What would you do if you had this client?

What would you do if you had this client?

What would you do if you had this client?

CMHC is at it again – or is that co-ops that are at it again.


Just this week, the board for yet another co-operative complex – Village Canadien Housing Co-op in St. Vital, Man. – went public in its fight to break a 50-year mortgage with the Crown corporation and avoid a $5.5 million penalty.

Brokers can understand their motivation: the co-op is paying 13.25 interest on that CMHC loan, reports the Winnipeg Free Press.

Back in 1983 when the co-op signed the mortgage, 13.25 was considered a pretty good deal since an average five-year fixed was going for 13.23.

Times, to say the very least, have changed and today the co-op wants to refinance in order to leverage its equity but also to take advantage of the current, much lower rates. It also wants to use $2.5 million for renovations, according to Linda Ferguson, president of the co-op.

CMHC says the pre-payment conditions of it contract with Village Canadien stipulates that the co-op has to pay a penalty of $5.5 million (the total interest due on the mortgage when it matures in 2028). Ironically, the current remaining balance on the mortgage is only $4.5 million.

Village Canadien’s predicament is not that unique. For instance in Ontario, the 78-unit Mondragon co-operative housing complex in Brampton, was asked to fork out a $140,000 in prepayment penalty to break out of its CMHC mortgage.

It too was in need of a $2.3 million renovation and retrofit and had a minimal balance owing on its principal.

Here’s a question for the most seasoned and creative brokers among you. What would you do for this client?

11 Comments
  • Jay Meakin 2012-09-29 3:20:33 AM
    Would a bonafide sale waive the penalty?
    Post a reply
  • John F. Smith (CENTUM Freeland Mortgage Group Inc. 2012-09-29 3:28:30 AM
    Are here any prepayments permitted at all? Can they pay it down gradually with permitted prepayments over a few years? Not ideal but better than $5.5 Million.
    Post a reply
  • Rebecca Awram, Origin Mortgages DLC 2012-09-29 3:35:51 AM
    If it was a residential mortgage, then any contract over 5 years in length can be broken on 3 months interest penalty. I suppose that doesn't apply to CMHC!!
    Post a reply