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Co-op stuck with mortgage deal: feds

By: Staff Writer

Posted: 09/19/2012 8:43 PM | Comments: 0

By Mia Rabson

OTTAWA — The federal government says a Winnipeg housing co-op has to suck it up and stick to the terms of a mortgage deal it signed with the Canada Mortgage and Housing Corporation in 1983.

Housing Minister Diane Finley responded to a question in the House of Commons about the Village Canadien Housing Co-op in St. Vital.

"The case to which the member refers is where these housing co-operatives made a deal with CMHC to get below-market-rate interest rates for fixed, closed mortgages," Finley said. "That means that the rate does not change and individuals agree to that because they get a benefit. Those are the terms that these individuals agreed to and those are the terms that we expect them to honour just as we will honour them."

Village Canadien signed a 50-year mortgage in 1983 with CMHC at a 13.5 per cent interest rate. The rate was much lower than market rates at the time but is far higher than they are today. Village Canadien wants to refinance the mortgage with a Manitoba credit union in order to take advantage of equity and lower interest rates and invest $2.5 million into renovating the 150 units in the complex.

However, the terms of the mortgage don’t allow an early exit from the mortgage and the only way CMHC will allow it to be paid out early is if the co-op pays a penalty equal to the total amount of interest it would have paid until the mortgage expires in 2028. That amounts to a $5.5-million penalty on a mortgage which has $4.5 million outstanding.

Liberal housing critic John McCallum raised the issue during question period Wednesday and said the penalty is crippling the co-op.

"Will the minister re-evaluate these mean-spirited policies and ensure that housing co-ops have the support they need," McCallum asked. "Or is this another Romney moment? Proof the Conservatives think it is not their job to help those people."

McCallum was referring to U.S. Republican presidential hopeful Mitt Romney, who is under fire for saying 47 per cent of Americans feel they are entitled to government handouts and that he doesn’t care about those people.

Nick Sidor, director of corporate affairs for the Cooperative Housing Federation of Canada, said in a statement his organization is counting on Finley to direct CMHC "to develop a fair and reasonable policy on mortgage prepayment."

"A fair and reasonable approach will help facilitate necessary renewal and reinvestment, as well as continuing economic stimulus through new employment," Sidor said.

He has previously noted the government should want to help the co-op because it would get the mortgage off the government’s books and into the private sector and invest $2.5 million back into the Winnipeg economy.

mia.rabson@freepress.mb.ca

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