Enhanced CMHC Workout Framework

Canada Mortgage and Housing Corporation (CMHC) is pleased to introduce additional workout flexibilities to help federally assisted co-operatives suffering from premature building envelope failure return to financial viability over the long term. These enhancements were developed in consultation with the Co-operative Housing Federation of British Columbia (CHF BC) and the Co-operative Housing Federation of Canada (CHF Canada).

CMHC is enhancing its workout framework for federally assisted CMHC-insured co-operatives committed under the Pre-86 Program with confirmed premature building envelope failure.

A number of these enhancements will also be applied where helpful and appropriate to other federally administered insured projects in difficulty across Canada.

The enhancements to be implemented immediately, where the flexibility can lead to a viable long term workout arrangement, include the following:

• Ability to re-set the amortization for existing financing for up to 40 years from the date of the workout, compared to the current policy which restricts the extension of the current amortization period to a maximum of five years. This will result in lower monthly mortgage payments for the projects.
• Increasing the amount of borrowing permitted in a workout situation relative to what has been permitted in the past.
• Where redevelopment of existing project sites is a more cost effective solution, CMHC is confirming that Enhanced Assistance will still be available.
• Projects being redeveloped will be eligible for Seed Funding to help cover the costs associated with the early stages of redevelopment.
• Where redeveloping, without federal funding, results in additional new affordable units being created, projects will also be eligible for CMHC Project Development Funding (PDF).

These new workout flexibilities, combined with the existing flexibilities, will result in an added cost-effective investment of an estimated $28 million, by the federal government through CMHC’s commercial mortgage insurance. More information

These enhancements build on work already undertaken by CMHC to find workable, affordable solutions to help members of housing co-operatives continue to have access to quality housing.

Since 1995, CMHC has invested more than $2 million on research information transfer to assist the construction and housing industry in addressing moisture problems.

In 1998, the BC Homeowner’s Reconstruction Loan Program was created by the province of BC to provide interest-free loans to homeowners in need who were experiencing financial difficulty as a result of premature building envelope failure. Housing Co-operatives became eligible for interest relief under the loan program in 2001. The Federal Government, through CMHC, contributed to BC’s Homeowner’s Reconstruction Loan Program $27.7 million.

In 2003, special enhancements and flexibilities for federally assisted Pre-86 Section 95 projects were introduced including:

• The establishment of a dedicated CMHC workout team to help develop solutions.
• Agreement that RGI subsidy need not be redirected to pay for repairs when low-income subsidized members leave the co-op of their own accord.
• CMHC contracted with BC Housing Management Commission to provide technical expertise for the assessment and remediation process.
• Funding for a dedicated CHF BC consultant to assist housing cooperatives through workout analysis and repair process.
• Upfront commitment to forgive, at the end of the workout period, 50 per cent of the interest charged during the workout, on the CMHC Insurance workout loan.

For homeowner condos, CMHC supports these affected homeowners through mortgage insurance flexibilities such as extending the repayment period to lower monthly mortgage payments, and access to additional funding to pay for repairs, with no additional premiums.

Low income households can also benefit from financial assistance provided through CMHC’s Residential Rehabilitation Assistance Program to cover the costs of repair.

Annex A — Enhanced CMHC Workout Framework for CMHC-Insured Co-operative Housing Projects in BC with Confirmed Premature Building Envelope Failure

Workout Framework Enhancements to be implemented immediately, where the flexibility can lead to a viable long term workout arrangement, include the following:

• Ability to re-set the amortization for existing financing for Pre 86 Co-ops for up to 40 years from the date of the workout Interest Adjustment Date (IAD), compared to the current policy which restricts the extension of the current amortization period to a maximum of five years. This will result in lower monthly mortgage payments for the projects.
• Increasing the amount of borrowing permitted in a workout situation relative to what has been permitted in the past.
• CMHC’s Enhanced Assistance will be available, subject to CMHC’s normal terms and conditions, where the redevelopment of an existing Pre 86 Co-op project site is viable and a more cost-effective solution.
• Projects being redeveloped will be eligible for Seed Funding to help cover the costs associated with the early stages of redevelopment.
• Where redeveloping, without federal funding, results in additional new affordable units being created, projects will also be eligible for CMHC Project Development Funding (PDF).

These enhancements build on CMHC initiatives already available, and which will continue to be made available, to co-op projects with confirmed premature building envelope failure including:

• Upfront commitment to forgive, at the end of the workout period, 50 per cent of the interest charged during the workout, on the CMHC Insurance workout loan.
• Enhanced Assistance — assistance available to eligible projects to cover remaining operating shortfalls.
• Interest-free CMHC-insured loans, offered through the Home Protection Office (HPO), to help pay for repairing moisture damaged co-operatives.
• Technical support for repair strategies, provided through contract to CMHC, from BC Housing Management Commission (BCHMC).