“We are very grateful to (the federal government) for making this prudent and timely decision,” Nicholas Gazzard, executive director for the Co-operative Housing Federation of Canada (CHF Canada), said Tuesday in the wake of an announcement promising to remove that kind of penalty. “This model takes financial liabilities off government books while preserving precious affordable housing and creating valuable construction jobs.”
Effective immediately, for eligible existing social housing projects that require capital repairs and renovations, the government will accept prepayments on closed CMHC mortgages that are “consistent with private lending institutions.”
That’s distinctly less than the tens of millions of dollars in penalties some co-ops were facing in trying to refinance their existing mortgages in order to make key and essential repairs.
In one case, and under the terms of its low-cost mortgage with CMHC, a Brampton co-operative was facing a $140,000 penalty to retiring its mortgage. Initially, CMHC held that the fee represented the interest it would have collected on the remainder of a five-year term only recently started.
Mondragon was also on the hook for the outstanding amount on its principal, some $1.8 million.
As late as last October, CMHC argued that the penalty jived with market standards and also reflects the preferential rate offered under its lending program.
Today’s announcement by Human Resources Minister Diane Finley marks an about-face, said Gazzard.
“It will benefit lower-income households living in existing social housing, including individuals, families, seniors, persons with disabilities, and Aboriginal people by helping to renew Canada's affordable housing stock,” said Finley Tuesday. "It will also create jobs and economic growth."
Dozens of housing co-ops across Canada are in serious need of updates, says Gazzard, and will now be able to proceed with new first mortgages in partnership with Canada’s credit unions.