Prepayment Flexibility for Co-operative and Non-Profit Housing Providers

For Section 15, 15.1, 34.18 (Section 26, 27, 61) loans held by CMHC

Important update

A call for applications is completed each year of the initiative. CMHC is currently issuing a call for applications with a February 1, 2018 deadline.

Some co-operative and non-profit social housing providers can now apply to prepay their mortgage without incurring a penalty.

To eliminate the high cost of prepayment, the government is providing $150 million to allow non-profit and co-op housing providers to prepay their mortgages held with CMHC without penalty.

Purpose

Waiving prepayment penalties will allow housing providers to access private market loans at current interest rates, which will lower mortgage expenses and help to keep rents affordable.

Lower interest costs give housing providers the opportunity to finance repairs with private capital, and offer flexibility to transition to more self-sustaining operating models.

Eligibility

Co-op and non-profit social housing providers who hold long-term, non-renewable mortgages with CMHC.

Refer to the application guidelines (PDF) for more information.

How to Apply

Download the application form. Complete it and return with all required supporting documentation (listed in the application) to CMHC by February 1, 2018.

 

FAQ

How much funding will be available?

The Government is providing $150 million over four years:

  • $50 million in 2016-17
  • $50 million in 2017-18
  • $25 million in 2018-19
  • $25 million in 2019-20

When can I apply for future years?

A call for applications will be completed each year. Current timelines for future application deadline is:

Budget year Application Deadline*
2019-20 February 1, 2019

*If the annual budget is not fully spent, additional calls for applications will be made and announced on the prepayment website.

What are the benefits of prepayment?

Prepayment without penalty gives housing providers the flexibility to access private-sector loans at current market interest rates, which will lower mortgage expenses and help to keep rents affordable.

Lower interest costs will place housing providers in a stronger financial position to deliver affordable housing through lower mortgage expenses, provide the opportunity to finance repairs with private capital, and offer flexibility to transition to more self-sustaining operating models.

How many loans are eligible for prepayment?

There are over 1,100 eligible loans held by CMHC — approximately 80% are under a Social Housing Agreement and 20% are federally administered.

CMHC can waive penalties on these loans up to the maximum of $150 million, as provided by the Government to offset its costs.

How will CMHC be assured that adequate levels of affordable and social housing will be retained once these mortgages are paid off?

CMHC will be assessing all applications on an outcome-based criteria such as:

  • completing repairs to promote housing sustainability
  • creating new affordable housing units
  • maintaining/increasing their level of rent-geared-to income units

CMHC will review all applications, regardless of the nature of administration (federal, provincial, territorial) and prioritize those projects that demonstrate the best results prior to waiving prepayment penalties.

Once projects have prepaid their CMHC loan (without penalty), does the operating agreement end?

Federally administered projects prepaying their CMHC loan: Operating agreements will be terminated. The prepayment penalty will be waived, and any unearned capital contributions remaining on the mortgage will also be waived.

Federally administered projects in receipt of CMHC Rent Supplement: The rent supplement funding will continue until the natural expiry of the rent supplement agreement.

Housing providers administered by a Province or Territory under a Social Housing Agreement (SHA): The Province or Territory may impose other conditions on the prepayment of the CMHC loan in regards to the operating agreement and other funding. We encourage you to discuss your prepayment options and its related conditions with the Province or Territory.

What happens to the subsidy for housing groups that opt to prepay their mortgage loan?

Federally administered projects: Will no longer be subject to their original operating agreement. Section 26, 27 & 61 housing sponsors are not in receipt of ongoing subsidy (like those under Section 95).

Projects that received capital contributions: Any unearned capital contributions on the long term non-renewable loan at the time of prepayment will be waived.

Housing providers administered by a Province or Territory under a Social Housing Agreement (SHA): The Province or Territory may impose other conditions on the prepayment of the CMHC loan in regards to the operating agreement and other funding. We encourage you to discuss your prepayment options and its related conditions with the Province or Territory.

How will Rent Supplement be calculated after the prepayment?

CMHC Rent supplements for federally administered projects will continue to be calculated, as per the agreement, until the natural expiry of the rent supplement agreement.

Does this announcement include projects on reserve?

Projects with long term non-renewable loans under the following programs are eligible for prepayment:

Section 26 (formerly 15.0) Loans
Section 27 (formerly 15.1) Loans
Section 61 (formerly 34.18) Loans

What happens when the $150 million has been reached?

Once the $150 million of waived penalties has been reached, CMHC will be unable to waive penalties going forward.

What if the housing provider received a contribution under the Canada’s Economic Action Plan (CEAP)?

Under CMHC’s Renovation and Retrofit Initiative (Canada’s Economic Action Plan 2009-2011), the housing provider agreed to maintain its non-for-profit status, and continue to own, operate, use and maintain the lands and premises to provide benefits to low and moderate income households for a period of at least ten years.

The CEAP contribution is under a separate agreement and is not tied to the operating agreement. The housing provider must continue to abide by the terms and conditions of the CEAP agreement.

If the operating agreement is terminated, can the housing provider access the renovation & retrofit funding for existing social housing under the new federal budget?

The renovation & retrofit funding for existing social housing requires a current operating agreement to be in place.

Federally administered projects prepaying their CMHC loan: Social housing projects that prepay their long-term non-renewable CMHC mortgage loans under the 2015 prepayment initiative can, however, apply to the P/T for funding under the Investment in Affordable Housing (IAH).

Housing providers administered by a Province or Territory under a Social Housing Agreement (SHA): The Province or Territory may impose other conditions on the prepayment of the CMHC loan in regards to the operating agreement and other funding. We encourage you to discuss your prepayment options and its related conditions with the Province or Territory.

Canada

Share...


Print(opens in a new window)