CMHC cash grab prevents refinancing repairs at local housing co-op
May 3, 2012 (Brampton) — By imposing a penalty equal to nearly five years of future interest payments for a mortgage that will no longer exist, Canada Mortgage and Housing Corporation (CMHC) is preventing a Brampton area housing co‑op from a private refinancing deal to take financial risks off government books and preserve precious affordable homes, say representatives from Mondragon Co‑operative Homes Inc. and the Co‑operative Housing Federation of Canada (CHF Canada).
CMHC is requiring that Mondragon, a 78-unit housing co‑operative near Kennedy Road and Sandalwood Parkway, pay a penalty of nearly $140,000, representing almost five years future interest in full, before releasing the co‑op from its mortgage. This is blocking the co‑operative from substituting private financing, and beginning urgently needed renovations.
Mondragon is one of two housing co‑ops participating in a pilot project organized by CHF Canada to test the feasibility of blending existing co‑op mortgages with new borrowing, into new first mortgages to be offered by credit unions. New mortgages would be extended over a longer period so that a co‑operative could service new debt to cover renovations and replacements.
“We are shocked and disappointed to find CMHC gouging social housing,” says CHF Canada’s Director of Corporate Affairs, Nick Sidor. “Without CMHC’s excessive penalty, the numbers will work and this can serve as a new model of public-private partnership, capitalizing on the enterprising spirit and strength of Canada’s co operative sector. It’s an innovative funding model that does not rely on taxpayer dollars.”
In October 2011, Mondragon received engineering studies that said that approximately $2.3 million should be invested in the co‑op’s properties over the next five years, starting immediately, to renovate and retrofit the co‑op’s properties as quickly as possible. The co‑op is now prepared to begin negotiations with a new private sector lender toward a new first mortgage totaling about $4 million.
However, CMHC has advised the co‑op through CHF Canada that, as well as paying off the $1.8 million principal remaining on its government loan, all of the interest that would accrue to CMHC during the full five-year term must be paid before CMHC will discharge its mortgage.
The amount demanded by CMHC is far in excess of normal prepayment penalties.
“We are prepared to pay a reasonable prepayment penalty,” says Mondragon President, Nadine Wisdom. “We are asking Minister Diane Finley, our Member of Parliament Parm Gill and Brampton Mayor Susan Fennell to help us in our fight for fairness to reduce this bureaucratic roadblock in our pursuit to maintain financial independence and housing security for all of our members. Our political representatives should also be concerned that CMHC’s unwavering stance directly impacts on the creation of new jobs in Brampton by preventing our multi-million dollar renovation project,” says Wisdom.
CHF Canada is the national voice of the Canadian co‑operative housing movement. Its members include over 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.
The United Nations has declared 2012 the International Year of Co operatives. There are nearly 1 billion co op members around the world. Canada’s co operative sector is very robust, with 9,000 co ops serving 18 million members.
For more information:
Nick Sidor, Director, Corporate Affairs, 613-297-5139, firstname.lastname@example.org
Nadine Wisdom, President, Mondragon Co‑operative Homes, 647-839-9736
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