‘Stuck’ paying for worthless homes

Hey there, time traveller!
This article was published 30/06/2002 (8474 days ago), so information in it may no longer be current.

LEAF RAPIDS — As many as 100 homeowners could be stuck with mortgages worth up to $50,000 each on homes made worthless after the Ruttan Mine closed here Friday.

Creditors have told miners they cannot just walk away from their homes. Instead, homeowners’ ability to pay — including severance pay — will determine whether or not they must fulfill the mortgage. At least four families have already been told they must fulfill the terms of their bank loan.

“There’s no way in hell we can pay off this mortgage,” said Clara Sullivan, who along with her husband, Aiden, owes the bank over $40,000. Aiden lost his job this week at the Ruttan mine, and Clara lost her job at Lu Lu’s Restaurant, which closed following the mine closure announcement.

The two have been trying to sell their home, which they bought for $55,000, for $1 plus the mortgage, without success.

Residents are so angry there is talk of civil unrest. The RCMP warned some outspoken homeowners this week that any demonstration must be peaceful.

Meanwhile, Wawanesa Insurance has reduced coverage in the town to just $10,000 per home.

In total, over 200 homes could be up for sale — including homes that have already been paid off — in this community 1,000 kilometres north of Winnipeg and 200 kilometres northwest of Thompson.

But it’s unlikely anyone will be able to sell a house in the town.

“As far as I know, we’re stuck with a house with no value — no value whatsoever,” said Mike Ross, who along with his wife, Brandy Brust, still owes $39,000 on his mortgage.

There are about 400 employees at the Ruttan Mine. About 120 were laid off Friday. The rest will work on mine clean-up for a few months before they are also laid off.

“It’s scary for people, and we know that,” said Jim Sexton, CIBC community manager for Northern Manitoba. CIBC is the lender in most Leaf Rapids mortgages, which range from about $25,000 to $50,000. Amortized over up to 20 years, the mortgages could cost the homeowners much more than that.

In many mining towns, the mining company provides the housing and the houses are simply returned to the company if the mine closes.

In other cases, the company and CMHC will often have “one-industry town” agreements to share the risk of a mine closure. For example, when the mine at Lynn Lake northwest of here closed in the 1980s, homeowners simply handed in their keys.

CMHC actually had such an agreement with the original Ruttan mine owners, Sherritt Gordon Mines. The copper-zinc mine was bought by Hudson Bay Mining and Smelting in the late 1980s. In 1995, the shared-risk agreement stopped.

But no one told residents. CIBC and CMHC continued to give out mortgages as recently as two years ago, even though the possibility of mine closure was high.

“Why couldn’t they tell us that?” said Clara Sullivan. “Wasn’t it their place to tell us?”

Residents like Sullivan were stunned to hear in recent months that they would be bound by their mortgages.

“The thing is, the bank misled everyone. We were led to believe we had insurance that allowed us to walk away if the mine closed,” said Bobbi Lynn Peddle, who with her husband still has a $48,000 mortgage.

Sexton said the bank had no responsibility to warn home-buyers of the consequences of a mine closure.

“Counselling on the longevity of employment isn’t our purview,” he said. “Our responsibility is to make people aware of the terms and conditions of the mortgage.”

Sexton said CMHC, a Crown corporation, underwrote all the mortgages in the community. “CMHC and the individuals took the risk. The bank is sort of in the middle,” he said.

CMHC moved to diffuse some of the anger on Friday by issuing eight homeowners with “quit claims.” That means the owners can simply turn over their homes to the lender in exchange for forgiveness of the remaining mortgage. That’s what most homeowners are hoping for.

However, CMHC also determined that four homeowners must fulfill their mortgages, even though they are relocating elsewhere to find work. Three of the homeowners are clients with CIBC and one is with the Royal Bank.

“I’m upset about it. I think it’s unfair,” said Sandy Campbell. She and her husband, Daryl, were informed they must continue to pay a $25,000 mortgage for their abandoned home in Leaf Rapids. The couple has relocated to Esterhazy, Sask., and lives in a small duplex.

“The bank said my husband made enough money to pay for two houses,” she said.

There are close to 100 more mortgages yet to be reviewed.

“In mining towns, people always put down the least down payment because you never know the future,” said Peddle, who was doing casual labour at the Ruttan Mine until mine clean-up is completed.

Peddle and her husband were told as recently as February by CIBC that they could walk away from their home when the mine closed without damaging their credit rating. “The only thing was we were told was we wouldn’t be able to get a mortgage for two years,” she said.

In many cases, people thought they were protected because the bank approved their mortgage and had them take out mortgage insurance. Married couple Wayne Haas and Melanie Dick have $52,000 left on their mortgage. “Nobody said we’d be on the hook for it. I thought there was insurance for it,” Haas said.

In addition to more than 100 homeowners with mortgages, there are about 170 homeowners with clear title who can’t sell their homes because they have no value. They include Andre and Betty Thibault, who were spotted loading their possessions into a moving truck heading for Estevan, Sask.

“We have no idea what we’re going to do with the house,” said Andre, who must continue to pay $2,000 in property taxes and $1,000 in insurance premiums, even though the house will be sitting empty.

Nor is it worthwhile to move homes. Most of the homes here were built with aluminum wiring, and have walls only four inches thick. House safety standards across Canada now require copper wiring and six-inch thick walls. Moreover, residents have been told it would cost about $15,000 to move a home. The town has also asked homeowners for $10,000 bonds to ensure that basements are properly filled.

About 800 of the town’s 1,300 residents could leave, residents say. The majority of homes have For Sale signs in the windows. The Northern Store has already closed, as have Lu Lu’s Cafe and the automatic teller machine. Soon to close are the CIBC branch office, the druggist, the jewelry store and Leaf Cafe.

Mayor Barbara Bloodworth is trying to hold things together. Leaf Rapids council is asking the province and HBM&S to put up $900,000 for care and maintenance of the up to 200 homes expected to be abandoned. Bloodworth believes the plan could help homes hold some value until new owners can be found.

“We would pay for the heat and aggressively market the community” as a retirement centre, and service and training centre for the region, she said. Leaf Rapids also wants to start an urban reserve.

“If we don’t ensure Leaf Rapids survives, all residents lose whatever they have in the community,” Bloodworth said.

“There are many people moving to isolated northern communities to retire. There’s pristine wilderness, no pollution and little crime,” she said.

The town has been granted $1.25 million by the province to assist it through its crisis.

When the mine was operating, HBM&S paid 60 per cent of the town’s property taxes. The loss of that money, combined with the fact that most residents are leaving, means town revenues will be a fraction of what they’ve been in the past.

The province has also chipped in $750,000 to help with moving costs. That’s expected to average out to about $2,500 per homeowner.

HBM&S announced in 2000 that the mine would close in two-and-a-half years. Then HBM&S announced last October it was speeding up closure by a year. Ruttan is a low-grade, high-volume copper-zinc mine. Prices have been poor lately, and HBM&S recently found the biggest copper-zinc sulphide ore deposit in Manitoba beneath the Town of Flin Flon.