$5.5 million federal cash grab blocks repairs at Winnipeg housing co op
Thanks to Ottawa, co‑op members face Winnipeg winter with original single-pane windows
September 13, 2012 (Winnipeg, MB) — An unfair and exorbitant $5.5 million mortgage prepayment penalty demanded by Canada Mortgage and Housing Corporation (CMHC) is stopping a Winnipeg housing co‑op from making needed repairs to its 36-year-old buildings. Village Canadien Co‑op Limited (VCCL) has asked Diane Finley, the federal minister responsible for CMHC, to instruct CMHC to set a fair and reasonable charge for the co‑op to prepay its mortgage.
VCCL manager David Gawthrop says that CMHC won’t let the co‑op pay off its $4.5 million mortgage without paying an extra penalty of $5.5 million, for a total of $10 million. “We are ready to pay a reasonable, normal prepayment fee,” says Gawthrop, “but an additional $5.5 million in penalties for CMHC is an outrageous and unaffordable demand that can’t be justified.”
The penalty CMHC is demanding represents all the interest that would otherwise be payable on the co op’s mortgage, which goes to 2028 at a fixed interest rate of 13.25%.
The Co‑operative Housing Federation of Canada (CHF Canada) supports VCCL’s view that CMHC’s position is a cash grab. According to CHF Canada’s Director of Corporate Affairs Nick Sidor, this penalty calculation is unfair, and far in excess of any prepayment penalty that would be charged to the co‑operative by any other lender.
“No other lender would charge such an enormous amount,” says Sidor. “We brought this issue to the attention of Minister Finley several months ago, and she has so far not acted. With a fair prepayment penalty in place, the co‑op would be ready to begin negotiations with a Winnipeg credit union for a new mortgage loan to finance needed repairs.”
On July 11, the board of Metro Vancouver also wrote to Finley, urging her to direct CMHC to reduce or eliminate excessive prepayment penalties for social housing providers that want to refinance their properties.
VCCL’s volunteer president Linda Ferguson says that co‑op members know that without needed renewal, the co‑op’s housing will simply deteriorate. “VCCL is dedicated to providing quality affordable housing for Winnipeggers, but this $5.5 million CMHC penalty is preventing us from preserving these valuable homes for future generations. We can’t wait another sixteen years to modernize our buildings, and we shouldn’t have to.”
The co‑op’s recent building condition assessment shows that it should borrow about $2.7 million for new insulation and new windows, which have not been replaced since the co‑op opened in 1976, and for roof replacements.
CHF Canada has also told Minister Finley that CMHC’s blocking new lending means that construction jobs and stimulus to local economies will be lost.
CHF Canada is the national voice of the Canadian co‑operative housing movement. Its members include more than 900 non-profit housing co‑operatives and other organizations across Canada. More than a quarter of a million Canadians live in housing co‑ops, in every province and territory.
For more information:
Nick Sidor, Director, Corporate Affairs, 613-297-5139, firstname.lastname@example.org
Linda Ferguson, President, Village Canadien, 204-255-1676
David Gawthrop, General Manager, Village Canadien, 204-257-2501
David Granovsky, Government Relations Co-ordinator, 1-800-465-2752 ext. 222, 613-290-7687, email@example.com
Scott Jackson, Program Manager, National Communications, 1-877-533-2667 ext. 122, firstname.lastname@example.org