as a separate item. As the Financial Administration Act is written now, what would be required is for each and every one of the loans that we guarantee to go through Cabinet. That would be unnecessary and onerous, especially where dealing with 2,000 or so different applicants.

Thank you, Madam Chair. Madam Chair, I guess the Act in its original form with sections 86 and 87 were used to check the check and balance within the government to make sure that the government was not guaranteeing loans that we are not able to pay back if they went bad. What type of insurance does the Minister or his departmental officials have that indeed, by exempting from the Financial Administration Act, that we will be able to have that check in place?

Madam Chair, what we will have is a normal screening process which will enable us to screen out as much as possible clients that may potentially have problems in paying off loans, et cetera. The loans that are guaranteed are through the banks so the banks, of course, have their fairly rigid ways of dealing with debts and forcing people to pay on time. What we also will be putting aside is a small reserve to be there as an insurance in case we do have problems.

Thank you, Madam Chair. Madam Chair, that does not set my mind at ease and I will explain why. For example, in the Nunavut settlement area where we do not own the land, 95 percent of your assumable mortgage is usually covered under Canada Mortgage and Housing Corporation. They insure your mortgage. The bank is at no risk because you have to come up with your five percent. So if I do default, the bank just goes to CMHC and they cover the risk. By setting up the debt reserve, on the other hand, is an indication that you do look at the exposure of having debt loss. Maybe my supplementary question on this area would be then, what is the corporation's reserve and what percentage of the guarantees being made do they expect to go into the negative side or the non-performing side of the guarantee?

Thank you, Madam Chair. I would like to ask the vice-president responsible for Finance and Administration, Mr. Nelson, to deal with that question.

Thank you, Madam Chair. The approximate amount of reserves are about $5 million and those reserves are intended not so much to cover losses as they are cash flow requirements. We do not anticipate significant losses with the program. What we will probably be doing is where there are situations where the payments cannot be made under the mortgage of the bank that we have guaranteed, that we will buy back the unit and resell it. So it is really a bridging finance situation as opposed to a loss provision. It is more of a reserve of cash to allow for us to buy back the unit and resell it.

Thank you, Madam Chair. I appreciate the clarification. Another concern is that we are going to get into selling and buying of houses. Although we have different checks and balances in place to assure that when you lend money or make guarantees that you have less exposure. But we know as a government, when we write off debts of the different corporations, the BCC and so on and so forth, over the past year and a half in this Assembly, that sometimes there are staggering amounts. I think it is naive of the corporation to look at not having some type of debt reserve and then of course what happens then is, for example, if I cannot meet my payments and then an arm of this government, the housing corporation, has to come in and evict me and sell my house, that leaves a very poor taste in my mouth as a government because we are going to be evicting people. I guess, I am looking for some type of assurance that you have a reserve or at least, if you have a portfolio of $15 million guaranteed are you looking at an exposure rate of 10 percent, five percent, eight percent. Standard accounting practices with lenders on the reserve or the debt loss ratio that the corporation would expect to take.

Thank you, Madam Chair. The maximum amount of the guarantees that can be outstanding will be set by regulation in accordance with the Act provision and that is $10 million at any one time. That will be the amount of guarantees that could be outstanding at any time. The amount of reserve that we will be establishing would be an amount of approximately $4 million, which is I think more than sufficient to cover off losses. As I indicated earlier, the majority of that will be cash flow requirements to buy back units, as opposed to covering losses.