Proceedings of the Standing Senate Committee on
Aboriginal Peoples

Issue 2 - Evidence - December 10, 2013

OTTAWA, Tuesday, December 10, 2013

The Standing Senate Committee on Aboriginal Peoples met this day, at 9:30 a.m., to study the federal government's constitutional, treaty, political and legal responsibilities to First Nations, Inuit and Metis peoples and other matters generally relating to the Aboriginal Peoples of Canada.

TOPIC: Housing.

Senator Glen Patterson (Chair) in the chair.


The Chair: Good morning, ladies and gentlemen.


I would like to welcome all honourable senators and members of the public who are watching this meeting of the Standing Senate Committee on Aboriginal Peoples either here in the room or via CPAC or the Web. I am Dennis Patterson from Nunavut, chair of the committee. Our mandate is to examine legislation and matters relating to the Aboriginal peoples of Canada generally. In order to understand our concerns and the concerns of our constituents, we regularly invite witnesses who can educate us on the topics that are currently of importance to them. These sessions are invaluable in helping the committee to decide what future studies it will undertake in order to best serve the Aboriginal community. The witnesses today have been invited to provide general background on the broad question of financing infrastructure on reserves, which could relate to capital projects, including schools, housing and other things. This morning, I am very pleased that we will hear from the First Nations Market Housing Fund.

Before we hear from our witnesses, I would like to go around the table and ask the members of the committee to introduce themselves.

Senator Moore: I'm Wilfred Moore, Liberal senator from Nova Scotia. Nice to see you both.

Senator Watt: Charlie Watt from Nunavik.

Senator Sibbeston: Nick Sibbeston from the Northwest Territories.

Senator Tannas: Scott Tannas from Alberta.

Senator Beyak: Senator Lynn Beyak from northwestern Ontario. Welcome.

Senator Wallace: John Wallace from New Brunswick.

Senator Ngo: Thanh Hai Ngo from Ontario.

The Chair: Thank you. Members of the committee, please help me to welcome our witnesses from the First Nations Market Housing Fund: John Beaucage, Chair of the Trustees; and Deborah Taylor, Executive Director.

We look forward to your presentation, which will be followed by questions from senators. Please proceed.

John Beaucage, Chair of the Trustees, First Nations Market Housing Fund: It is a pleasure to be here today as this committee examines the infrastructure needs on reserves across Canada. We are grateful that you are considering studying this issue, examining solutions and helping to raise the profile of our collective challenges and opportunities.

Today I will talk to you exclusively about housing, the role of the First Nations Market Housing Fund, the way it plays into broadening the range of housing options available to First Nations and the way it is driving infrastructure development in our communities.

I want to start my presentation by sharing with you our vision: Every First Nation family has the opportunity to have a home on their own land in a strong community. This vision is fundamental to our fund's existence and the core of all of our activities.

We are not alone in this vision. The fund came into being as a joint initiative of the Assembly of First Nations and the Government of Canada. The concept was to establish a sustainable fund that would encourage private investment, individual home ownership and improved access to lending to facilitate the development of an on-reserve housing market for First Nations.

The fund is a recognition that First Nations people living on-reserve do not have the same housing opportunities as other Canadians largely because they cannot easily get housing loans. Lenders are reluctant to lend money to First Nations people without having access to security, something that is tangible that will ensure that if a person does not pay their loan, the lender will not lose money. The type of security a lender would usually take in an off-reserve setting is the land through a mortgage. As that is not possible on-reserve, lenders were reluctant to lend. The fund fills a void and acts as partial security for the loan.

The fund became operational in May 2008. We were established by the Government of Canada, through Canada Mortgage and Housing Corporation, and the government made a one-time investment of $300 million to the fund to get it started. We have leveraged this investment with the goal of making a potential $3 billion available for housing investment on reserves and on settlement lands across Canada.

To be clear, our work is not meant to be the solution for all First Nations nor the complete solution to address the significant housing deficit and overcrowded conditions that continue to exist in First Nations. However, we are, as intended, part of the solution. By helping to make more private financing accessible, we are enabling some people to help solve their housing challenges and to help redirect social housing to those in need.

Now that you know why we exist, let's talk about how we actually work with First Nations. First, and most important, participation in the fund is completely voluntary. We recognize the differences amongst First Nation communities and work with them in their own timelines to provide them with the choice and flexibility they need to address their unique housing challenges. There are two main ways that we work with our First Nation partners: credit enhancement and capacity development.

For credit enhancement, we provide qualified First Nations with a 10 per cent backstop for housing loans, which are also guaranteed by the First Nation. The approval of the fund provides financial leverage to negotiate with lenders, which results in lower interest rates, reduced program access fees, risk-sharing opportunities and administrative arrangements that are favourable to each First Nation.

You might be wondering if these things matter. They do. Home ownership has existed in some First Nation communities for a long time, but many borrowers do not receive a competitive interest rate from the lender. Indeed, some have had to pay a premium or a surcharge for the privilege of borrowing.

The lenders working with us are offering discounts to interest rates in the same way an individual off-reserve could negotiate an interest rate discount. Not everyone pays the posted interest rate in lending institutions. We strive to ensure borrowers from First Nation communities get that same benefit.

Some First Nations have had to pay a fee for setting up a credit facility with a lender. This fee could be in the tens of thousands of dollars. Again, this is an area that we've seen reduced or eliminated as a result of the backing of the fund. First Nations that qualify for the fund's credit enhancement now acquire loans to address the market housing needs specific to their communities, be it individual financing, the construction or the renovation of a home to then purchase, or the construction of a new multi-unit rental accommodation for the nation.

With capacity development, we help all our partners by strengthening their communities and enabling self- sufficiency with customized programs. We offer supports such as helping nations to develop policies, codes, bylaws and laws in a variety of areas including finance, governance, lands management and housing. We support the professionalism of the First Nations workforce, providing financial assistance for staff to obtain accounting designations and certifications in technical areas such as water, waste water, gas and oil installation, lands and property management.

The impact of this work extends further than our portfolio, helping to develop and support governance and management to all facets of local First Nation government.

To determine exactly which of our services are right for each of our First Nation partners, the fund does an assessment every time a nation applies to work with us. All nations who believe in market housing — that is, the idea that individuals who can pay for their housing do pay — go through the assessment process. They qualify for capacity development services, but only some are immediately ready for credit enhancement.

We want to make sure that we are setting nations up to succeed, not to fail. That is why both the fund and the community do assessments of their situation. We want to make sure that they have the financial and land management capacity necessary to successfully introduce or expand and sustain market housing for their communities.

Of course, if they don't have the capacity right away, we can help build it, and then they can graduate to being eligible for credit enhancement.

Mr. Chair, First Nation communities are clearly interested in the supports the fund provides and in being able to offer market-based housing on their lands. To date, 115 First Nation communities have chosen to partner with the fund. These communities can be found in every region of the country, from the West Coast to the East, from southern Ontario to First Nations in the Yukon Territory. These communities have populations as low as 100 and as large as 9,000. They are located in urban, rural and remote locations.

Mr. Chair, we only talk about our First Nation partners when they are ready. We respect them and treat their information in confidence. When they wish to be announced as participating with the fund, we do so. Indeed, tomorrow, together with 10 chiefs, I will be announcing 10 more First Nation partners who have chosen to work with the fund to increase housing opportunities for their citizens, and all have been approved for credit enhancement.

I'm pleased to say that right now 53 of our First Nation partners have already been approved for the fund's credit enhancement program. This includes three First Nations that have graduated from the capacity development only stage to be eligible for credit enhancement. Together, these 53 nations have been approved for $610 million of credit backed by the fund to support an estimated 3,700 loans for individuals or a First Nation to build or renovate a home on reserve and settlement lands.

This means that we have taken the original $300 million the government gave us to steward and have effectively leveraged it into more than $600 million of investment opportunity. In just five short years, we are well on our way to turning $300 million into $3 billion of investments for housing on reserve. We have invested wisely and earned interest to pay for our operations and to fund millions of dollars in capacity development initiatives. We are truly self- sustaining.

We also have agreements in place with 14 different financial institutions to provide loans to nations that have qualified for credit enhancement. It is important to us that our lending partners are committed to providing a high level of service to First Nations, and thus they too must go through an application process to provide loans backed by the fund.

I'm pleased that these financial institutions include both mainstream traditional lenders and First Nation-run financial institutions, as well as members of the credit union movement.

Mr. Chair, I know you can tell from my speech so far that I am very proud of the fund and the work that we do. I believe that thanks to the hard work of our trustees, staff and our partners, we are starting to have a real impact on the housing situation on-reserve. However, I do think it is important to provide some perspective on the speed at which we are making progress.

Our fund is a unique and novel tool that was created to help address a long-standing and complex problem. This problem was never going to be fixed overnight, and we will never be the full solution to it. We had some very ambitious targets at the fund outset, and to be frank, we did not come close to meeting them. The idea of a housing market on- reserve was foreign to many communities, and those communities that had previously considered it had very little practical experience at providing market housing.

Therefore, much of our work became not just about increasing access to mortgages; it is about shifting attitudes through exposure to new opportunities. Once those attitudes are shifted, it is still a much more complex operating environment to build a home on-reserve than in the urban settings many members of this committee are perhaps more used to.

In fact, on average it takes three to four years for a home to be built on a First Nation after it completes its application. We are working hard to reduce that period. We also cannot forget the individuals who become borrowers and the role they play in this process.

We can work with First Nations and lenders to set up the process, but at the end of the day, it is the individual who needs to qualify to borrow and repay the loan. We have seen many instances where people have been turned down by the lenders due to poor or bruised credit. We are using our capacity development to work on personal budgeting and financing as well as credit, so that more people who wish to know will know what it is to qualify for loans.

While results were initially slower than planned, Mr. Chair, I am pleased to say that the fund's foundations are strong. We are building momentum at a great pace. This year alone, we will add more than 20 new First Nation partners and increase the amount of credit for loans backed by the fund by more than $120 million. Most important, we helped strengthen the governance framework of First Nations across the country and supported a large increase in the number of new homes being built.

As a not-for-profit trust, we have been able to distinguish ourselves from government, and I believe that that is the key to our success.

Mr. Chair, I have talked about what we do, whom we partner with and what we are achieving. I also thought it is important to mention to this committee how we are governed. As I mentioned previously, the fund was made possible by a one-time investment of $300 million by the federal government into a trust. We take this trust and, more figuratively, the government's trust and the public's trust very seriously. The fund is overseen by nine trustees, six appointed by the minister responsible for CMHC and three by the Minister of Aboriginal Affairs.

The trustees provide governance and leadership and are stewards of the fund. They are strong, informed and engaged individuals who are responsible for the fund's achieving its objectives and ensuring financial accountability, the safeguarding of assets and the regular reporting of results.

Further, the fund has a funding agreement with CMHC. This is designed to protect the federal government and the federal funding and set parameters for the administration of the funding over the long term. The annual plan and budgets of the fund are submitted to the minister for CMHC for approval, and as should be expected, the fund engages external auditors to conduct an audit of the fund annually. As I said earlier, we take the trust put in us seriously, and it is in good hands.

Before I close, Mr. Chairman, I would like to give you an example of the work the fund is doing with one community, and the impact it is having there. This past summer, my fellow trustees and I had an August board meeting in the Cree community of Wemindji. They are located at the mouth of the Maquatua River, along the coast of James Bay, some 1,400 kilometres north of Montreal. The community has a strong vision to empower its residents with smart infrastructure investments that generate economic opportunities while fostering a collective pride in their community.

In 2012, the chief and council decided to leverage real estate and housing construction as the latest innovation in its community building. Wemindji submitted an application to the fund in May 2012, which was approved in August 2012 for credit enhancement and capacity building. As part of a pilot project, Wemindji has built 20 new housing units. These beautiful modern dwellings come in three different models, and so far there have been 15 confirmed sales and a growing interest in private home ownership. Many of these homeowners have moved out of social housing in the community, thus freeing up those units for others who need them or reducing the overcrowding as in many of our First Nation communities. The economic benefits have also been obvious by generating local construction and landscaping jobs for the community.

The First Nations Market Housing Fund has also assisted Wemindji with two capacity building projects to strengthen human resources and project management. Other initiatives will soon be under way, and Wemindji plans to build many more homes with the fund's backing. Even a strong community like Wemindji needs capacity development to become stronger to sustain a market-based housing program over the long run. We believe this money is well spent.

Wemindji is a great example of an accelerated success story. There are 52 other First Nation communities that have qualified for credit enhancement and are working to be equally successful. Tk'emlups, also known as Kamloops Indian Band in B.C., the Siksika in Alberta, Flying Dust in Saskatchewan, Atikameksheng in Ontario, and Membertou in Nova Scotia are but a few of the thriving communities that have chosen to work with the fund to build their strength and make home ownership a reality on a broad scale.

We are working with other community partners to move from capacity development to credit enhancement, and we are working hard to partner with Canada's other First Nations applying our learnings and experience to make the process smoother for our partners.

The best part of my role as chair is speaking to First Nation leadership, meeting prospective and new homeowners and to hear about their stories, to hear about their hopes, to hear about their children and to hear about their pride in their communities. As more First Nations partner with the fund and develop their communities, I take great comfort in knowing that we will have many more stories like Wemindji in the years to come.

We are grateful that the Government of Canada chose to invest $300 million to make life better in First Nation communities using this model, a one-time contribution invested under the direction of the trustees, which is used as collateral security for loans on-reserve and generating interest income, which is used to build capacity and communities. It is truly a novel approach.

I thank you for being able to be present here today at the committee's proposed study of on-reserve infrastructure, and at the fund, we firmly believe that good housing is a foundation that contributes to the health and self-sufficiency of First Nation families.

I hope you have found this presentation informative, and I welcome any questions that you have. Miigwetch. Thank you very much.

The Chair: Thank you very much, Mr. Beaucage.

Before I turn to senators' questions, I wonder if you could give us more background on the organization. Specifically, under what authority do you exist? I believe it is policy. Second, could you tell us a bit about your organization and the staff? I know your executive director is here. Are there other staff? Third, do you make annual reports that could be made available to our committee?

Mr. Beaucage: I will start with the third question first. Yes, we do have annual reports, and all our reports are on our website and we can make sure that the clerk has a copy of all our annual reports from day one. I think that would be very helpful.

We do have a small but very dedicated staff, and our head office is here in Ottawa. All the trustees will be in town tonight, and we are having meetings tomorrow and the next day here in Ottawa. We will be over at meetings at the Assembly of First Nations tomorrow night to have an open house with, hopefully, all of our 115 communities that are signed up with the fund, including some other ones that are anticipating being part of our fund.

We were set up in 2008, and I believe it was by policy, under the National Housing Act, and the initial fund came from the Aboriginal envelope of funding, and it's sitting in a number of different investments.

We have an agreement that the fund can only be put in AAA investments. Thus far, the fund has grown from $300 million to $330 million, and it is very well managed. It looks after all of our administration expenses, and half of the investment income can be turned back into capacity development dollars.

The Chair: That's helpful. Thank you very much, and thank you for your presentation.

Senator Wallace: Thank you, Mr. Beaucage.

I just want to make sure I'm clear on this. The backing that you would provide for housing on reserves would be in response to the First Nations community, which has the need for the funding, since individuals on the reserves cannot borrow and finance in a typical mortgage fashion.

Mr. Beaucage: That's right.

Senator Wallace: That's true. Is there the need for your fund because the First Nations' communities do not have the financial capacity to borrow on their own? When I ask that, I understand that there are a number of housing funding programs through which the federal government provides funding to the First Nations communities for housing. So is it that that funding is inadequate and compels the First Nations communities to borrow in addition to that, and yet they would not have the capacity to borrow so have to come to a fund like yours? How does that fit together?

Mr. Beaucage: Mr. Chair, I'll try to answer. It's a very complex question, and there are different programs by the federal government. There have always been a number of programs by the federal government, first through the Department of Aboriginal Affairs, to provide what is called subsidy unit dollars to First Nations. I'll give you an example of my own First Nations, Wasauksing First Nation, which is near Parry Sound, Ontario. We have a population of about 1,200. On an annual basis, we get subsidy unit dollars, which would be three to four subsidy units, and it's about $30,000 per subsidy unit. So it would work out that we would get about $120,000 per year to build four houses. Now, anyone who has built a house nowadays knows that that will not build four houses. So the individual has to find other sources to top up that amount of money to actually build a house.

You can get a section 10 loan. That is a loan that goes through a bank, under section 10 of the National Housing Act, and allows for a loan on-reserve, but the collateral is a ministerial guarantee from the Minister of Aboriginal Affairs. It is a slow and tedious process, and I go back to my own example. I worked for Canada Mortgage and Housing Corporation across the country for 15 years, and when I decided to leave Canada Mortgage and Housing Corporation, I moved back to my home near Parry Sound and decided to build a house on-reserve at Wasauksing First Nation. It took me six months to get a loan under section 10, and I considered myself a housing expert. I had been through all of the process with Indian Affairs and CMHC and lenders for years. I knew what I was doing. It still took me six months.

One can imagine the difficulty and the trials and tribulations that the ordinary person off the street has to put up with. I was a chief when a lot of the initial work was done on the fund, and one of the things that came from all across the country was that there has to be an easier way to get loans on a First Nation so that our emerging middle class — and we do have an emerging middle class on First Nations — can go out and get a loan, build a house that they want and pay for it. That's essentially what we do. Once we're up and running on a community and they have credit enhancement and a person has good credit, they could probably get a loan approval within a couple of days, not several months. That's really what we were attempting to do.

Senator Wallace: Chair, is there time for one more? Last week, Mr. Beaucage, we had some very informative presentations by Keith Maracle and John Kiedrowski from the First Nations National Building Officers Association, and they had some very serious things to say about the lack of building permits and standards for housing in First Nation communities. Mr. Maracle indicated that only six of the 640 First Nations communities have building permit regimes. Only 20 per cent have actual bylaws that deal with standards. There is also the lack of a certification process for inspectors.

I'm wondering, from your point of view and your time with CMHC as a lender and financier of housing, how significant those issues are in impeding First Nations communities from being able to go to conventional lenders and obtain financing.

Mr. Beaucage: In the past, that has been a huge problem. One of the things that we are doing with the Market Housing Fund is trying our very best, and we're succeeding, in many instances, to improve the standards available for housing. When we do our capacity development, we look at improving the standards. I'll mention the community of Atikameksheng, which is near Sudbury, Ontario. Part of the capacity dollars there went to developing standards for the houses that were going to be built at Atikameksheng. I'll even do a little bit of name dropping here: Mike Holmes was part of that process. His organization was integral to developing the housing standards. Architects from his group came in. We've developed the standards, which are probably in excess of National Building Code standards and Ontario Building Code standards. We are looking to have these standards used more frequently across the country. We paid for them as an organization, and basically the federal government paid for them through us. We see this as a step forward and something that can be used by First Nations throughout the country, and the standards are second to none.

Senator Wallace: Yes, Mike Holmes' standards usually start with a sledgehammer.

Mr. Beaucage: I didn't see him there with a sledgehammer, but —

Senator Raine: Are the standards developed at Atikameksheng similar to the National Building Code or above? How do they differ?

Mr. Beaucage: They are in excess of National Building Code standards. In my years with CMHC, we always said that the National Building Code standards were minimum standards. We always endeavoured to have builders or developers build in excess of those standards. With regard to Atikameksheng, the Mike Holmes initiative and our paying for the standards, they are in excess of the National Building Code and in excess Ontario Building Code standards.

Senator Raine: Did the architects that you worked with on that project design the house specifically for the needs of that area? How would it differ from a typical CMHC house?

Mr. Beaucage: For one thing, the energy standards that were included as part of the house were very meticulously worked on to make sure that the houses were as energy efficient as possible. The other thing was that people were building their own house. They were paying for their own house.

In Atikameksheng and Wemindji, you could look at the house in isolation, and you wouldn't know that you weren't in, say, Ottawa or a small community in Ontario, Quebec or the Maritimes. You could be anywhere. Unlike some of the houses that we've all seen on reserves where you go along a road, you see houses and all of a sudden you see a little box house and you say, ``Well, we must have crossed over; we're on the reserve now,'' you just can't identify the reserve by looking at the houses, which I think is a great thing.

The Chair: If I may, further to that line, Mr. Beaucage, the other thing we heard was that inspection on most reserves — and this would be outside your program — was extremely inadequate. Home inspectors had no authority to issue stop-work orders, and inspection requirements were far below national standards. Provinces required seven or eight inspections, and witnesses noted much fewer, I think at least a maximum of four on-reserve and no ability to train inspectors, even under Human Resources and Skills Development Canada.

Does your capacity building also address what was identified to us as a very important but lacking component of quality housing?

Mr. Beaucage: Thank you very much for the question, Mr. Chair; it gives me the opportunity to say yes, we are doing that through our capacity development. We are training inspectors, and we also insist that the First Nations have appropriate housing policies and governance in place. Then when we fund or back the financing of houses through the First Nations Market Housing Fund, there's a minimum of six inspections required.

There is the opportunity to stop work if the work is proceeding improperly. Our lenders want to make sure the security is there, and the people who are moving into the house want to make sure that they're paying for a good house, just like any other Canadian across the country. If you're paying good money for something, you want to make sure it's going to last, and that's our raison d'être.

Senator Tannas: Thank you for your presentation and for being here, Ms. Taylor and Mr. Beaucage.

My first question is along the same lines, and then I'll ask another question, but I just want to understand, who actually controls the building of the house? If I wanted to build a house on the reserve, I could somehow get my section of the land, I go out and get my own builder, build the house and make a deal with the bank, et cetera. The band is not mixed up in all of this, and I don't make payments through some circle. Is it direct between me and the bank and the fund? Can you help me with that?

Mr. Beaucage: Yes, it can get a little confusing at times.

Basically, the First Nation itself qualifies with its governance, its housing policies and its financial regime. They have to back future loans as well. The First Nations Market Housing Fund backs 10 per cent, which in many instances will allow a little bit more positive attitude on the part of lenders, that they're not taking the full brunt of it. There is no ministerial guarantee, so the federal government is not involved for the full amount of the loan. Mostly, it's an agreement between the individual and the lender.

Now, if there is a default, that's where the First Nation comes into play. The First Nation would actually have some kind of arrangement where they would, say, make the payments while they're finding a new homeowner because they're actually responsible for removing from the house the person who is not paying. They have to have a process to make sure that the loan is paid and that people live up to their obligations.

I'm also happy to say this has not happened; there have been no defaults. And if we go back in time with one of our major lenders, the Bank of Montreal, they say over time they've had no defaults. They're very circumspect on whom they lend to, but there is also a great deal of integrity on the part of their borrowers. Right now, there are zero defaults on these types of loans, which I think is a great thing.

But we have to make sure that we have the infrastructure, all of the pieces in place to make sure that First Nations can succeed. We're not there to have failures.

Senator Tannas: That's great. Again, just so I'm clear, I would make my payments to the bank?

Mr. Beaucage: That's correct.

Senator Tannas: Not to anybody else. And I would be in charge of building my own house and working with contractors, et cetera. I wouldn't have to have another body involved in between?

Mr. Beaucage: The only other body would be the governance aspect, just like a municipality has housing inspectors, and they would be in charge of making sure the inspections were done and that any local bylaws that might be enforced are in effect and that kind of thing.

Senator Tannas: That's terrific. Thank you.

Senator Watt: Probably along the lines of my colleagues across who have asked questions, I would just like to expand it a bit into the area of insurance requirements and municipal service taxation. How do those aspects fit into the equation when you are dealing with people who are not necessarily paying taxes on-reserve? Or is this a new scheme that is being introduced now that would put them into the position like any other Canadian? My friend asked questions about whether a person who is going to end up being the owner at the end of the day has some form of control. I think that is very important.

The other aspect of it I'd also like to expand on is if there is a third-party interest making an investment, what is the guarantee there, if the absolute guarantee is not from the Government of Canada providing assurance if something goes wrong? I'm a little concerned about the private sector side wanting to make an investment, whether there is enough security there, providing enough interest and willing to put forward his own money into a risk.

Mr. Beaucage: Thank you very much for that question. It does bring in many aspects of the First Nations Market Housing Fund, and I think the one good thing that is happening here is that we have a number of lending institutions that are willing to invest. We're now up to $610 million of commitments for housing on-reserve. This $610 million is not government money; it is private investment money that will be coming on-reserve. There's certainly enough confidence shown that these lenders are willing to do it.

We are backing 10 per cent of the total amount of loans, so we're on the hook for something if there are all these defaults. So far we haven't seen any defaults, and I think after a period of time when we do an actuarial analysis, we might be able to go beyond the $3 billion that was originally intended for the fund.

As far as homeowners are concerned, the homeowners take on the responsibility of any homeowner, and I'll take myself as an example. I built my own house on the reserve. I'm on a traditional land holding. I have no deed. I built my house some 25 years ago, and I look after all of the maintenance and the operations of it. The First Nation itself will plow my driveway on occasion. I hope this morning they plowed it. It's the responsibility of the homeowner. And there are a number of homeowners in our community who do the same thing. We also have a lot of section 95 units, which are social housing units. These are rental units, and sometimes for people, that's what their choice is and their need. So they'll stay in those rental units sometimes their own whole lives.

I think we're looking at a range of housing options for the community, and our fund is not to go into deep subsidy or into subsidized units whatsoever. There are a number of people that can pay, that are willing to pay and will pay for their housing. That's what we're looking at.

We are also very cognizant that there are a lot of people in our First Nation communities who are in need of housing assistance, and we've seen in one community, Wemindji, where people have moved out of socially assisted houses and moved into home ownership, thus letting those socially assisted houses be open for other people who are in need. If we can look at that for, say, 25,000 units across the country, that will open up a lot of social housing units for people who do need them. So it's a bit of a domino effect that we're looking at, and as we start building up our portfolio of housing units, it will only help.

Given the need that we see in our communities, I don't know if we'll ever have this solved within my lifetime, but certainly each step helps. I'm not sure if I answered your full question, senator.

Senator Watt: I just have one small one. On reserve, do you pay for municipal services?

Mr. Beaucage: Usually on reserves, the municipal services are covered by user fees, and in many communities they will have user fees for garbage and for piped-in water services or sewer services. Often the cost, the maintenance and operating of these services, exceeds the transfer payments that First Nations get from the Minister of Aboriginal Affairs, so the extra costs have to be offset by using fees. It's not accepted in all communities or not done in all communities, but it is done in many communities.

If a First Nation does have other sources of income, they often will subsidize that themselves, but a lot of communities are going to user fees. I have not yet seen municipal-type taxes in First Nation communities east of British Columbia, but user fees are almost flirting with that.

The Chair: Thank you. You mentioned 25,000, Mr. Beaucage. Is that an estimate that your organization has made of the potential for what I think you called the new middle class or the emerging middle class, if that was the right term? Is that the potential that you see for home ownership across the nation?

Mr. Beaucage: Yes, Mr. Chair. That was the original goal that we had for the first, I believe, 10 years of the fund, but we're looking at closer to 15 years of the fund having this number of housing units under a market housing regime.

The Chair: What's the total now? Do you have a number?

Mr. Beaucage: We have actually built 55 units thus far, and we have commitments for 3,700 units on the books right now. The First Nation has three to four years to finish building these, and normally our commitment process gives them a broad range of dollars within which they have with credit enhancement, and then regular and annual applications will build up to their maximum allotment under the current commitment, and when that's finished, they will get a new commitment after.

Senator Moore: Thank you again, both of you, for being here. I just wanted to follow up on Senator Watt's question with regard to municipal services. You said they were funded by user fees.

Who pays the user fees? Is it the First Nation, or is it the individual homeowner?

Mr. Beaucage: It would usually be the individual homeowner. The First Nation normally gets transfer funds from the Department of Aboriginal Affairs on the basis of population, and very often the funding is inadequate for modern uses of water, sewer, garbage and all these other kinds of things that the modern person needs nowadays. So any shortfall has to be covered from somewhere, and it's usually the individual, unless the First Nation has external sources of income that they can subsidize it with.

Senator Moore: So I'm a First Nations person, I'm on a reserve, and I apply for a loan with your fund. I get approved. Can I sell?

Mr. Beaucage: Yes, sir.

Senator Moore: I can sell.

Mr. Beaucage: A First Nation individual can sell, and that's why we call it a market housing fund. It's a market.

Senator Moore: So can I sell to a person who is not a member of that nation?

Mr. Beaucage: No, you can't.

Senator Moore: Can the mortgage be assumed by the purchaser?

Mr. Beaucage: Yes, it can, if the purchaser qualifies to the institution.

Senator Moore: Can I rent that property?

Mr. Beaucage: Yes, you may.

Senator Moore: Can I leave it in my will to a beneficiary?

Mr. Beaucage: Yes.

Senator Moore: You mentioned that the First Nations voluntarily apply to be a partner and participate in the program and that they must go through an assessment process. Who does that assessing, and, just briefly, what is the process? Maybe that's something you can provide to us, but I think that's a very important part of how all this gets started.

Mr. Beaucage: With the permission of the chair, I would like to ask my colleague Deborah Taylor to speak to the assessment process. She is very much aware of how it all works.

Deborah Taylor, Executive Director, First Nations Market Housing Fund: Thank you, Mr. Chair. When a First Nation chooses to apply to us, we have three pillars that we examine: financial management, governance and community commitment. The First Nation will provide to us a minimum of three years of audited financial statements, including their notes for the nation together with any policies, codes, bylaws that they already have in existence. We'll look at things like job descriptions. We'll look at resumés, if they exist. We're really trying to get a good sense of where the First Nation is situated with respect to both their strengths and their weaknesses.

We're very open with our assessment process. We have a self-assessment form, which you will find on our website, that a First Nation completes, where they ask themselves questions about their financial management, about their governance and their community commitment.

What we're looking for is whether the First Nation is ready and able to safely guarantee loans for their citizens. We look at the financial category and look at what opportunities they may have to guarantee loans without taking away from services that they provide to their citizens, so not taking away education or health or other services.

The governance area will look at things such as the following: Do chief and council meet regularly? Do they take notes of their meetings and are they accessible to the public? Do they have housing policies? Are they committed to quality? Do they enforce building codes? Do they have inspections? Do they have a land management regime? Do they have human resource policies for their government, for their administration, all of those aspects?

In the community commitment category, we'll look at whether the people are willing and able to pay for their housing, even in a rental situation because it's important to walk before you run. We want to make sure that the people are poised to get into loans because they already appreciate paying for their housing. We will look at what is happening in and around the community from a market and job employment perspective, both currently and what is forecasted to occur in the next few years. All of those elements together make up the assessment of a community.

Depending on the results, the First Nation will either qualify for credit enhancement and capacity building — even strong communities can have areas they want to strengthen and you heard the chair talk about Wemindji — or they may qualify at the outset just for capacity building and be working toward qualifying. Right now we have another 23 communities in that situation. They believe in market-based housing and they want to implement a loan program, but first they have other areas to work on before they qualify for loans.

Senator Moore: Is the first step approval for capacity development and then they move into the credit enhancement process?

Ms. Taylor: It could be that a community is approved for both and then seeks to put in place their credit enhancement program at the same time that they are strengthening capacity.

For example, some First Nations who had finance policies in place would like to take that a step further and develop a financial administration law. As they move into home ownership, some need to develop a matrimonial real property law. We would contribute to the development of those things so that it would make them stronger and help sustain that market-based housing program in their community.

Senator Moore: Mr. Beaucage, I think you said you had 3,700 loan applications. I don't know if the fund provides funding for upgrades of existing housing. Is that 3,700 for new home construction or is a portion of that for upgrading an existing home? If so, what is the percentage breakdown of that 3,700 if it's not all for new housing?

Mr. Beaucage: Mr. Chair, the fund will allow First Nations or individuals to renovate their houses. Many of our loans are for renovation of houses, but the percentage is relatively small; probably fewer than 10 per cent are for renovations. There is also the ability of a First Nation or an individual to build rental housing and have it backed as well. We have one of those loans happening in Nova Scotia in Membertou.

Senator Moore: It is a very well-run organization. I remember Bernd Christmas started that and dug in and made it work.

I have a question on something you mentioned earlier. You mentioned that you make sure building codes are in place and that they are adhered to. We heard some — I call it shocking — evidence last week that there are situations where builders also appoint the building inspector and the obvious not good results that come from that, let alone the conflict of interest.

Have you had experience with that, or what do you do to make sure those situations don't happen and that the homeowner does get a quality home? That's something where corners have been cut and so on. I'm concerned about three or four years to build a house. Maybe you can talk about why that takes so long, the scheduled inspections and so on. I just don't understand how it would take that long.

Mr. Beaucage: Sometimes the three- or four-year mark is actually talking about how the borrower might have bruised credit and it takes a little bit longer to build the credit back up. It may be that this is all new to First Nations, the market housing and for a person to go and get a mortgage and find a builder, because frankly many of our communities are still addicted to dependencies — someone else will look after it for me.

Now what we're saying is, ``This is your house; you have to look after a lot of it on your own. We'll help you and teach you, but this is yours.'' We are undergoing a process of education as well as the financing and also an attitude shift. Sometimes that is the slowest thing to happen — I can't depend on that person or this person to do it; this is mine and I have to do it myself. Away they go and sometimes it takes a little bit longer to get everything in place. It's not the actual hammer and nails part. It's all of the preliminary stuff to get the loan ready, find a builder, sign the contract, get the land ready and do all the things that are necessary to build a house. It is all of those things that need to be done.

The community of Wemindji is very organized. They empower their citizens and do very well. They applied for 20, they built 20 and I saw the 20 when I was there.

Senator Moore: Tell me a bit about the building inspection. That is troublesome for me, and I want to know how you are making sure the inspections are carried out, that the reports of the inspectors are being followed and the homeowner is getting what he or she paid for.

Mr. Beaucage: We want to ensure the building inspectors are part of the whole governance of the community. Governance is really important because you need to have the appropriate governance and the appropriate will of the government in place to follow the housing policies, to make sure that people are paying and if they don't pay that there is a result of not paying. That's key.

We often will work with tribal councils, who might have as many as a dozen communities that they look after for technical requirements, such as housing inspections. We want to make sure that the housing inspector is at arm's length from any contractor or builder and that there are a minimum of six inspections to any house that we will finance.

It's a whole process that we look at. We look at the finance, the governance, the housing policies and all of the things with the community before we are ready to provide a commitment for a housing loan.

Senator Moore: Okay, thank you.

Senator Raine: Thank you very much. I apologize for being a few minutes late. I'm watching what is happening in the Tk'emlups First Nation, and this is a piece of the puzzle that was missing so I congratulate you on the work you're doing.

When a First Nation applies to become part of the process, you said they need to have a housing regime in place, but do they also need to have zoning and planning and those kinds of things? If you build a beautiful home and there is no zoning, and all of a sudden there is an industrial plant beside you, then your property would be devalued. Is part of the process making sure that the zoning is in place? I guess that's through the land management regime.

Mr. Beaucage: That is one of the things that are part of governance that we work on with First Nations. It is not an absolute requirement that zoning is in place, but it is a requirement that the First Nation starts to work toward a more planned management of their lands. And many communities do decide to have zoning because, as the senator points out, if you spend $200,000 or $300,000 or $400,000 on a house you don't want a garbage dump next door. You want to make sure that your investment is protected, and sometime or another you will pass that house on to a family member or you might sell it to another citizen of that particular First Nation.

That is becoming more important to First Nations. Not all First Nations have the zoning requirement, but some of them are putting them in, and that is certainly one of the things that we looked at when we were doing the property standards with Atikameksheng. They built a wonderful subdivision that is all residential; it's removed from anything industrial. Many First Nations are doing the same thing. I'd say we are one step above encouraging it with all of the First Nations that we're working with.

Senator Raine: On a completely separate topic but going back again to the building inspection, the testimony we heard last week was very interesting. It seems like the trade or the profession of a building inspector is not properly recognized in Canada, and I'm wondering if there is a move to have it become a recognized, certified profession that is supported in terms of education and development through our human resource development programs. If there's a need, yet you can't get support for the training through HRSDC, then something is out of step.

Mr. Beaucage: I agree wholeheartedly that we do need to further certify our building inspectors.

I will go on an aside for the moment and point out about the Aboriginal Financial Officers Association. I was involved with some of the very early stages of that organization. It was set up by First Nations to train financial officers, to provide courses and to certify them as such for First Nations finance. When we first had our annual meeting about 12 or 15 years ago, we could have filled a room half this size. At the last annual meeting that took place, there were more than 1,200 financial officers present.

I think it is one of these situations where if you build it, they will come. And if we start to put emphasis on housing inspectors and First Nation planners, they will come as well. There is a very good course at the University of British Columbia for First Nation planning, which I took in 1992.

Senator Raine: I have a supplementary question. Home maintenance on-reserve is sometimes difficult. It's not that easy to get qualified contractors. So in the process of developing this capacity, I can see an opportunity to develop small businesses that do home repairs right on-reserve. It could be, for instance, the person building their own home or contracting on it, or their wife could be getting into the business of repair because as they are building homes, they are also learning to look after them.

Mr. Beaucage: Once again, a well-pointed question. We have made use of our capacity development dollars to train gas fitters, plumbers, electricians and carpenters. In some of the First Nations where trained people have used our dollars for this training, they are now hiring these people out to neighbouring First Nations to do some of the work. It is part of that burgeoning and middle class that I talked about where people trained in these building professions are starting to work elsewhere.

The Chair: If I may just follow up on that, your organization is doing training under the capacity building program that you described to us. I think you acknowledge that there is a huge need across Canada on First Nations reserves, probably a lot more than you're able handle, from you've said.

You talked about the successful program for Aboriginal financial officers. Have you given any thought to how this training, this capacity building could be addressed? We focused on inspectors, but you mentioned planning and trades. Have you given any thought to how this committee might recommend this be tackled nationwide?

Mr. Beaucage: There are some mainstream organizations that take on some of these roles. However, with our capacity development funding, we look at commitments of $3 million to $4 million per year going out in capacity development funding, and that is really a drop in the bucket in terms of the total need across the country. Skills development and training may be something else that the committee wishes to look at and enhance programs through the federal government.

We have a very young population in First Nations. About a third of our total population is under 25 years of age, and many of these people are underemployed or unemployed. I see that as a huge potential for people to work, for people to get trained and for people to break welfare cycles, to break some of the paradigms we are faced with every day in our communities. Anything we can do to start looking at that is a good thing.

We see the need for housing inspectors, and we see the need for First Nation planning, to look at planning the communities properly. Our First Nation community geographics are not growing. We do have reserves, but the reserves have boundaries. It takes 20 years to get additions to reserve, so we have to make best use of the land that we've got right now. Good planning and good governance are part of that solution.

The Chair: Could you elaborate on ``mainstream organizations''?

Ms. Taylor: We engage with universities and colleges across the country to provide training to First Nation citizens who work for First Nation governments, such as Thompson Rivers University in B.C., Yellowquill College in Manitoba, Cape Breton University in Sydney, Membertou, Université du Québec and different organizational institutions that offer programming where it can benefit the people.

Similarly, we have paid for a number of people to get training through the Aboriginal Financial Officers Association and to become a certified Aboriginal financial manager, which is equivalent to a Level 4 of a CGA accounting program. Some people go onward beyond that. We have some staff working on their MBAs, for example, in an effort to increase the professionalism.

The Chair: I think it would be useful for the committee if you could kindly give us a list of the organizations you've worked with in this connection of capacity building, as well as the areas of training. May I ask for that through the clerk?

Ms. Taylor: Certainly, Mr. Chair.

The Chair: Thank you.

Senator Tannas: I just want to come back to the role of the First Nation. They are, in effect, the first guarantor of this. So if I somehow qualified for a million-dollar house based on my financial strength, can I go ahead and do that without their approval? There must be an approval process that the First Nation is involved in.

Second, with your capacity building, could you elaborate on what your standards are? Do you work with the First Nation to develop some kind of a good, strong leasehold structure, as you say, with respect to resale and succession, willing it and all that kind of stuff? Could you comment on both of those, please?

Mr. Beaucage: I would like to turn this over to my colleague who deals with this every day.

Ms. Taylor: Thank you for that question, Senator Tannas. Each First Nation sets the loan limits that they are willing to guarantee for an individual borrower. They determine both the type of loans they are willing to back, for example a homeowner loan, a renovation loan, refinancing, rental, and the maximum amount they are willing to guarantee for someone who qualifies.

Right now across the country, First Nations have set the limits anywhere from $115,000 for a new home up to $400,000. It takes into account the cost, where they are geographically located, as well as what they believe the affordability to be — sort of a measure of their citizens who might choose to borrow. Someone might qualify for that million-dollar home that you're speaking of, but the First Nation might be willing to guarantee only $400,000 of that loan. The person may have to borrow from other resources or cobble together financing to be able to have that million- dollar home.

We want to ensure that the First Nation is aware that they are looking at the overall credit they are willing to guarantee and, if someone cannot pay that loan and they would have to take it over, whether they have borrowers coming behind them who can afford and qualify to take on that loan or, if the First Nation were to choose to take that home into their rental portfolio, whether they could command a high enough rent to be able to carry the costs — the principal, interest and operational costs of that home. Those things are decided at an individual First Nation level.

Senator Tannas: But not at an individual borrower level?

Ms. Taylor: No. Once the arrangement is set up, the First Nation would know that the maximum they could borrow would be $400,000; as it is public and made available to them, they go to the bank and they would qualify for the loan and they would get guaranteed up to that amount of money.

For your question with respect to capacity development and the standards and so forth, when we work with a First Nation that does not have a land management system in place, we present to them the different options. With legal advice, it is the different options they might want to explore for giving a person the right to occupy a piece of land. They will not own the land, but we think it is important and is a motivator for someone to know they have the right to occupy a piece of land as long as they meet the terms and conditions of the First Nation.

There is a range of options that a First Nation can use. If they are an Indian Act band, then they could use any number of options up to and including a certificate of possession, which is the highest legal instrument they have available to them right now. We also deal with First Nations who have developed land codes under the Framework Agreement on First Nation Land Management. That gives them a different type of control and a different ability to offer a type of security to the individual borrower, and for them to know that there is a system in place that is protected and that the they are not going to be put off of that land if there is a successive government elected in their community. That is an important feature.

Senator Tannas: Thank you.

Senator Wallace: Mr. Beaucage, you said something earlier that I obviously misunderstood, after listening to what Ms. Taylor has just said. I thought you said earlier that First Nations would guarantee up to 10 per cent of the amount of a loan given to a person on the reserve. Was I wrong in understanding that?

Mr. Beaucage: There might have been a bit of confusion. It is the First Nations Market Housing Fund that guarantees 10 per cent, and the First Nation would guarantee the balance. Sometimes a lender will take on a little of the risk themselves; but it doesn't happen very often.

Senator Wallace: There are two different funding resources within First Nations communities. Would your First Nations Market Housing Fund guarantee only what the First Nation community has backed or guaranteed, or could you be called upon by the lender to guarantee the entire personal loan to the person who wishes to build the home?

Mr. Beaucage: We are limited to the 10 per cent of the loans under the portfolio that we approve. If a First Nation asks us to guarantee or to back $5 million in housing loans over the next five years, then we will back 10 per cent of that in whatever individual loans it might be.

Senator Wallace: Are you backing a First Nation community's performance if called upon to guarantee, or are you guaranteeing the loan that is given to the individual who wishes to build the home?

Mr. Beaucage: We are backing the First Nation's performance.

Senator Wallace: It's only their failure — if they fail to honour their guarantee.

Mr. Beaucage: Yes.

Senator Wallace: Okay. One final question, if I could. I think you said earlier that 115 First Nations communities participate in your First Nations Market Housing Fund. From what we heard last week, I believe there is a total of 640 First Nations communities; so it's 115 of 640. It seems that a rather low percentage are participating in the fund, and yet it would seem to me hard to find a reason that they would not want to participate as there is no down side. Why is the participation rate that low?

Mr. Beaucage: We are very encouraged by the participation rate, given that we have been in existence for only five years. Also, we are looking at a completely different mindset and attitude. As I mentioned before, Mr. Chair, First Nations in this country have been addicted to dependencies, and that's where the fiduciary responsibility comes into play. The federal government has made decisions for First Nations since Confederation. Basically, someone else was always there to do things, such as build houses, roads and all the other kinds of things. In the past five years, we've looked successfully at changing the mind of individual First Nations toward market housing to pay their own way, to not look at subsidies and to not have someone else build it for them.

We're working in First Nations where the treaty right to housing is still there, but they've said that the treaty right to housing will get us some houses but not all I need, so I have to do something different. There are people in our community who are doctors, teachers and engineers. They can pay for their housing, and they are after me as chief to do something. We are going to move ahead on this.

I will point out that one First Nation in Alberta, Siksika, we are working with had enormous issues with flooding this year. They have come to us and want to build hundreds of houses. First, they want to look after the flooding issues and the damage, but going forward, they want to build houses under the First Nations Market Housing Fund. They have the capacity and the will to do so, and they want it available for their community members, even though they will not give up the aspect of treaty right to housing.

Senator Wallace: If an individual who wishes to build a home were to borrow from a conventional lender, part of that loan would be guaranteed by the First Nation community, and your fund, to some extent, would back that First Nation community's loan. Does that mean that anyone living on a reserve who wishes to own a home and is unemployed or making very low income would still be called upon by a conventional lender to satisfy the normal tests they have when they decide whom they'll loan money to? Does that essentially mean that persons on reserves who do not have regular income or have very little income basically would not be able to build a home and your funding really wouldn't be able to provide any benefit to them?

Mr. Beaucage: Mr. Chair, as I mentioned earlier, we are one part of the solution for housing in First Nations communities, and we've never pretended to be the whole solution. There are a lot of people in our communities who are poor, who have to live in rental housing, who have to live in subsidized housing.

In many communities right now, and I'll speak in generalities here, when there's a rental housing regime in a First Nation community of subsidized housing, very often it's the middle-class person who is put into that house because it's probably going to be the path of least grief for the housing management because he's not going to have to chase up the rent, and there are usually no problems with that.

It is a middle-class person in a subsidized house. So what we're offering is an opportunity for that middle-class person to build or buy their own home, freeing up the subsidized unit for somebody who really needs it.

In Wemindji, we have 15 houses that are now filled by homeowners. A large percentage of those 15 homeowners came from subsidized units. So we've freed up those subsidized units for people who really need them.

Senator Wallace: Thank you very much.

Senator Tannas: I just want to make sure I understand. In the event of a First Nation's guarantee going into failure and your call coming into place, do you have any rights, then, that would allow you to step in and take control of the units in some kind of outside fashion? If you're going to put up your 10 per cent and maybe even make the bank whole and go forward, is there any way? Or does it all kind of collapse there and now you've got non-paying houses that can't be seized, et cetera? You know what I'm saying.

Mr. Beaucage: Yes, sir, I do. Basically, no, we have no rights to go in and be a mortgagee in possession or any other thing like that. And that's why we work so diligently with the First Nation on their governance and on their housing policies before our commitment comes into play. They actually must have policies in place that would foresee these kinds of circumstances and what they would do in the event of default. It has to be laid out, chapter and verse, what would happen. That's part of the capacity development process.

When a First Nation gets to a point where their governance is such that all of these things are there, then that's when they get credit enhancement.

Senator Wallace: Thank you.

Senator Moore: I just have one question of clarification and a couple of other short ones.

Mr. Beaucage, I think you said there is $610 million in credit now backed by the fund. Is that right?

Mr. Beaucage: That is correct.

Senator Moore: There is $610 million backed by the fund. You mean 10 per cent of that is backed by the fund?

Mr. Beaucage: That is correct, sir, yes.

Senator Moore: What Senator Wallace was asking you is whether you back 10 per cent of the First Nation's guarantee.

Mr. Beaucage: Yes, it is.

Senator Moore: Ms. Taylor, I think you mentioned something about making sure that a new government comes into play in the First Nation. I don't want to be bumped off my land. How is that land secured? If I'm applying for a loan, do I have a piece of paper from the reserve or a long-term lease or something to know that I'm on that land, and I expect for at least the amortization period — I would like to know about that; is there a maximum amortization period? I also want you to tell us something about what your requirements may be for insurance coverage and if it is obtainable.

Ms. Taylor: Thank you for the question.

With respect to the maximum amortization periods, the maximum period is 25 years for a loan, although First Nations may choose to set a shorter period of time. Many have for renovations, as an example, where it's a smaller amount of money being borrowed than the amount for a new home.

With respect to insurance requirements, yes, it is required that there be fire insurance. That's a standard requirement in lending practices, so the lender does require that that be obtained and kept.

Also, many First Nations have chosen to put in place conditions under which they will provide a guarantee to their citizens. They may ask that somebody have life insurance or disability insurance. They may ask that they have attended a maintenance course. Some have asked that they will do an internal credit check to verify that there is nothing outstanding to the First Nation, whether it's for housing or for daycare fees, things like that.

There's a rigour applied by the First Nation in deciding who they're going to provide a guarantee for and the conditions they need to meet, and those conditions are contained normally in a band council resolution, which would be required for each loan that they are approving. That would include as well confirming that that person has the right to occupy the piece of land under whatever land instrument that First Nation has chosen to use.

So they could be, for example, using a lease. It's not a lease that's strong enough to be held by a bank as security, so they're not using that as a pledge of land, but in fact it's a formal lease arrangement between the First Nation and that individual borrower to occupy that piece of land.

Senator Moore: Is that tied in with the agreed-to amortization period of the loan so that they can't be bumped?

Ms. Taylor: That lease will be at least as long as the amortization period of the loan. That is one of the requirements that we have. But in some cases it's far longer. In some cases it's there in perpetuity. In some First Nations you have, for example, certificates of possession, so they don't have a time limit on them.

Senator Moore: A certificate of possession?

Ms. Taylor: Right.

Senator Moore: Describing that particular piece of land, that's so they could show it to a lender, and on the strength I guess they would own it and be able to convey it or be able to devise it to a beneficiary.

Ms. Taylor: Yes. The fund requires that the person have the right to occupy a piece of land under whatever instrument the First Nation has chosen to use. The lender is often looking at the First Nation guarantee, and so some lenders may be less concerned about whether that land instrument is in place or not. What they're concerned about is does the First Nation have the financial capacity to pay the loan in the event that the borrower defaults. Because, as the chair has said, it's the First Nation's responsibility to take action in the event of a borrower defaulting.

With the lenders we work with, we encourage them to apply the same techniques as would be available to someone off-reserve. If someone gets into difficulty, no one wants that loan to go south. You want to work with them to see if this is a short- or long-term problem: Is there a loss of employment? Is there a marital breakdown where you were depending on two sources of income to pay that loan?

If it can be saved, we have the lenders offering those same techniques to either capitalized arrears or enter into a special payment arrangement or re-amortize that loan. It's only at the end of looking at those opportunities, if they are not successful, that then the First Nation would need to take action as the guarantor and either sell that home to someone else or have someone else to the loan, if they qualify, or bring it into their rental portfolio and rent it over the short term or the long term.

Senator Moore: I'm encouraged by the fact that you say you have had no defaults to date. Is that on the basis of the 55 loans that you've approved?

Ms. Taylor: Yes, that is correct. There are no defaults to date.

Senator Moore: And the 3,700 that you have under application — that's a lot of applicants.

Ms. Taylor: Yes, it is.

Senator Moore: How long does it take to go through that? Does that tie into the three- to four-year period of getting a loan and getting the house built? Is that considered part of that process, the time period?

Ms. Taylor: Yes, that's the estimated number of loans for those 53 First Nations. The $610 million in credit that we have approved would result in 3,700 loans, of which we have done 55 to date.

Senator Moore: So those are not applicants. Those are potential within the total home requirements of those First Nations, of those 55 —

Ms. Taylor: Those 3,700 are loan estimates by each of those, the cumulative total by those 53 First Nations, for what they believe the need is in their community and the estimated cost, the average loan amount that would go. A range of limits have been approved for First Nations, running from roughly $1 million to $200 million in a community in terms of the estimated total loans that they will do. And the three- to four-year period is from the onset; the average was from an onset when a First Nation would have chosen to make an application to the fund —

Senator Moore: To become a partner?

Ms. Taylor: — and then go through the assessment process, set up their arrangements with lenders, get people to the bank and then build, buy, or renovate their homes.

I would just add, you saw Wemindji spoken about as an accelerated process because they in fact went much faster than that three- to four-year average. They had houses on the ground within a year of choosing to work with the fund.

Senator Tannas: Could you tell me, Ms. Taylor, how many actual people are in the pipeline beyond the 55 right now?

Ms. Taylor: We do not have the actual number, other than to say anecdotally we know that there are approximately 50 applications right now that are in process between the borrower, the bank and the actual First Nation.

The chair alluded in his remarks to the credit issues. We do keep in touch, obviously, with the First Nations we're working with, especially as they are implementing. We had a community recently where they went through the process I described of pre-approving their borrowers. All those people satisfied the conditions. The First Nation was ready to give them guarantees if they qualified. Twelve families went to the bank; eleven were turned down.

We are now doing some extra credit work in that community. You don't right your bruised credit overnight. We're helping people understand what they need to do to work out these issues. We're helping as well to educate other members of that community how not to get into credit difficulties.

That's an example of one of the real-life challenges that we face where we get very enthusiastic about the number of applications we hear are being processed, and then there is some difficulty. The Siksika flood is certainly an example where we were on the cusp of doing loans in June when the floods hit, and that derailed things, rightly so, in the sense that the community needed to focus its attention on the flood recovery.

Those are the types of day-to-day challenges that we deal with.

Senator Watt: I'm trying to have a clear understanding of the programs we're talking about. I get mixed up when you talk about community versus individuals. I wonder if we can try to clarify that area.

When the band council seems to have a responsibility of guaranteeing a large amount but the agency you represent covers 10 per cent, if that's what I understood, what happens in the case when either a municipality or a band council doesn't have a way of covering costs that could not be covered by an individual person? Let's say a person has managed to enter into the programs and done all the right things, but unforeseen factors kick in down the road and the municipality or the band council gets stuck with it. What happens then?

You mentioned that then they would take action. What action would that be? Is this legal action, or would they be entering into discussions with the Government of Canada to try to negotiate some kind of a piece to guarantee what is missing? I wonder if you could cover that, because it's not too clear to me.

Mr. Beaucage: There are some differences that could occur from one First Nation to the next, and also if it was on settlement lands it could be a little bit different, but by and large the First Nation government would have policies in place to look after default. The first policy might be that they start doing counselling with the homeowner, and the counselling would be, ``Look, you've got a nice house here. You've paid for five years. What's the problem?'' Maybe it's a loss of job, as was pointed out. Maybe it was the breakup of a marriage.

They try to work individually at first, and they might even assist with actual housing payments, which is not like paying off the entire loan. Only when it gets to the point where there is absolutely no way that the default can be cured does the First Nation come in with a process of removing that person from their house, foreclosing, if you will, and then putting that house up for sale to sell to somebody else.

In that interim period, they could keep the payments current with the lender, because one the worst things is to just let it all go and then the lender has to demand payment.

There are probably three, four, maybe even five steps that the First Nation could undertake to make sure that the final step of paying off the lender is — nobody wants that.

So all of these things are undertaken, and as I mentioned earlier, the First Nation or the band government would actually have these things foreseen as part of their housing policies before they get into credit enhancement. We have consultants who help them put their housing policies together, very experienced people who will go through all the scenarios. What if this happens? What if that happens? Let's do a policy. Let's think about this. What do you want to do in those circumstances?

We try to make sure that there are no surprises out there, that the possibilities are looked after at the very beginning of the process and that the aspect of a total default is the ultimate thing that could happen.

As I said, thus far things have been pretty good. The communities we're working with all have excellent policies, all have good governance, and all have good financing arrangements. That's why we looked at their audits for the past five years, to make sure that they do have a good financial regime in place so that if in the event something untoward did occur, they're not going to have to pull in money from education, social programs or any other things, that they're doing quite well. But there are many steps that could be looked after before that final result of a total default would happen.

Senator Raine: Someone else has already asked my question. I appreciate what you're doing and wish you the best of success. I see this as a key piece of the overall puzzle, because when you can fill that need for new homes being built that people own, then the motivation for everybody starts to change. Thank you.

Senator Beyak: Senator Watt's question and yours, too, Senator Raine, and the response pretty well answered my question as well. If a non-First Nation young couple were purchasing a home in Ontario, they would have to have 25 per cent down of their own funds, or 5 to 10 per cent guaranteed by CMHC in a CMHC mortgage.

Basically a young First Nation couple can purchase a home without their own money with your fund guaranteeing the down payment, which gives them a great opportunity. Do I understand that right? And the pride of ownership would be the incentive to pay it back, rather than having their money invested.

Mr. Beaucage: Our current policies indicate that they need 5 per cent of either cash or some other kind of in-kind effect to put against their housing loan. There is no such thing as a 100 per cent loan.

Senator Beyak: Thank you.

Senator Wallace: We had heard from other witnesses about some of the deficiencies with construction and inspection standards involving home construction on reserves, and I'm wondering, in your experiences, do the conventional lenders that are financing the construction of homes on reserves — again realizing they don't get mortgages on those homes; they don't have direct security — do those conventional lenders typically impose the need for a construction standard on the borrower or an inspection standard that has to be met as part of the term of the condition of a loan that they would extend, or do they get involved in that?

Mr. Beaucage: Just because there are guarantees by the First Nation and whatnot, the lenders do not want to waive any of their policies that they would have for any other borrower on a municipality, or wherever. Construction standards have to be the same as they would be anywhere else. If the First Nation itself adopted standards such as the ones we did in Atikameksheng, which are greater than OBC or the National Building Code, the standards adopted by the First Nation would be the standards in place. There is no waiving of standards or lesser standards just because it's an on-reserve house.

Senator Wallace: Presumably if those standards weren't present in the First Nation community, conventional lenders would not loan funds for home construction.

Mr. Beaucage: They would go by the National Building Code standards.

Senator Wallace: Thank you.

The Chair: Thank you. Just before I give Senator Watt the last question, one matter was brought up earlier in our study in this area on the problems of overlapping jurisdictions between the federal and provincial jurisdictions; that was seen to be a source of confusion and barriers to progress.

I wonder if you would have any comments on how your organization has addressed these issues. Have there been problems, and do you have any experience you could share with us on that?

Mr. Beaucage: I don't recall any issues we have had with jurisdictions. We work very closely with the First Nations, and we respect the First Nations' jurisdiction, by and large, as we know that there are some instances where First Nations have adopted laws of common purpose, where they have made their own laws or where they accept the federal jurisdiction in some of the areas; thus far I haven't seen any issues.

From time to time in Ontario we have had issues about work safety, workmen's compensation and WCB and that kind of thing where there is somebody up on a roof, and they're not properly tied in when they're doing the roofing, so we do insist that workplace safety measures be taken in any kind of workplace environment.

I've not seen any of those issues. No.

The Chair: Just a quick follow-up on that, too.

Regarding your interface with First Nations, you've talked about working with communities. Do you have a working relationship with AFN, and if you do, could you describe that briefly?

Mr. Beaucage: We do meet regularly with the Assembly of First Nations and their Chiefs Committee on Housing. In the past annual assembly that took place in Whitehorse, Yukon, the Assembly of First Nations passed a resolution supporting the First Nations Market Housing Fund and also pledging to work with us to improve all aspects of the housing fund going forward.

The First Nations Market Housing Fund was actually a joint venture between the Assembly of First Nations and the Government of Canada when there was a think tank on housing some 10, 12 years ago that occurred in Gatineau. This was one of the aspects that came out of the think tank on housing, and one of the things that moved forward and is proving successful.

Senator Watt: Just to let you know that we do, in the North, run similar programs to what you're introducing now. I would like to put my hands on what you've been talking about in terms of the programs, how the program is being governed, what the relationship is between Canada Mortgage and Housing Corporation and the housing authorities that you represent.

If you also have a hard copy of a policy that describes how it works and who benefits and the whole aspect of it, the taxation issues and the municipal services and so on, the whole thing, how it links, I would like, Mr. Chairman, to have that brought, if it has not already been brought to the table here. I will also be prepared to bring down from the North what we deal with so that we can compare the two and see which one works and which one doesn't work.

We do have a very clear knowledge about the one in the North. It looks very, very attractive up-front; but at the tail end, it discourages people. I don't want the First Nations to run into similar problems that we have run into, because what it really does is knock out a lot of potential clientele. Especially in the North, where with the high cost of living, the high cost of transportation, purchasing power only represents 25 cents, in some communities. It is even worse further north. It might be 10 cents, and some communities might even be going under.

Those things have to be taken into account. If they are not, then the programs we're trying to put forward might not work, if the people cannot afford it, and if they cannot live with certain conditions that are laid out. At times it looks very attractive, but at the tail end you get a hell of a surprise.

Let me say, for example, the municipal service might end up costing you, on a yearly basis, anywhere from $6,000 to $7,000 or $8,000 a year, and if a certain percentage is subsidized, then you are obliged to pay $3,000 to $4,000, even though it is already subsidized.

Some people cannot afford that because of the high cost of living, high cost of transportation, and no purchasing power. I'm just raising those issues so we could have proper information, Mr. Chair. If that could be allowed, then I would appreciate that.

Mr. Beaucage: Mr. Chair, we will undertake to provide not only our annual reports but also other program details that we have, and we will supply those to the clerk. If there's anything more, please get in touch with our office, and we will endeavour to get whatever we can to make sure that the committee is well informed.

The Chair: I can say with certainty that this presentation and the offer of further information are very valuable to the committee, and I thank you very much for that.

Just before we close, I would draw to the committee members' attention that we received four very helpful, at first glance, documents from FNNBOA as well, just yesterday, which I think will add to our knowledge of this subject.

I think we're all agreed that we found something extremely worthwhile to study.

This will be our last committee meeting this year, so I want to thank members for their participation so far. We'll look forward to continuing this important work in the new year, and I wish you all the very best for the holiday season.

(The committee adjourned.)