Kenawind Draft Policy for Market Based Housing
5% down (cash only no sweat equity)
Serviced Lots only (water, hydro & gas)
Certification of Possession (CPs)
First Nation to hold CPs until mortgage is fully amortized.
Total Debt Services Ratio
Not to exceed 40%
Debts owed to First Nation
To be addressed if Band member is in arrears (all program).
Contraction method General
Hold back on Contruction
CMHC Mortgage Insurance
STAGE 1 - Pre-Qualification
1) A Market Based Housing Application is sent by the Band member to Lac Seul First Nation Housing. An Orientation package is sent to Band member detailing the eligibility requirements.
2) Lac Seul First Nation conducts a internal credit check to ensure there are no accounts in arrears or other debts that are outstanding. Outstanding accounts for the purpose of this process are accounts thats are in default more than 30 days. If the band member is in good standing a Conditinal Letter of Support (Appendix 1) will be issued to the financial institute stating that the Lac Seul first Nation is prepared to guarantee the band member's mortgage provided they meet the lending reqirements.
a. If the Band member has an outstanding account, s settlement of these debts or a repayment plan must be negotiated prior to the issurence of a Conditional Letter of Support
b. If accounts are too high or the Band member refuses, the application is declined and no further action is taken on the file
c. If repatment plan is initiated Lac Seul First Nation may at its discretion defer the application for a period of six months to ensure that the Band member abides by the repayment plan.
3) Only after the Band member has received conditinal support from Lac Seul First Nation can the member apply for pre-approved mortgage. The Band member will be required to submit pay stubs, photo id, and information regarding overall debt load to the bank.
a. Total Debt Servicing (TDS ratio not to exceed 40%.
b. Gross up factor on income earned on-reserve will be applied
c. Band member must have satisfactory credit
d. Band member must have good job tenure
e. Band member must demonstrate they suffcient equity of 5%.
If band member is unable to meet the minimum credit standards of the bank, the application is declined and no further action is taken
4) Band member required to obtain and maintain life insurance in an amount suffcient to cover loan balance. Insurance can be odtained from financial institution where they are financing the mortgage or from an idependent broker.
5) Where a household includes a non-Band-member applicant whose income is being used to qualify for a loan, that non-Band member should seek idependent legal advice regarding thier right to claim in the event of household break-up. The non-Band-member applicant must sign a declaration that they fully understand the ramifications as it applies to home ownership on reserve and thier rights.
STAGE 2 - Approval & Contruction
1) I dentification of a serviced lot and CP formally transferred to the First Nation, if Lac Seul First Nation does not already hold CP. A title search will be conducted to ensure that the lot is unencumbered, as well as to ensure the lot is surveyed and registered under Canadian Land Survey Registry (CSLR). CP is transferred to Band member only after the mortgage has been fully amortized.
2) Housing Officer or other designated authority will confirm to the lender that the Band member has met all the pre-established conditions for approval of a loan guarantee and housing lot allocation.
3) Band member to submit two sets of plans, one for the Lac Seul First Nation and one to be forwarded to the financial institution. Any modifications recommended by the technical review must be implemented
a. As minimum, engineered plans will only be accepted and must be approved by appropriate agency (Health Canada for Septics). In addition, site plan to be provided.
b. Plans from local hardware stores may also acceptable. provided they are engineered stamped.
c. Plans to be reviewed by Technical Services Technical Services to ensure they meet, as a minimum, NBC.
4) For Modular/trailers/prefabricated construction, unit must meet the following minimum standards before guarantee is issued:
a. Contractor not paid until home is in place and inspected.
5) Band members get quotes from contractors and as a minimum the contractors must demonstrate that they have liability insurance, %1.5 million, and provide proof of WSIB coverage to First Nation. In addition, contractor must be capable of bridge financing contruction, as advances prior to contruction are prohibited.
6) Contractor responsible for installing services, water and septics, to the lot line and must be included in cost of contruction.
7) Fees for hydro and gas hook-ups are the responsibility of the Band member
8) Final quote along with verification of equity must be forwarded to financial institution for final approval. Must be below maximum loan amount.
9) Band member is responsible for CMHC mortgage insurance premiums, which can be rolled into the mortgage. Premiums based on the following: (may06,2011)
Loan to value Premium on Total Loan
Up to and including 65% 0.50%
Up to and including 75% 0.65%
Up to and including 80% 1.00%
Up to and including 85% 1.75%
Up to and including 90% 2.00%
Up to and including 95% 2.75%
Financial institution confirms CMHC mortgage insurance is in place
10) Loan document forwared to Chief and Council for approval. Chief and Council issue BCR for loan guarantee. (Appendix 2)
11) Credit Enhancement Certificate is issued by the First Nation Market Housing Fund confirming its backing of the loan
12) Contractor to provide proof of contruction insurance to Lac Seul First Nation and Financial Institution.
13) Copy of builder's contract forwarded to Lac Seul First Nation and any related correspondence must be forwarded to First Nation
14) Construction begins
15) Qualified Inspector responsible for progress and compliance inspections. The maximum number of progress advances in six (6). Pictures to be included in the advance documentation. fee to be determined and Band member responsible for payment.
16) Health Canada to inspect septic systems and issues certificate , copy to be provided to First Nation.
17) Equity (5%0 must be drawn down first prior to the first loan advance being processed.
18) Holdback of 10% for 30 days will be rwuired and enforced by the lender. General contractor to sign Statutory declaration stating all subs have been paid.
19) Proof of fire insurance provided by Band member to financial institution prior to move in date.