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The National Housing Act, 1954*

Published online by Cambridge University Press:  07 November 2014

J. V. Poapst
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The year 1954 was an active one in the development of Canada's financial system. Important revisions were made to banking legislation. The statutory minimum cash reserve ratio required of the chartered banks was changed from a fixed daily ratio of 5 per cent to a daily average of 8 per cent which the banks must achieve for the calendar month. The central bank was granted another tool of monetary control—the right to alter the minimum cash reserve ratio. The chartered banks were admitted to new fields of lending. In June another step was taken to broaden the short-term money market when the chartered banks commenced to make day-to-day loans. These developments reflected a desire on the part of the monetary authorities to increase the sensitivity and flexibility of the nation's financial system.

Meanwhile Canada's fourth housing act was passed. The National Housing Act, 1954, marked the federal government's twentieth year of continuous assistance to housebuilding. Like its forerunners, the Dominion Housing Act of 1935 and the National Housing Acts of 1938 and 1944, the new act provides assistance primarily through the medium of the mortgage market. All the acts have been concerned with the provision of mortgage credit for housebuilding at terms more favourable to the borrower than those prevailing in the conventional loan market.

Type
Research Article
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 22 , Issue 2 , May 1956 , pp. 234 - 243
Copyright
Copyright © Canadian Political Science Association 1956

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Footnotes

*

The views expressed in this article are those of the author and do not necessarily reflect those of the institution with which he is connected. The author wishes to acknowledge the helpful comments of Messrs. H. Woodard and D. W. Knight.

References

1 For a brief outline of financial changes affecting banking see, for example, “Canada: The Role of the Banks in a Rapidly Expanding Economy,” Statist, Dec. 11, 1954, 10–12; Federal Reserve Bank of New York, “The Canadian Banking System,” Monthly Review of Credit and Business Conditions, 12., 1954, 156–61.Google Scholar

2 In computing the daily average of 8 per cent, the chartered banks' Canadian deposit liabilities and holdings of Bank of Canada notes are taken as the average at the close of business for the four Wednesdays preceding the last Wednesday of the preceding month. Bank of Canada deposits are taken as the average amount of such deposits for each juridical day in the current month. Statutes of Canada, 1953–4, chap. 48.

3 For more information on day-to-day loans see below.

4 Statutes of Canada, 1953–4, chap. 23.

5 Ibid., 1935, chap. 58, 1938, chap. 49, and 1944–5, chap. 46, respectively.

6 Many of the provisions of the 1944 act were re-enacted with little or no modification. For a brief statement of the more important provisions which were retained see the C.M.H.C. publication, Housing in Canada, 1st quarter, 1954, 13.

7 This statement is based on data for the period 1950–Sept., 1953. See Canada, House of Commons Standing Committee on Banking and Commerce, Minutes of Proceedings and Evidence, no. 1, Bill 102, Tuesday, Feb. 2, 1954 (hereafter cited as H. of C. Banking & Commerce, Minutes), 32.Google Scholar

8 C.M.H.C., Mortgage Lending in Canada, VII, 1953, Table 4, 36.Google Scholar

9 Statements to this effect, made by the presidents of the Dominion Mortgage and Investments Association and the Canadian Life Insurance Officers Association, were reported in Financial Post, Dec. 26, 1953, 3, and Jan. 9, 1954, 18. For other evidence of a prospective shortage of mortgage funds see the evidence of Mr.Mansur, D. B. in H. of C. Banking & Commerce, Minutes, 13–17.Google Scholar Mr. Mansur referred to the above statements in his evidence.

10 Mansur, D. B., “Economic Growth and Life Insurance” in American Life Convention, Proceedings of the Forty-Sixth Annual Meeting, Financial Section, 1951, 311.Google Scholar

11 Statutes of Canada, 1947, chap. 40.

12 C.M.H.C., Annual Report, 1952, 5.Google Scholar

13 This statement is based on a survey of mortgage loans registered in Ontario by various types of lenders in September, 1954. A brief description of this survey is contained in C.M.H.C., Mortgage Lending in Canada, VIII, 1954.Google Scholar

14 The fees accumulate in a mortgage insurance reserve fund and are invested in federal government or government-guaranteed securities; claims are paid by C.M.H.C. out of the fund.

15 The different insurance fees reflect differences in risk. Where loans are advanced in instalments, 2 per cent is charged on home ownership loans and 2¾ per cent on loans for rental housing and home conversion. On loans without advances the charges are 1¾ and 2¼ per cent, ¼ per cent lower in each case.

16 For a brief description of the settlement provision see C.M.H.C, Housing in Canada, 1st quarter, 1954, 13. For a hypothetical example of processing loans and settling losses, see H. of C. Banking & Commerce, Minutes, 23–7.Google Scholar

17 C.M.H.C., Annual Report, 1953, 13.Google Scholar

18 For further details see C.M.H.C., Housing in Canada, 1st quarter, 1954, 14–15.Google Scholar

19 Canada Gazette, 02. 16, 1955, p. 1199.Google Scholar

20 Statutes of Canada, 1932, chap. 46.

21 H. of C. Banking & Commerce, Minutes, 17.Google Scholar

22 Revised Statutes of Canada, 1952, chap. 12.

23 Canada Gazette, Supplement, Feb. 8, 1930.

24 Revised Statutes of Canada, 1952, chap. 110.

25 Ibid., chap. 278.

26 Hobson, J. A., “Term Loans for Capital Purposes,” Canadian Bankers' Association Journal, LIV, 1947, 102–9.Google Scholar

27 Percentages respecting assets and liabilities of loan companies and trust companies were calculated using data reported in Extracts from Loan and Trust Corporations' Annual Statements, December 31, 1953 (Ontario, Registrar of Loan and Trust Corporations: 1954). Mortgage data include sale agreements.

28 Statutes of Canada, 1948, chap. 65, 1951, chap. 36, and 1953–4, chap. 41, respectively.

29 Hart, Albert G., Money Debt and Economic Activity (New York, 1948), 57.Google Scholar

30 The fact that insured loans are acceptable collateral for borrowing from the Bank of Canada probably has little practical significance even though in 1953 the banks commenced to utilize this long-possessed right. See the evidence of Mr.Towers, Graham in H. of C. Banking & Commerce, Minutes, 251.Google Scholar

31 Bank of Canada, Annual Report to Minister of Finance and Statement of Accounts, 1953, 8.Google Scholar

32 Bank of Nova Scotia, 123rd Annual Report, 10. 31, 1954, 24.Google Scholar

33 Bank of Canada, Statistical Summary, 02., 1955, 31.Google Scholar

34 Ibid., 29.

35 Ibid.

36 Statements are based on data in the Tally (monthly publication of the Institute of Life Insurance, New York), Feb. and Sept., 1954, and on data compiled from reports of individual companies to the Superintendent of Insurance, Ottawa.

37 See n. 13.

38 McLeod, Young, Weir Bond Yield Average, March 3, 1955.

39 Bank of Canada, Statistical Summary, 02., 1955, 38.Google Scholar

40 This statement is based on data appearing in Canada, Dept. of National Revenue, Taxation Statistics, 1954, Table 2, 28–35.Google Scholar

41 United States, Housing and Home Finance Agency, 7th Annual Report, 1953, xiv.Google Scholar

42 Federal Housing Administration, Mutual Mortgage Insurance: Administrative Rules and Regulations (Washington, D.C., rev. 08. 9, 1954), 1 Google Scholar, par. 221. 5(b), and Servicemen's Readjustment Act, 1944, Title III.

43 The factual statements that follow are based on C.M.H.C., Annual Report, 1954.Google Scholar All data on approvals refer to net loans approved, that is, the total number of approvals plus reinstatements and increases, minus cancellations, decreases, and withdrawals.