CMHC for Aboriginal	November 2007

Direct Lending Program

Canada Mortgage and Housing Corporation's Direct Lending Program provides financing and renewals for eligible social housing projects and offers the lowest average financing rate available. All loans that are financed or renewed at the same time and for the same term receive an identical rate regardless of the size of the loan or the location of the project. CMHC commenced Direct Lending to finance new commitments and renewals for social housing projects in order to reduce subsidy expenditures and make the best possible use of financial resources.

Who is eligible?

Band Councils or sponsors of eligible social housing projects are eligible to apply for Direct Lending financing for new project commitments or for renewal of existing project loans.

How does it work?

For new commitments and renewals, Band Councils or eligible sponsors have a choice to finance their project through Direct Lending with CMHC, with an Aboriginal Capital Corporation, where applicable, or through Approved Lenders.

For renewals, Band Councils or sponsors will receive an information package reminding them of the upcoming renewal. If the loans for the existing projects are in arrears, the loan must be brought current before transferring to Direct Lending.

Since the program inception, Direct Lending interest rates have been consistently below market rates. The interest rate is set at no more than 0.50 basis points above the Government of Canada benchmark bond rate for the equivalent term. Loan terms are for five years, plus or minus a few months. Repayment is based on equal blended monthly payments of principal and interest for the duration of the term and loans are not open for prepayment.

Note: for Band Council Section 95 commitments, the interest rate cost plays a role in determining the amount of subsidy a Band Council will be eligible to receive and for new construction, the number of units they can build. In this regard, a lower interest is better.