Executive Summary on Borrowing
Twice a year (generally in the Spring & Fall following the Annual General Meeting-in late March, and Semi-Annual Meeting-in September, respectively) the MFA will fund the loan requests of clients which have been vetted through all appropriate approval processes. Deadlines for regional districts to submit Security Issuing bylaws to the Ministry of Municipal Affairs and Housing (for a Certificate of Approval) are typically six weeks prior to the Annual General Meeting and Semi-Annual Meeting.
Once a loan has been approved, clients can generally expect funding to occur in April for the Spring Issue or October for the Fall Issue. On occasion, the timing of funding may vary so please monitor the website for updates. If funds are required prior to issuance, please access our Short Term Borrowing page. The MFA will determine the exact date of funding as it monitors the capital market for the best interest rates available.
Proceeds on a loan request will be 99.00% of the gross amount of the loan. 1.00% is deducted by the MFA for security against loan default (this is held in trust by the MFA in its Debt Reserve Fund and will be refunded to clients, with interest, at loan expiry).
Each new issue will generally be for a 10 year term, which means the lending rate will be set from the date of funding for a period of 10 years. Members have the option to borrow for periods ranging from of 5 to 30 years, therefore, any terms that exceed the 10 year period will have the lending rate reset starting in year 11. Typically, the rate will be reset for the next 5 years covering the start of year 11 to the end of year 15, and this “5 year reset process” will continue as required (i.e. until loan obligations mature). Interest payments will be required semi-annually; with the first interest payment being 6 months after proceeds are received. Interest costs over the life of the loan are based on the original amount borrowed.
Principal repayments will occur annually, commencing one year after funds are received. Associated with each principal payment is an “actuarial adjustment” which is a ‘non-cash reduction’ of your loan balance. Actuarials are the expected earnings that the MFA anticipates it will realize on each principal repayment. The outstanding loan obligation to the MFA at any point in time is the “Gross Loan request” less the sum of the “Accumulated principal payments & Actuarial adjustments” to date – or in other words, the reducing balance on the amortization schedule at the most current date. For further details on the capital borrowing process see information contained on the status of loans document and the sample Long Term Debt Amortization Schedules.
Surplus Payments: If the MFA earns more than the actuarial associated with a loan, then that excess is paid back to the borrower once the loan is repaid either at the maturity date of the loan or the early full repayment date – see 'early loan payments' below. Surplus payments are made on the date the loan is extinguished.
Early Loan Repayments: Members wishing to repay their loan early may do so at any of the stated rate reset/refinancing dates for an issue (i.e. after the first 10 years and typically each 5 year period thereafter). These dates are indicated on the status of loans document and the balance owing is simply the amount outstanding according to the amortization schedule at that date (after payment of the regularly scheduled principal and interest amounts). Members wishing to payout must notify the MFA before deadline dates (posted on the website & members on-line accounts) and submit payment directly to the MFA prior to the applicable rate reset date (payout date).
- Regional Districts - August 9, 2019: Applications for a Certificate of Approval on a Security Issuing bylaw due to Ministry.
- Regional Hospital Districts - August 9, 2019: Capital Borrowing bylaws, RHD Liability Certificates and Requests for Long Term Financing due to MFA.
- Refer to the Fall 2019 Borrowing Memo for full details.