CMHC Lending Programs
Over the years CMHC has made loans to housing projects under a number of lending programs at below market interest rates.
As a Crown corporation, CMHC is able to borrow funds at a lower cost than a private lender. CMHC locks in its funding cost at the same time as it lends to project sponsors.
CMHC passes these savings on to social housing projects by charging lower interest rates than they would otherwise be able to access and, CMHC is able to lower the cost of government assistance required by these projects.
CMHC operates its lending program on a break-even basis and when a housing group chooses its mortgage term, the mortgage is closed to prepayment for that term.
Since January 2009, CMHC lending rates have averaged some three percentage points less than commercial rates on 5 year terms.
Some 85% of these loans are renewable loans with an average interest rate of less than 3% and a term of less than 3 years remaining until renewal. Many of these projects receive additional subsidies that have the effect of further lowering interest rates.
The remaining 15% of these loans are longer term non-renewable loans with a variety of interest rates and terms to maturity. Some of these receive ongoing subsidies that reduce the effective interest rate.
Prepayment of closed CMHC mortgage loans
For projects requiring capital repairs and renovations, effective January 29, 2013, CMHC will accept the prepayment of closed mortgages with a yield maintenance prepayment penalty consistent with private lending institutions.
To prepay a CMHC closed mortgage loan with a yield maintenance prepayment penalty, a housing project must meet the following criteria:
-- The housing project is financially viable, and will continue to be viable after the expiration of the operating agreement.-- Capital investment in the property is required to address the replacement or repair of major capital building components and the housing project sponsor does not have sufficient funds in its replacement reserve or will not be able to accumulate the required funds before the maturity of the loan, necessitating refinancing.-- The project has a capital replacement plan in place spanning a minimum of ten years, which identifies and supports the proposed capital repairs and renovations.-- The housing project must continue to be subject to their operating agreement with CMHC, until its scheduled expiry.
Housing projects requiring immediate capital repairs/renovations either for health and safety reasons or for repairs/renovations which must be undertaken in the short term (1 to 5 years), and the housing project sponsor has insufficient replacement reserve funds available, or cannot borrow funds via secondary financing while maintaining viability, will be addressed through existing project in difficulty workout solutions.
Prepayment requests for CMHC mortgage loans to undertake capital repairs and renovations on housing projects administered by CMHC will be submitted directly to CMHC or to the Agency for Co-operative Housing, where projects' operating agreements are administered by the Agency on behalf of CMHC. Similarly, requests for projects administered by provincial and territorial governments will be submitted to those governments.
Federal Investments in Existing Social Housing
Annually, through CMHC, the federal government provides $1.7 billion in support of almost 605,000 individuals and families living in existing social housing under long term arrangements. Provinces and territories also contribute annually under long term agreements to the existing housing stock. Ongoing subsidies help ensure that lower-income families living in these units do not pay a disproportionate amount of their income on housing.
Under the Investment in Affordable Housing 2011-2014 bilateral agreements, which provides a combined federal, provincial and territorial investment of $1.4 billion, provinces and territories have the flexibility to design and deliver a range of housing programs and initiatives to address their local housing needs and priorities.
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