Ministerial Loan Guarantees Manual

Effective date

This version of the Ministerial Loan Guarantee (MLG) Manual takes effect on April 1, 2022. It replaces the Manual version of January 31, 2020.

Objectives

The MLG Manual provides direction on issuing and managing Ministerial Loan Guarantees made by the Minister for loans on reserve in accordance with the Ministerial Loan Guarantee Terms and Conditions approved by Order in Council P.C. 1999-2000 on November 4, 1999 (Appendix G).

The objective of the MLG Manual is to facilitate compliance and effective application of MLGs for lending institutions and First Nations.

Definitions

Definitions to be used in the interpretation of this manual are provided in Appendix A and in the Appendix G with the MLG terms and conditions. The acronyms used in this manual are provided in Appendix B.

1. Ministerial Loan Guarantees

1.1 Context

Reserve lands are held by the Crown for the use and benefit of First Nations, as set out in the Indian Act. Section 89(1) of the Act reads as follows:

"Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a band."

This provision prevents the use of land on reserve as security for loans, as the lender is unable to seize the real or personal property of the owner. This creates an impediment to those First Nations who wish to access financing for housing projects located on First Nation lands. To offset this, Indigenous Services Canada (ISC) issues Ministerial Loan Guarantees (MLGs) to secure the loans for First Nations for the purpose of construction, acquisition or renovation of on-reserve housing on defined lands. By providing a MLG, the Minister guarantees that the Crown will pay the loss incurred by the lender if a First Nation defaults on its loan with the lender.

The Department of Indian Affairs and Northern Development (DIAND) was first granted authority by parliament to provide MLGs in 1966 in order to provide First Nations communities living on reserve the security necessary to obtain loan financing for housing projects. Over the years, the Department has received increases to its Ministerial Loan Guarantee authority in response to the growth in population, increased housing construction costs and need for housing loans. The most recent increase was approved in October 2008, raising the Department's authority to $2.2 billion from its previous authority of $1.76 billion. The Ministerial Loan Guarantee Program is currently administered by Indigenous Services Canada.

A First Nation also may apply for a MLG on behalf of an individual member.

MLGs are not provided for housing projects on designated lands as long-term leases on these lands are mortgageable. Article 89 (1.1) of the Indian Act reads as follows:

"Notwithstanding subsection (1), a leasehold interest in designated lands is subject to charge, pledge, mortgage, attachment, levy, seizure, distress and execution."

Although most MLGs are provided for housing located on reserve, MLGs also may be provided for housing projects to be undertaken on the following lands:

lands held by a First Nation pursuant to a land claims agreement;
federal Crown land;
provincial Crown land; and,
certain settlement lands

In this manual, the term "First Nation lands" will be used to describe all types of lands for which MLGs may be issued.

1.1.1 Modern Treaties and Self-Government Arrangements

MLGs originated before modern day treaties and self-government agreements were entered into between the Government of Canada and First Nations. With the implementation of modern land claims, self-government or other agreements, it has become more challenging to determine whether or not First Nations operating under these agreements are eligible for MLGs. Careful consideration needs to be given to each MLG request from these First Nations. Each agreement and the MLG Terms and Conditions (see Appendix G) need to be assessed to see if both the borrower and land are eligible for a MLG.

1.2 Authorities

Department of Indian Affairs and Northern Development, Vote 5c, Appropriation Act No. 3, 1972.
Ministerial Loan Guarantee Terms and Conditions, approved by Order in Council P.C 1999-2000, dated November 4, 1999 (Appendix G).
Default Prevention and Management (formerly Intervention Policy).
Environmental review process for projects on reserve land.
Contaminated Sites Management Policy.

1.3 Conditions for the provision of Ministerial Loan Guarantees

The authority to issue MLGs for housing in First Nation communities is delegated by the Minister to the regional directors general and other designated regional representatives.

MLGs may only be issued subject to the availability of the Ministerial Loan Guarantee authority granted to the Minister.

The Minister may not guarantee a loan amortized beyond 25 years. Any subsequent renewals or refinancing of a guarantee may only be for an amortization period equal to the original amortization period less the total number of years of previous term renewals (some exceptions may apply and any exceptions are subject to the approval of the lender and ISC).

1.4 Eligibility criteria

The First Nation is required to have a satisfactory record of managing previous MLGs and housing projects funded by the Department, whether new construction or renovation. This will be verified and assessed by the regional MLG officer based on performance in previous years.
At a minimum, all housing reporting requirements in the First Nation's funding agreements must have been met. Regions can also request, at their discretion, that all capital reporting requirements in the First Nation's funding agreements must have been met. This will be verified by the regional MLG officer.
The ISC regional officer responsible for MLGs has confirmed that the project is exempt under the Impact Assessment Act (IAA), or, if not exempted under that Act, has confirmed with the regional officer responsible for environment verification that appropriate procedures are being followed under the IAA or, if applicable, under the environmental regimes of Modern Treaties.
The regional officer responsible for MLGs has confirmation from either the First Nation administration (with lands administration powers under either a Modern Treaty, or delegated powers under Articles 53 and 60 of the Indian Act) that:
- the land of the project site is land for which a MLG may be provided (land is eligible);
- the Band Council Resolution (BCR) or Letter of Authorization (LOA) confirms that the land of the project site is under the control of the First Nation or the individual;
- there are no encumbrances or charges on the land that would prevent its use for residential purposes; and,
- for individual applications, the consent of the individuals has been provided, as well as the consent of any spouses or common-law partners, if applicable (see footnote in section 1.5 Application Requirements below).
The First Nation's annual audited consolidated financial statements have been accepted by ISC at an initial review stage, as set out in ISC year-end Recipient Reporting Guide.
The First Nation is well managed and has a satisfactory record of meeting its financial obligations, including but not limited to the following:
- where the Department has required the First Nation to develop and implement a Management Action Plan (MAP) in accordance with the Directive on Default Management, the First Nation may be considered eligible to request that the Minister provide a MLG to the First Nation's lender, only if a MAP is in place and has been operating effectively for at least the last 6 consecutive months;
- if the First Nation has defaulted on a loan and the loan has been paid out by the Minister, the First Nation may be eligible for a MLG on a new loan only after an acceptable debt recovery plan has been operating effectively for at least the last 6 consecutive months; and,
- none of the MLGs of the First Nation, or its members, has an outstanding notification of default or a claim to the Minister for payment.

1.5 Application requirements

A First Nation may request, by way of an application to the Minister, that a loan guarantee be provided to the First Nation's lender or to the lender of an individual member of a First Nation. The Minister and the lender will enter into a guarantee agreement, which is the formal legal agreement that sets out the obligations of the Minister and the lender.

To ensure that the risk of loan defaults is minimized and to prevent undue fiscal pressures on First Nations and the Department, each MLG application request must be carefully assessed and approved against the application requirements and eligibility criteria. The following documents must be provided by a First Nation along with its application:

Letter of intent: a copy of either a letter of intent from a lender, a loan agreement from a lender, or a Canada Mortgage and Housing Corporation (CMHC) conditional commitment letter.
Project Description form: Section A and Section B, including a project summary (a brief overview of the project to be used in the environmental review process). The overview must include the nature of the project, a description of the physical works that are related to the project, including the purpose, size, capacity, expected lifespan and required land area. For guidance on preparing a project summary, refer to Appendix D1.
Site map: a copy of a site map, including the address of the location (lot number, street name and number) for each housing unit under the MLG application to be constructed, acquired or renovated. For guidance on preparing a site map, refer to Appendix D2.
Latitude and longitude coordinates: the Environmental Management System requires for all projects the coordinates in decimal degrees or degrees/minutes/seconds.
A survey plan (optional): a copy of a registered survey plan on which the housing project is situated, with the legal description, location and extent of the land (if available).
Band Council Resolution or letter of authorization, duly passed with quorum, certifying that:
1. the First Nation has informed itself and understands the Ministerial Loan Guarantee requirements, and agrees to the Ministerial Loan Guarantee terms and conditions.
2. the loan, if granted, will provide for the construction, acquisition or renovation of housing units on lands, as defined in the terms and conditions.
3. the services and utilities for the housing project will be in place by the completion of the project.
4. all housing units constructed, acquired or renovated will be inspected by qualified inspectors who must confirm that they meet or exceed the national building code standards and other applicable code standards. The First Nation agrees that the record of inspection and record of compliance to the national building code standards and other applicable code standards will be kept on file by the First Nation for the life of the MLG.
5. the project will comply with the Impact Assessment Act or any applicable modern Treaty environmental assessment provisions.
6. the First Nation, in undertaking the housing project, will practice due diligence and inform itself of its obligations and responsibilities associated with all applicable federal environmental statutes and regulations including the Canadian Environmental Protection Act, Species at Risk Act and the Fisheries Act in order to avoid potential violations.
7. an environmental site assessment has been carried out, if applicable, on the subject property, either individually or as part of a sub-division or community assessment, in accordance with the Canadian Standards Association's standard Z768-01 for environmental site assessment (or as may be revised from time to time) by a qualified assessor. A record of the assessment will be kept by the First Nation for the life of the MLG, and the Minister will be provided copies on request.
8. there is no evidence of contamination that may, upon exposure, constitute an identifiable risk to human health or to the natural environment.
9. the land of the project site is unencumbered and is under the control of the First Nation or the individual member of the First Nation.
10. if the land of the project site has not been surveyed and recorded in the lands registries, the applicant should ensure project is built in accordance with the community's land use plan, if applicable.
11. where section 89 of the Indian Act is applicable, the First Nation will provide Her Majesty the Queen in Right of Canada with a waiver to the application of section 89 with respect to the First Nation's assets other than land^{Footnote 1}.
12. the First Nation agrees that if the Minister pays under the guarantee agreement in respect to the MLG, the amount paid by the Minister is a debt due to the Minister and is immediately repayable by the First Nation.
13. the First Nation agrees that the Minister will recover from the First Nation the amounts paid on a defaulted loan plus interest starting on the date the default payment was made to the lender by the Minister. The First Nation agrees that this recovery will be effected through the following process, in ranked order:
  1. recovering acceptable security when pledged by the First Nation.
  2. entry by the First Nation into a repayment agreement.
  3. Set Off against any sum of money that may be due or payable by Her Majesty the Queen in right of Canada to the First Nation council as set out in subsection 155 (1) of the Financial Administration Act.
14. the First Nation understands that Set Off will be used where the conditions of the repayment agreement are not met.
15. in respect of the loan that is the subject matter of the guarantee agreement, if the borrower and the lender agree to renew the loan for another term, or agree to transfer the loan to a new lender, or the lender assigns the loan to a new lender, the First Nation will continue to assume the obligations set out in paragraphs (a) through (n) above.
16. the promises and commitments made in the band council resolution or letter of authorization are final.
If the First Nation is acting on behalf of an individual, the band council resolution or letter of authorization must also confirm that the First Nation has obtained the written consent of the individual.
In addition, for individual applications, applicants need to complete the Matrimonial Real Property Assessment Form and Statutory Declaration^{Footnote 2} (PDF). If they have a spouse or common-law partner and the loan encumbers the "family home", they will also need to fill out the Statutory Declaration of Spouse/Common-Law Partner.
Any other document required by an ISC regional office; contact your regional office for more information.

1.6 Accountable advances (applicable only to the CMHC Non-Profit Housing Program)

For loans made to finance projects under the CMHC Non-Profit Housing (Section 95) Program, the First Nation may apply to the lender for an accountable advance to cover costs incurred before construction start, such as shipping and purchasing costs of building materials. In such cases, accountable advances will be covered under the Ministerial Loan Guarantee (and will be accepted by ISC as a prudent lending practice) as long as the following financial limits and procedures are followed:

for a project constructed in a First Nations community with all-year road access, up to 25% of the value of the project may be covered by the guarantee agreement;
for a project constructed in a First Nations community with only winter road access, up to 50% of the value of the project may be covered by the guarantee agreement;
for a project constructed in a First Nations community without all-year or winter road access, up to 75% of the value of the project may be covered by the guarantee agreement; and,
when making any accountable advance, the lender is to ensure that it has procedures in place, and that it applies them, to document the borrower's use of the advanced funds. Procedures are to be appropriate and reasonable for the risk presented by the amounts involved and the borrower's circumstances.

If there are any particular cases where a higher percentage of the loan amount is requested by the First Nation as an accountable advance, ISC, in consultation with CMHC (as manager of the Non-Profit Housing Program), will consider covering this higher advance under the Ministerial Loan Guarantee on a case-by-case basis. For each case, CMHC shall include supporting documentation provided by the First Nation: a Band Council Resolution and a justification for the accountable advance. ISC, at its discretion, may issue a letter to the lender confirming its agreement to cover the higher accountable advance under the Guarantee or it may leave the additional risk to the lender.

Any request from the First Nation and/or lender to cover a higher accountable advance shall be discussed as early as possible with the ISC regional officer responsible for Ministerial Loan Guarantees. To ensure national consistency, the regional officer should discuss each case with the national office. Before agreeing to the inclusion of the higher advance under the Guarantee, the lender will be asked to provide appropriate supporting documentation.

1.7 Renewal of Ministerial Loan Guarantee

Where a borrower and the existing lender agree to renew an existing loan for another term, the MLG will continue to apply, provided that the lender will forward a written notification (Guaranteed Loans Terms and Conditions Report) to ISC, within 60 days after the loan has been renewed, indicating:

the term start date and term end date
the interest rate for the new term of the loan
that the outstanding principal balance under the loan is not being increased
that the total amortization period of the loan is not being increased (some exceptions may apply)
the instalment frequency
the interest type
the instalment amount
the date of first instalment
the lender loan number

Any costs associated with a renewal are the responsibility of the borrower. The lender shall collect any costs related to the renewal of the loan (i.e. penalty or administration fees) from the borrower.

More information regarding renewals is provided in section 2.2.

1.8 Transfer (in/out) of a Ministerial Loan Guarantee

A guarantee agreement may be transferred. Where a borrower wishes to transfer the loan to another lender, the loan agreement and guarantee agreement will be transferred to the new lender, provided that the existing lender and the new lender each forward a written notification (Guaranteed Loans, Terms and Conditions Report) to ISC within 60 days of the loan being transferred, indicating:

the name and address of the new lender
the name and address of the previous lender
the term start date and term end date
the interest rate
that the outstanding principal balance of the loan is not being changed
that the total amortization period of the loan is not being increased (some exceptions may apply)
that the new lender assumes the obligations under the loan agreement
that the new lender assumes the obligations under the guarantee agreement
the instalment frequency
the interest type
the instalment amount
the date of first instalment
the lender loan number

Any costs associated with a transfer are the responsibility of the borrower. The lender shall collect any costs related to the transfer of the loan (i.e. penalty or administration fees) from the borrower.

More information regarding transfers is provided in section 2.4.

1.9 Assignment of a Ministerial Loan Guarantee

Where a lender wishes to assign the loan to another lender, the loan agreement and the guarantee agreement will be assigned to the new lender, provided that the existing lender and the new lender each forward a written notification (Guaranteed Loans, Terms and Conditions Report) to ISC, within 90 days of the loan assignment, indicating:

the name and address of the new lender
the name and address of the previous lender
the term start date and term end date
the interest rate
that the outstanding principal balance of the loan is not being increased
that the total amortization period of the loan is not being increased (some exceptions may apply)
that the new lender assumes the obligations under the loan agreement
that the new lender assumes the obligations under the guarantee agreement
the instalment frequency
the interest type
the instalment amount
the date of first instalment
the lender loan number

More information regarding assignments is provided in section 2.5.

1.10 Arrears and defaults

In the event a borrower fails to make loan payments as stipulated in the loan agreement, the lender shall inform the borrower, the First Nation and ISC of the default by submitting a first Notification of Loan Default form within 90 days of default and every 30 days thereafter while the default continues (up to a period of 120 days from the date on the notification of loan default). Failure to provide notification as per this schedule requires the notification process to start over.

ISC may make loan payments to the lender, including the arrears, and take any other steps which may be deemed appropriate in the circumstances. Any loan payments made on behalf of the borrower will be recovered from the First Nation in accordance with the recovery of defaulted loans, see subsection 1.12.

The lender is required to notify ISC if the First Nation has assumed the responsibilities of an individual borrower by making the loan payments on the individual borrower's behalf.

1.11 Claim for payment

Where the loan remains in default for 120 days from the date on which the lender gave the notice referred to in subsection 1.10, or for such other period of time as may be agreed upon by ISC and the lender, the lender shall submit to ISC a claim for payment of the unpaid balance of principal and accrued interest at the contract rate up to the date that the claim is paid by ISC. Any reasonable charges incurred by the lender, in accordance with prudent lending practices to safeguard the interest of the lender, such as insurance premiums against fire and other insured risks or hazards, electricity, water and sewer, inspection or management fees, property protection, property maintenance, property repairs and expenses, and heating costs are recoverable.

A claim for payment form shall be submitted to ISC by the lender along with supporting documentation, confirming that the loan is in default and the unpaid balance of principal and accrued interest, plus other reasonable costs, are specified and included in the amount set out in the claim and are due under the terms of the guarantee agreement. The maximum period of accrued interest being paid shall not exceed 270 days. In exceptional circumstances, the lender can continue charging accrued interest even after the 270 days, in order to have enough time to find a workout plan. This has to be agreed upon in advance and in writing by a letter signed by the ISC regional director general and the lender.

1.12 Recovery of defaulted loans

After the lender assigns all its rights under the loan agreement to ISC, ISC will inform the First Nation that ISC is now the owner of the debt. The Minister will recover from the First Nation the amounts paid on a defaulted loan plus interest from the date of payment to the lender, see section 2.8 for detailed description of the process.

1.13 Environmental review process

1.13.1 Environmental Review Legislation

Different environmental reviews are required prior to approving an MLG, depending on the governance regime applicable to the lands on which the housing project is to be located.

Some MLGs are requested for projects located on Treaty settlement lands. Under Modern Treaties signed since the 70s, settlement lands are subject to specific environmental regimes negotiated under each of these Treaties. When reviewing MLG requests for projects situated on eligible Modern Treaty settlement lands, the regional MLG officer is to work closely with their regional environmental officers to determine environmental review requirements, and plan as early as possible the process that is applicable to that project.

For projects located on Indian Act reserves, the regional MLG officer needs to apply the requirements of the federal Impact Assessment Act. The rest of this section provides detailed procedures for applying the IAA.

1.13.2 Other Federal Authorities

Loan guarantees are routinely requested for projects where another authority has responsibilities under the IAA. Most of the time, these are projects approved by CMHC, which is now a federal authority under the Act. These include projects under the Non-Profit (Section 95) Housing Program, the Shelter Enhancement Program, the Housing Co-investment Fund, and other CMHC assistance programs.

If multiple authorities are required to apply the Impact Assessment Act to the same project, they are encouraged to work together in:

Determining if a project is exempt from the environmental review process; or
if the project is not exempted, then completing their analysis and/or producing a single report. ISC regional staff are to contact their counterparts in the other federal authority (CMHC or other) to coordinate the application of the Act, to ensure that the First Nation and the public are provided with a single window to the assessment of a given project.

While authorities are encouraged to work together in such cases, each authority must ensure that they meet their obligations under sections 81–91 of the IAA. This means that, even when working with others, ISC must meet the requirements for:

posting public notices (i.e. the Notice of Intent and the Notice of Determination) on the Registry and ensuring that the minimum 30-day period between both notices is met; and,
completing a determination of adverse environmental effects, based on a consideration of all factors set out in section 84.

1.13.3 Environmental Review Exemption Under IAA

Any housing project for which an MLG is requested, that is:

located on developed land as defined in the Act;
for which the housing footprint is under 1,000 m²;
does not involve the placement of temporary or permanent fill in a water body;
does not involve the disturbance of known or suspected subsurface contamination; and,
does not involve the demolition of a building that is less than 30 m from a school, hospital or residential building

is exempt from an environmental review under the Impact Assessment Act. This will be the case for most MLGs to be approved by ISC.

In the rare cases where housing projects that do not meet the exemption conditions, the Act requires federal authorities, such as ISC, to consider factors such as the environmental effects of the proposed projects before approving the Ministerial Loan Guarantee.

1.13.4 Projects on lands managed by First Nations under the First Nations Land Management Act and the Environmental Review Process

Under the Framework Agreement on First Nations Land Management (FNLM) and the First Nations Land Management Act (FNLMA), the responsibility for authorizing leases, permits, or other land instruments in support of a project is transferred to the First Nation, and therefore the First Nation has jurisdiction over environmental assessments on its land. Where a First Nation operates under the FNLMA with its own environmental review process and there is an ISC authorization required for a Ministerial Loan Guarantee (i.e. the project is not exempted), ISC will work with the First Nation to minimize duplication and embrace the principle of "1 project, 1 review".

If an agreement cannot be reached on a way to harmonize the First Nation's process with federal requirements for an environmental assessment, ISC may have to conduct an environmental review separate from the First Nation's environmental assessment, resulting in 2 reviews for the project. However, ISC will still have to work with the First Nation to fulfill section 84 considerations, like Indigenous and community knowledge.

If the First Nation and ISC agree on a harmonized approach to the project assessment, ISC will post the intent for the project on the Registry. ISC will also work to follow the First Nation's processes for receiving comments from the community. Results of the environmental assessment should be shared between the First Nation and ISC to ensure both parties have sufficient evidence to make their independent determinations. Once ISC makes their determination, they post the notice on the Registry.

Parties should work together to resolve any disagreement in findings; however, should a First Nation determine that the project won't move forward, this decision must be respected.

Proponents should contact the First Nation for information about that First Nation's environmental review requirements in regard to the First Nations Land Management Act.

1.13.5 Environmental Review Process Under Impact Assessment Act

There are many factors to be considered for the impact assessment of a project that is not exempted. Specifically, Section 22(1) of the Impact Assessment Act requires that federal authorities, such as ISC, must conduct an environmental review to determine whether a project is likely to cause significant adverse environmental effects before making any decision that would allow a project to proceed. In addition, Section 166 requires that projects reviewed by federal authorities are reported to Parliament annually.

As such the Department has established an environmental review process (ERP) to satisfy its legal requirements under Impact Assessment Act. To apply this process in an appropriate manner, the MLG officer is to work closely with regional environmental officers who will provide guidance and direction.

1.13.6 When seeking MLG approval for a project that is already wholly or partially constructed

Occasionally, situations occur where a project has commenced before or during the Environmental Review Process. The fact that a project has already commenced physical work will not alter ISC's requirement to ensure an environmental review is completed, and a determination of environmental effects made, before approving the MLG.

It is always recommended that proponents consider the following risks before undertaking a project prior to an environmental review being completed:

risk of delay in funding release until environmental issues are adequately addressed
additional costs to rework project design
potential for environmental damage
potential violations of the Canadian Environmental Protection Act, Species at Risk Act, Fisheries Act, or other legislation

1.13.7 Project description form and site map

The project description form gathers preliminary information about the proposed project and the existing environment. This form is required to assist in the determination of whether or not a project is exempted from the ERP.

Applicants are expected to complete section A and section B in the project description form. Within section A, the project summary must provide sufficient detail about the project. For guidance on how to prepare an adequate project summary, refer to Appendix D.

Important note: Forms with insufficient information may cause delays in the environmental review and approval process. If the regional officer responsible for environment verification requires more information to make a determination of environmental effects pursuant to Impact Assessment Act, an email will be sent to the MLG applicant outlining what additional information is required.

1.14 Environmental site assessments

An environmental site assessment (ESA) is required for (a) the purchase or transfer of ownership of existing developed properties, or (b) new housing construction on previously developed lots. For information on ESAs, see Appendix E.

The MLG application process may not go further until the project meets the environmental requirements as per Impact Assessment Act, YESAA or any departmental policies.

2. Ministerial Loan Guarantee procedures

2.1 Steps for an MLG approval

Only a First Nation may request, by way of an application, that ISC provide an MLG to the First Nation's lender. A First Nation may also apply on behalf of an individual member or First Nation entities, such as a Band Housing Authority or a Tribal Council. An application for an MLG can be submitted either manually (printed copy) or by combining manual and electronic copies.

Step 1: Application for a Ministerial Loan Guarantee

The First Nation submits a complete MLG Application form with all the required documents listed above in section 1.5. Application Requirements.

Step 2: The regional MLG officer assesses the MLG application against application requirements

The regional MLG officer reviews the request and works with regional colleagues to ensure that all the requirements listed in section 1.4 Eligibility Criteria and section 1.5 Application Requirements have been met. If any of the required documents are not attached, the regional MLG officer will contact the First Nation stating what is missing in the application.

Step 3: The regional MLG officer fills out section A and section B of the project description form and the applicant completes remaining information.

Step 4: The MLG application is assessed against the eligibility criteria

The regional MLG officer reviews the MLG application to ensure that:

sufficient authority is available within the Ministerial Loan Guarantee authority, and
all eligibility criteria listed in section 1.4. Eligibility Criteria are met.

The regional officer responsible for land verification confirms that the land is surveyed and registered in the Indian Lands Registry, First Nations Lands Registry or self-governing First Nations Lands Registry under the MLG terms and conditions, and that there are no encumbrances or charges on the project site of the land that would prevent its use for residential purposes.

For individual applications, the regional officer responsible for land verification also ensures that the consent of the individuals has been provided, as well as the consent of any spouses or common-law partners, if applicable (see footnote in section 1.5).

The regional officer responsible for environment verification confirms that the project meets environmental requirements as per Impact Assessment Act, YESAA or any Departmental policies.

If the application meets the requirements and eligibility criteria, the regional MLG officer processes the MLG for approval.

If the application does not meet the eligibility criteria, the regional MLG officer notifies the First Nation in writing, stating the reasons for the rejection.

Step 5: Signing the guarantee agreement

The regional MLG officer sends the two original copies of the Guarantee Agreement to the lender.

The lender signs and returns both copies of the Guarantee Agreement to the regional MLG officer.

The guarantee certificate must not be distributed until the regional MLG officer has received signed copies of the guarantee agreement.

The regional director general or director signs the two copies of the guarantee agreement.

Step 6: The regional MLG officer distributes copies of the guarantee agreement

The regional MLG officer sends to the First Nation:

a departmental letter of MLG approval
an original signed copy of the guarantee certificate
a copy of the guarantee agreement

The regional MLG officer sends to the lender:

a departmental letter of MLG approval
an original signed copy of the guarantee agreement
a copy of the guarantee certificate

Step 7: The lender provides a copy of the guaranteed loans terms and conditions report

Within 90 days of the interest adjustment date, the lender forwards a completed guarantee loans terms and conditions report to the regional MLG officer.

2.2 Loan renewal process

The lender is required to report the renewal of an existing loan subject to a MLG by submitting a guaranteed loans terms and conditions report to ISC.

Any increase in the total amortization of the existing loan or of the outstanding principal balance, under the terms of the existing guarantee agreement, requires an application for a new MLG. Any costs associated with the renewal are the responsibility of the borrower. The lender shall collect any costs related to the renewal of the loan (e.g., penalty or administration fees) from the borrower.

If the total amortization period or the outstanding principal balance of the existing loan is being increased, the regional MLG officer informs the lender that the guarantee agreement is not to be renewed, and that the borrower must apply for a new MLG.

2.3 Loan refinancing process

The refinancing of any loan covered by a MLG must be reported to ISC.

Within 60 days of the loan being refinanced, the lender must submit a completed guaranteed loans terms and conditions report form to the borrower (as well as to the First Nation where an individual is the borrower) and to ISC.

2.4 Loan transfer (in/out) process

All loans covered by MLGs and transferred to a new lender must be reported to ISC.

A loan can be transferred out of a lending institution into a new lending institution. Both, the previous lender and the new lender, have to provide a guaranteed loans terms and conditions report and indicate if the MLG is transferred out or transferred in.

Any increase in the total amortization of the existing loan or of the outstanding principal balance, under the terms of the existing guarantee agreement, requires a new application for a MLG and not a transfer report. The borrower must cover any costs (e.g., penalties, administration fees) for the loan transfer.

Step 1: The existin g lender provides the new lender with a copy of the guarantee agreement for each loan transferred out

Within 60 days of the transfer of an existing loan, the existing lender shall:

provide the new lender with a copy of the guarantee agreement including the guarantee certificate number; and,
forward a guaranteed loans terms and conditions report to the regional MLG officer indicating that the loan has been transferred out.

Step 2: The new lender reports the new loan transferred in, by submitting a guaranteed loans terms and conditions report

Within 60 days of receipt of the transferred loan, the new lender:

forwards a completed guaranteed loans terms and conditions report to the regional MLG officer; and,
sends a letter to the regional MLG officer certifying that the lender assumes the obligation of the loan and the guarantee agreement transferred to them.

The regional MLG officer acknowledges the transfer of the MLG to the new lender in writing.

2.5 Loan assignment process

All loans covered by MLGs and assigned to a new lender are to be reported to ISC.

Step 1: The existing lender provides the new lender a copy of the guarantee agreement for each loan assigned

Within 60 days of the assignment of an existing loan, the existing lender shall:

provide the new lender with a copy of theguarantee agreement, including the guarantee certificate number; and,
forward a guaranteed loans terms and conditions report to the regional MLG officer indicating that the loan has been assigned.

Step 2: The new lender reports the new assigned loan by submitting a guaranteed loans terms and conditions report

Within 60 days of receipt of the assigned loan, the new lender shall:

forward a completed guaranteed loans terms and conditions report to the regional MLG officer; and,
send a letter to the regional MLG officer certifying that they assume the obligations of the loan and Guarantee Agreement assigned to them,

Step 3: Regional MLG officer updates the information concerning the new lender within Guaranteed Loan Management Module (GLMM) for each loan assigned

The regional MLG officer acknowledges the assignment of the MLG to the new lender in writing and updates the loan status within GLMM.

2.6 Loans in arrears: Notification of loan default process

The lender shall exercise reasonable care and prudence in the administration of the loans. This includes notifying the borrower and ISC of the loan arrears. In the case of individual loans, the lender is required to provide the First Nation with copies of these notifications.

For every loan in arrears, the lender shall monitor the situation with due diligence. The lender may approach the First Nation to assist in resolving delinquent payments and negotiate alternative arrangements with the borrower, in order to avoid requesting a payment under the guarantee agreement.

In the management of arrears and defaults of MLGs, the following processes are required:

notification of loan default
claim to Minister for payment
review of the claim to Minister for payment
processing of the claim to Minister for payment
debt recovery:
- negotiating repayment schedule, and
- tracking repayment schedule

Step 1: The lender submits a notification of loan default if a borrower is in arrears

Within 90 days of the borrower defaulting on loan payments, the lender shall forward a notification of loan default formto the borrower(s), the First Nation and ISC.
Every 30 days thereafter that the loan remains in arrears, the lender sends a notification of loan default form to the borrower, the First Nation and ISC (not to exceed 120 days from the date of the first notification of loan default or other period of time as may be agreed upon by the Minister and the lender).
Failure by the lender to provide notification as per this schedule requires the notification process to start over.
The lender is required to notify ISC if the First Nation has assumed the responsibilities of an individual borrower by making the loan payments on the borrower's behalf.

Step 2: The regional MLG officer assists in resolving a potential default

Upon receiving a notification of loan default, the regional MLG officer contacts the First Nation by phone and in writing to discuss the First Nation's financial situation.
Where the borrower is the First Nation and the financial difficulty seems temporary, ISC may make interim loan payments, including arrears, to the lender, on behalf of the First Nation following assessment of the situation.
Where interim payments have been made by ISC to the lender on behalf of the borrower, ISC recovers the full amount from the First Nation by payment or Set Off, to reimburse the consolidated revenue fund.

2.7 Claim for payment process

Where it is determined that the lender has not followed prudent lending practices as outlined in the terms and conditions of the guarantee agreement, the Minister may reduce the payment to the lender of the accrued interest or other reasonable amounts included in the amount set out in the claim. Where a certificate of insurance has been issued under the NHA, CMHC must be consulted regarding any such reduction.

Step 1: The lender submits a claim for payment form with supporting documentation

If the loan remains in default for 120 days from the date indicated on the first notification of loan default form, or for such other period of time as may be agreed upon by ISC and the lender, the lender shall submit to ISC a claim for payment along with supporting documentation (including justification of any reasonable charges such as penalties, administration fees, etc. incurred by the lender, in accordance with prudent lending practices to safeguard the interest of the lender).

Step 2: The regional MLG officer verifies the claim for payment

The regional MLG officer:

verifies that the claim for payment form is in order, that the supporting documentation is included, and notifies the First Nation and the lender;
verifies that the amount requested in the claim includes the unpaid balance of the principal and accrued interest up to the date that the claim is paid, plus any reasonable charges incurred to safeguard the interest of the lender;
ensures that the maximum period of accrued interest being claimed/paid does not exceed 270 days, unless otherwise agreed to by the Minister, in advance and in writing;
informs the lender of the approval, adjustment or refusal of the claim for payment; and,
informs the First Nation that it is no longer eligible for MLGs, unless the lender releases ISC from the claim for payment.

The lender must provide to ISC an absolute assignment of its rights under the loan agreement, including any judgements and interests in insurance policies issued under the terms of the loan agreement.

After this, the payment is issued.

2.8 Default and repayment management

ISC is required to recover the amounts paid on a defaulted loan plus interest from the date of payment as per the MLG terms and conditions.

The process of recovery will be done through the following process, in ranked order:

Recover acceptable security when pledged by the First Nation.
Establish a repayment agreement: a repayment agreement will only be established if all reasonable efforts have been made by ISC to recover acceptable security when pledged by the First Nation.
There are two scenarios for establishing a repayment agreement:
1. Continue repayment as per original loan agreement
  If this option is selected, the following rules apply:
  - interest must be charged at the same rate as established by the lender as per the original Loan Agreement; and,
  - the term of the repayment agreement must not exceed the original loan agreement amortization date.
  OR
2. Enter into a new repayment agreement
  If this option is selected, in exceptional circumstances, changes to the amortization and interest can be made.
If the conditions of a repayment agreement are not met and none of these two scenarios are possible, there is the possibility of leveraging a Set Off.

Set off: If the acceptable security or repayment agreement cannot be recovered, the minister shall Set Off against any sum of money that may be due or payable by Her Majesty the Queen in right of Canada to the First Nation Council as set out in subsection 155(1) of the Financial Administration Act.

2.9 Lender confirmation of actuals

To ensure the integrity and quality of loan data under the MLG program, ISC monitors and reviews the volume and value of loan accounts on an ongoing basis.

The regional MLG officer sends out a call letter to each lender by March 1 of each year. Each lender shall complete a lender confirmation of actuals report summarizing the yearly status of each MLG as of March 31, and submit to the regional MLG officer by the date indicated in the call letter.

Most lenders provide these reports annually, but for CMHC and TD this exercise is conducted every quarter. Further extension to some other lenders is planned in the near future.

2.10 Reports Provided Electronically

In order to accommodate lender efforts to automate reporting, lenders may provide Guaranteed Loans Terms and Conditions reports needed by ISC in electronic form via quarterly reports.

Appendix A: Definitions

"Acceptable security" (optional, for exceptional circumstances) means a security within a First Nation's control which is accessible to use as a payment to the Minister if a First Nation Council has defaulted on a loan. The acceptable security includes stockholdings, bond holdings, real property, and moveable assets but does not include any security under the control of the Minister. The acceptable security shall be available for the life of the MLG. The First Nation Council shall notify the Minister in writing if the acceptable security changes during the life of the MLG.
"Applicant" means an individual as defined below or a group of individuals (such as a Council of a Band, a Tribal Council, an authorized Band Housing Authority, a Band Housing Corporation including a Band Corporation under the Naskapi and the Cree-Naskapi Commission Act, a corporation without share capital and a cooperative association, where all members of said corporations and cooperative associations are also members of the First Nation) who have applied for a MLG to secure a loan for the construction, acquisition or renovation of housing located on lands as hereinafter defined.
"Application" means the formal request by a First Nation that the Minister provide a Ministerial Loan Guarantee to a lender.
"Assignment" means the situation where a lender wishes to assign the loan to another lender, either during or at the end of the term, without changing either the outstanding principal balance or the remaining amortization period.
"Band" means:
1. Band as defined in the Indian Act or the Naskapi and the Cree-Naskapi Commission Act ; or,
2. A former band or group of bands who is/are signatory to an implemented self-government agreement with Canada, or with Canada and the appropriate province/ or territory.
"Band council resolution" means the resolution or equivalent authorizing document approved by the First Nations 's council to provide the assurances or certifications required to request the Ministerial Loan Guarantee from the Minister.
"Borrower" means an applicant to whom a loan has been made by a lender, which has been guaranteed by the Minister.
"Default" means the borrower has failed to make loan payments as stipulated in the
loan agreement.
"Environmental assessment" means an assessment of the environmental effects of a project defined by the Regulations Designating Physical Activities that is conducted in accordance with the Impact Assessment Act or in accordance with the provisions of applicable modern Treaties.
"Environmental review" means an analysis of environmental effects, pursuant to section 22 of the Impact Assessment Act by which the Minister makes a determination on the likelihood of a project to cause significant adverse environmental effects before allowing the project to proceed. This type of review is for projects defined by the section 81 of the Impact Assessment Act, but not subject to a federal environmental assessment.
"Environmental site assessment" refers to an assessment as prescribed by the Canadian Standards Association (CSA) Standard Z768 entitled Environmental Site Assessment, describing a systematic process by which an assessor determines whether a particular property is or may be subject to actual or potential contamination, but does not refer to an environmental assessment, as may be required pursuant to the Impact Assessment Act or the Yukon Environmental Socio-Economic Assessment Act.
"First Nation" means:
1. a Band as defined in the Indian Act or the Naskapi and the Cree-Naskapi Commission Act, or
2. a former band or group of bands who are signatory to an implemented modern Treaty
"Greenfield" means undeveloped land either used for agriculture, landscape design, or left to evolve naturally. These areas of land are usually agricultural or amenity properties being considered for residential or park development.
"Guarantee agreement" means the agreement between the Minister and the lender containing the terms and conditions for the Ministerial Loan Guarantee.
"Guarantee certificate" means the document prepared by the Minister to certify the housing loan amount being guaranteed by the Minister.
"Housing unit", "housing" or "house" means:
1. any self-contained dwelling unit on a permanent foundation on lands as defined, with washroom, kitchen and sleeping facilities that is to be used as a principal residence or a rental unit, whether or not it is presently occupied or needing renovation or repair, and includes a detached or semi-detached house, a mobile home, a row house, or a multi-unit residence where each unit is counted separately ; and,
2. any self-contained special purpose dwelling unit under control of the Chief and Council that contains on site non-medical care facilities, and includes children's aid homes, halfway houses, shelters for homeless people, homes for single mothers, shelters for those experiencing family violence, homes for drug and alcohol rehabilitation programs, residences for physically or mentally disabled adults or children, and homes for the elderly.
"Individual" means a person who is registered or is entitled to be registered under the Indian Act, or a person who is a beneficiary as defined under a modern Treaty.
"Interest adjustment date" means the date on which the term of the loan commences and the loan comes under regular payment of both principal and interest. It is determined at the beginning of the first mortgage agreement, and cannot be adjusted during renewal, transfer, assignment, etc.
"Lands" means:
1. lands which constitute "lands reserved for the Indians" pursuant to section 91(24) of the Constitution Act, 1867, including lands, the legal title to which is vested in Her Majesty the Queen in Right of Canada, that have been set apart as reserve for the use and benefit of a band under subsection 2(1) of the Indian Act. This may also include lands so defined or similarly defined in implemented self-government agreements and land claims agreements or under the First Nations Lands Management Act (FNLMA), or
2. a designated Indian settlement where groups of Indians normally resides and the federal Crown holds title to this land or has acquired the right to use and occupy this land by agreement with the appropriate provincial or territorial government, or
3. Category 1A or category 1A-N lands as defined in the Naskapi and the Cree-Naskapi Commission Act, or
4. Category A, category B or fee simple settlement land of a Yukon First Nation which were formerly land set aside by notation in the land records of the Northern Affairs Program for Indian housing or which were formerly a reserve under the Indian Act,
5. But does not include lands that are held in fee simple
"Land survey plan" is a map of a parcel of land, created by thoroughly examining and measuring the property. It determines and delineates boundary locations, building locations, physical features and other items of spatial importance. Once recorded in the lands registries, it can be referred to as legal land description.
"Lender" means Canada Mortgage and Housing Corporation, acting as a lender, and any lender designated under the National Housing Act for the purpose of making loans.
"Letter of Authorization" for self-governing First Nations: means a document equivalent to a Band Council Resolution which evidences the authorization by the community government in a form satisfactory to the Minister.
"Loan" means a Loan which the Minister has guaranteed for the construction, acquisition or Renovation of Housing Units on Lands as defined above.
"Loan agreement" means an agreement between a borrower and a lender containing the terms and conditions of the loan.
"Minister" means the Minister of Indigenous Services or designated representative.
"Ministerial Loan Guarantee" or "MLG" means a promise by the Minister that Indigenous Services Canada will repay to the lender the amount of a loan that the lender has made to a borrower in the event of default by the borrower, but does not include a guarantee of a loan authorized by the Minister pursuant to section 64(1)(j) of the Indian Act using band moneys as security.
"Ministerial Loan Guarantee authority" means the amount of loans that the Minister may guarantee pursuant to the Department of Indian and Northern Development Canada Vote 5, Appropriation Act No. 3, 1972.
"Project" means the acquisition, construction or renovation of one or more housing units by a borrower where such activities are grouped under one application for a Ministerial Loan Guarantee.
"Refinance" means the borrower wishes to change the interest rate, or increase or decrease the outstanding principal balance, or both, of an existing Ministerial Loan Guarantee with an existing lender, either during or at the end of the term of the loan.
"Renewal" means the existing lender offers to continue financing the loan for another term without making changes to the outstanding principal balance.
"Renovation" means the act of improving the condition of a housing unit by renewing it, adding an addition to it, or putting it in a safe condition for habitation, but does not include the purchase of new appliances or furnishings.
"Set Off" means the recovery of a debt owed to Her Majesty the Queen in right of Canada, by way of a deduction or Set Off against any sum of money that may be due or payable by Her Majesty the Queen in right of Canada to the First Nation Council as set out in subsection 155(1) of the Financial Administration Act.
"Transfer" means the situation where a borrower wishes to move a loan from an existing lender to a new lender, either during or at the end of the term of the loan, without changing either the outstanding principal balance or the remaining amortization period.
"Written consent" means the agreement between an Individual and the First Nation stating the terms and conditions to be met by the Individual during the amortization period of the loan and the rights of the First Nation in the event of loan default.

Appendix B: Acronyms

BCR: Band Council Resolution
CARD: Corporate Accounting and Reporting Directorate
CMHC: Canada Mortgage and Housing Corporation
CSA: Canadian Standards Association
DIAND: Department of Indian and Northern Development
ERP: Environmental Review Process
ESA: Environmental Site Assessment
FHRMIRA: Family Homes on Reserves and Matrimonial Interests or Rights Act
FNLMA: First Nations Lands Management Act
GCIMS: Grants and Contributions Information Management System
GLMM: Guaranteed Loan Management Module
IAD: Interest Adjustment Date
IEMS: Integrated Environmental Management System
ISC: Indigenous Services Canada
LCA: Lender Confirmation of Actuals
LOA: Letter of Authorization
MAP: Management Action Plan
NBC: National Building Code
NHA: National Housing Act
MLG: Ministerial Loan Guarantee
TAFR: Treasury Accounting and Financial Reporting
YESAA: Yukon Environmental Socio-Economic Assessment Act

Appendix C: Ministerial Loan Guarantee forms and templates

The following forms and templates can be found online at Forms: Housing and infrastructure:

Guaranteed Loans Terms and Conditions Report form
Ministerial Loan Guarantee Application form
Notification of Loan Default form
Claim for Payment form
Individual and Band Council Resolution/Letter of Authorization document templates

The following forms can be found in the Grants and Contribution Information Management System:

Ministerial Loan Guarantee Certificate
Ministerial Loan Guarantee Agreement

Appendix D: How to prepare a project summary and site map for the purpose of environmental review process

For more information please consult the Environmental Review Process for Projects on Reserve Land where you can find the complete Description and guidance for the project description form.

D1: Checklist for preparing a project summary for all proposed physical works or activities:

Lot number, if available
Identification of all proposed works/activities (primary and ancillary structures)
All proposed building size(s) (ft² or m²)
Heating system(s) type(s) to be used (i.e. diesel, electric, propane, wood, geothermal, solar or mixed)
Type/size, age and condition of fuel tank(s), if applicable
Water source to be used (communal piped, well(s))
Sewage treatment (communal piped, septic tank and field)

D2: Checklist for preparing a project site map:

Appendix E: Environmental site assessment

An Environmental Site Assessment (ESA) is a systematic process by which a qualified assessor seeks to determine whether a particular property is or may be subject to actual or potential contamination. This is critical in the establishment of baseline information to help determine whether a site is suitable for development. If a former heating fuel tank, gas station, commercial/industrial business or landfill was identified on or around the site there may be serious restrictions for development of the site as a residential area. The only way to rule out possible exposure to contamination at the site is to conduct a proper historical review of the area. Such reviews are referred to as phase one or stage one reports depending on the region. An ESA does not involve the investigative procedures of sampling, analyzing and measuring such as boreholes, soil tests or other intrusive types of sampling or testing unless enhancements are agreed to. An ESA may also include a review of previously performed environmental ESAs.

The review process includes the following areas of investigation:

historical aerial photo interpretation
interviews with people knowledgeable about the site history
published geology and groundwater information
searches of public and private databases

A qualified assessor can be a registered professional engineer licensed to practice in that province, or a certified member of a provincial or national association of environmental site assessors.

A certification is required that stipulates that an ESA has been carried by a qualified assessor, in accordance with the Canadian Standards Association Standard CSA Z768-94 for Environmental Site Assessment (or as may be revised from time to time), or in accordance with the process developed by a First Nation under the First Nations Land Management Act, and that such an assessment confirms that there is no evidence of contamination that may, upon exposure, constitute an identifiable risk to human health or the natural environment. This certification is a condition of agreement included in the band council resolution or letter of authorization. The First Nation is to hold copies of the ESA on file for future reference.

Appendix F: Federal statutes, acts and regulations pertaining to Ministerial Loan Guarantees

The federal statutes and regulations below are provided for reference only. For more information on federal statutes and regulations applicable to Ministerial Loan Guarantees, contact your regional MLG officer.

Appendix G: Ministerial Loan Guarantee terms and conditions

(As approved by the Treasury Board in 2008)

1. Definitions

In these terms and conditions:

"applicant" means an individual Indian or a group of Indians (such as a council of a band, a tribal council, an authorized Band Housing Authority, a band housing corporation including a corporation under the Naskapi and the Cree-Naskapi Commission Act, a corporation without share capital and a cooperative association, where all members of said corporations and cooperative associations are Indians) who has applied for a loan for the construction, acquisition or renovation of housing located on lands as hereinafter defined.

"application" means:

an application for a housing loan for which Canada Mortgage and Housing Corporation will provide loan insurance pursuant to the National Housing Act, and which will be secured by the Minister through a Ministerial Loan Guarantee, or
an application, other than an application as described in (a) above, for a housing loan, which will be secured by the Minister through a Ministerial Loan Guarantee

"band" means:

band as defined in the Indian Act or the Naskapi and the Cree-Naskapi Commission Act, or
a former band or group of bands who is/are signatory to an implemented self- government agreement with Canada, or Canada and the appropriate province/ or territory.

"borrower" means an applicant to whom a loan has been made by a lender, which loan is guaranteed by the Minister in accordance with these terms and conditions.

"council of a band" means:

a council as defined in the Indian Act, or
a council of a band corporation as defined in the Naskapi and the Cree-Naskapi Commission Act, or
the governing body of a former band or group of bands who is/are signatory to an implemented self-government agreement with Canada, or Canada and the appropriate province/territory, or
groups of individuals that the Minister has authorized to be considered as an Indian band by Order of the Governor in Council.

"default", for the purpose of these terms and conditions, means the borrower has failed to make loan payments as stipulated in the loan agreement.

"environmental site assessment" refers to an environmental site assessment as prescribed by the Canadian Standards Association Standard Z768-94 entitled: Environmental Site Assessment, describing a systematic process by which an assessor determines whether a particular property is or may be subject to actual or potential contamination, and does not refer to an environmental assessment as may be required pursuant to the Impact Assessment Act.

"guarantee agreement" means the agreement between the Minister and the lender containing the terms and conditions for the Ministerial Loan Guarantee.

"Indian" means:

a person who, pursuant to the Indian Act, is registered as an Indian or is entitled to be registered as an Indian, or
beneficiaries as defined under the Naskapi and the Cree-Naskapi Commission Act.

"lands" means:

lands which constitute "lands reserved for the Indians" under class 24 of section 91 of the Constitution Act, 1867, including lands, the legal title to which is vested in Her Majesty, that have been set apart as reserve for the use and benefit of a band under subsection 2(1) of the Indian Act, and may also include lands so defined or similarly defined under the terms specified in implemented self-government agreements or implemented land claims agreements, or
a designated Indian settlement where groups of Indians normally resides and the federal Crown holds title to this land or has acquired the right to use and occupy this land by agreement with the appropriate provincial or territorial government
Category 1A or Category 1A-N lands as defined in the Naskapi and the Cree-Naskapi Commission Act, or
any other lands that are within the legislative authority of Parliament as contemplated by class 24 of section 91 of the Constitution Act, 1867,

but does not include:
lands that are held in fee simple (in Quebec: full ownership)

"lender" means Canada Mortgage and Housing Corporation or other lender approved by Canada Mortgage and Housing Corporation pursuant to the National Housing Act for the purpose of making loans.

"loan" means:

a loan made pursuant to the National Housing Act by a lender and which the Minister has guaranteed for the construction, acquisition or renovation of housing on lands as defined, or
a loan not made pursuant to the National Housing Act by a lender and not insured by Canada Mortgage and Housing Corporation, which the Minister has guaranteed for the construction, acquisition or renovation of housing on lands as defined above.

"loan agreement" means an agreement between a borrower and a lender containing the terms and conditions of the housing loan.

"loan guarantee" means a Ministerial Loan Guarantee whereby the Minister guarantees repayment of the loan to the lender in the event of default by the borrower.

"Minister" means the Minister of Indigenous Services or his/her designated representative.

2. Conditions for the provision of Ministerial Loan Guarantees for housing loans

Where the Minister is assured that the applicant will obtain the loan through a lender, the Minister may agree to provide a loan guarantee where the council of a band has submitted to the Minister, in writing:

certification that the loan, if granted, will provide housing or housing improvements for Indians, on lands as defined;
that an environmental site assessment has been carried out on the subject property either individually or as part of a sub-division or community assessment, in accordance with the Canadian Standards Association's Standard Z768-94 for Environmental Site Assessment (or as may be revised from time to time), and that such an assessment confirms that there is no evidence of contamination that may, upon exposure, constitute an identifiable risk to human health or the natural environment; and,
consent, by means of a band council resolution or an authorizing document from a council of a band under self-government legislation, to the expenditure of the band's revenues, or the transfer of such other security deemed acceptable by the Minister, for the purposes of reimbursing the consolidated revenue fund for payments made pursuant to subsection 7(c) and section 10 below; and, where Section 89 of the Indian Act is applicable, the council of the band shall provide Her Majesty in Right of Canada with a waiver to the application of section 89 with respect to the band's assets other than land.

3. Additional conditions for the provision of Ministerial Loan Guarantees for housing loans to individuals

In the case of a loan to an individual Indian, the Minister may agree to provide a loan guarantee provided that the conditions set out in Section 2 above are met and where the council of a band has confirmed to the Minister, in writing:

that it is satisfied with the reputation and financial responsibility of the individual for whom it takes on the risk that, should a default occur, it would have to assume responsibilities under the terms of the loan agreement or the loan guarantee as set out in Section 12 below, and
that it has received written consent from the individual that upon default of the loan, they will:
1. where applicable, initiate the transfer of any certificate of possession or occupation, location ticket or other documentation held by the individual in respect of the property referred to in the loan application, to the council of the band, or
2. vacate that property, having been given reasonable notice by the council of the band.

4. Renewal or refinancing of loan

Where a borrower and an existing lender agree to renew an existing loan for another term or to refinance an existing loan, the loan guarantee will continue to apply provided the lender forwards written notification (currently, Guaranteed Loans Terms and Conditions Report) to the Minister, within 60 days after the loan has been renewed or refinanced, indicating:

the length of the new term
the interest rate for the new term of the loan (at a rate normally not to exceed the weekly posted closed, fixed interest rates available at the time of the renewal or refinancing)
that the outstanding principal balance under the loan is not being increased, and
that the total amortization period of the loan is not being increased

5. Transfer of loan and Ministerial Loan Guarantee

In the event that the borrower requests a transfer of the loan to a new lender during the original amortization period, the loan agreement and the loan guarantee will be assigned to the new lender, provided that the new lender will, within 60 days of receiving the loan, provide the Minister with written notification, indicating:

the name and address of the new lender, as herein defined
the ISC Guarantee Number (previously DIAND Guarantee Number)
the length of the new term
the interest rate for the new term of the loan (at a rate normally not to exceed the weekly posted closed, fixed interest rates available at the time of transfer)
that the outstanding principal balance under the loan is not being increased
that the total amortization period of the loan is not being increased, and
that the new lender assumes the obligations under the loan agreement and the loan guarantee

6. Assignment of loan/Ministerial Loan Guarantee

In the event a lender wishes to assign the loan to another lender, the loan agreement and the loan guarantee will be assigned to the new lender, provided that the new lender will, within 60 days of receiving the loan, provide the Minister with written notification, indicating:

the name and address of the new lender, as herein defined
the ISC Guarantee Number (previously DIAND Guarantee Number)
the outstanding principal balance under the loan being assigned to the new lender, and
that the new lender assumes the obligations under the loan agreement and the loan guarantee

7. Notification of loan default

In the event a borrower fails to make loan payments as stipulated in the loan agreement, the lender shall inform the Minister of the default situation, by submitting a notification of loan default (formerly arrears report) within 90 days of the borrower being in default in making payments under the loan, and every 30 days thereafter while the default continues
Where the Minister receives notice from the lender that a borrower is in default in making payments under the terms of the loan agreement, the Minister, in conjunction with the lender, shall cause every reasonable effort to be made to have the borrower make the payments required under the terms of the loan agreement
The Minister may, if he or she considers it desirable, make loan payments, including the arrears, to the lender, and take any other steps which may be deemed appropriate in the circumstances. Any loan payments made on behalf of the borrower will be recovered from the band

8. Claim to Minister for payment

Where the loan remains in default for 120 days from the date on which the lender gave the notice referred to in subsection 7(a) above, or for such other period of time as may be agreed upon by the Minister and the lender, the lender shall submit to the Minister a claim for payment of the unpaid balance of principal and accrued interest at the contract rate up to the date that the claim is paid by the Minister, due under the loan pursuant to the terms of the guarantee agreement. Any reasonable charges incurred by the lender in accordance with prudent lending practices to safeguard the interest of the lender, such as insurance premiums against fire and other insured risks or hazards, hydro, water/sewer, inspection or management fee, property protection, property maintenance, property repairs and expenses, heating, are recoverable
The claim referred to in subsection 8(a) shall be in a form prescribed by the Minister (Claim for Payment of On-Reserve Housing Guarantee) and, along with supporting documentation, shall confirm that:
1. in the case of an NHA-insured loan, the loan was made and administered in accordance with the loan agreement, the applicable provisions of, and regulations under the National Housing Act, the terms and conditions of the insurance, the guidelines, the guarantee agreement, and any special conditions relating to the loan; or
2. in the case of a non-NHA insured loan, the loan was made and administered in accordance with the loan agreement, the guarantee agreement, and prudent lending practices as outlined in section 9 below or as may be prescribed by the Minister as and when may be agreed to, from time to time, by the parties, and
3. the loan is in default and the unpaid balance of principal and accrued interest, plus other reasonable costs, are specified and included in the amount set out in the claim and are due under the terms of the guarantee agreement. The maximum period of accrued interest being paid shall not exceed 270 days unless agreed to, in advance and in writing, between the lender and the Minister

9. Lender performance

The Minister may, at their discretion, review the file to determine whether the lender is in compliance with the terms of the guarantee agreement and has followed prudent lending practices. If the lender has not followed prudent lending practices, the Minister may reduce the payment of the accrued interest or other reasonable costs included in the amount set out in the claim referred to in subsection 8(a).

Prudent lending practices to be used when approving a non-NHA insured loan for use on-reserve:

For loans taken out for housing purposes by the borrower, lenders are expected to manage the loan and any potential default as if it was a conventional loan made to a individual living off-reserve, and as follows:
1. verify the borrower's credit worthiness prior to lending the funds
2. in the case of an individual, verify their employment history, income levels and stability, assessing that there is sufficient revenue to repay the loan
3. confirm that the borrower's equity is available and in place at the time of lending the funds
4. should the loan go into default, the lender is expected to notify the borrower of the delinquent account, as soon as possible. The lender will also attempt to implement remedial actions to assist the borrower in meeting their obligation. This may include implementation of a special repayment plan which meets the borrower's circumstances and enables the repayment of the loan and arrears. In the event that the borrower refuses to agree to such a repayment plan or does not fulfill the conditions of such an agreed upon plan, the lender could then request payment through the Ministerial Guarantee; and
5. in every manner, the lender will make and administer a loan subject to a Ministerial Loan Guarantee with the same degree of diligence as would be expected for a non-guaranteed loan, except for matters particular to on-reserve such as recovery and disposal of the property
The lender will not lend more than the reasonable construction, acquisition or renovation cost of the project. The borrower shall provide an estimate of the construction, acquisition or renovation cost along with any required plans and construction information. The lender shall ensure the reasonableness of cost estimates through an appraisal or a comparison with similar projects in the community/area. All new construction and renovation work must meet or exceed national building code standards or equivalent standards
Lenders shall submit reports to Indigenous Services Canada as stipulated at the end of these terms and conditions to section 13

10. Payment on loan guarantees

The Minister shall pay to the lender the amount set out in the claim referred to in subsection 8(a), less any amount that may be determined in accordance with section 9, within 60 days from the receipt by the Minister of the claim or within such further period of time as may be agreed upon by the Minister and the lender.

11. Lender assignment to the Minister

Where a payment to the lender has been made pursuant to section 10, the lender shall give the Minister an absolute assignment of its rights under the loan and under any judgment obtained by the lender in respect to the loan, and its interest in any insurance policies issued under the terms of the loan.

12. Recovery of defaulted loans

Pursuant to the band council resolution or an authorizing document from a council of a band under self-government legislation referred to in subsection 2(c), and subsequent to a lender's claim being paid by the Minister, the Minister will recover amounts paid on defaulted loans:
1. by entering into repayment agreements with the council of a band, for the repayment by the council of a band of the amount paid by the Minister under section 10, plus interest from the date of payment by the Minister which interest may include an adjustment of the original contract interest rates, or
2. by taking necessary measures to reimburse the consolidated revenue fund from the security in instances where another form of security, such as trust money or land claim monies, has been used as collateral for the loan guarantee
In the case of loans made to individuals and pursuant to the written consent from the individual referred to in subsection 3(b) for recovery on defaulted loans, the Minister may, where applicable, apply Section 24 of the Indian Act whereby the Minister approves the transfer of the borrower's right to possession of the lands to the council of the band
Subsequent to the transfer of the certificate of possession or occupation, location ticket or other documentation held by the individual in respect of the property, from the individual to the council of the band, the council of the band will commence such proceedings as may be necessary against the borrower to take physical possession of the property related to the certificate of possession

13. Reporting requirements

The Minister may, in consultation with the lenders, prescribe such security forms and reporting requirements as may be required for the purpose of these terms and conditions. Lenders are required to submit the following reports to the appropriate ISC regional office as stipulated in the guarantee agreement:

Guaranteed Loans Terms and Conditions Report
1. Within 60 days following the renewal, refinancing, transfer or assignment of a loan, the existing lender and new lender must provide written notification to the Minister detailing the applicable information requested in sections 4, 5 and 6 of these terms and conditions
2. When a new loan is issued, the lender must provide written notification to the Minister, within 60 days of issuing a new guaranteed loan, providing the related information
Notification of loan default

In accordance with subsection 7(a), within 90 days of a loan default, the lender will provide a notification of loan default (formerly arrears report) to the Minister giving the status of the default situation, the outstanding arrears and principal. Such notification is to be provided every 30 days thereafter that the loan remains in default.
Claim for payment of on-reserve housing guarantee

In accordance with subsection 8(a), within 120 days of initial notification of loan default, the lender will submit to the Minister a claim for payment of the unpaid balance of principal, accrued interest, and any reasonable charges due under the loan pursuant to the terms of the loan guarantee.
Lender Confirmation of Actuals

This report is to be submitted by the lender for each guaranteed loan, identifying the outstanding balance, principal and interest at March 31 of any given year.

Furthermore, lenders shall provide reports which may be prescribed by the Minister as and when may be agreed to, from time to time, by the parties.

Footnotes

Footnote 1

Should there be any question regarding this requirement, the First Nation representative should discuss the matter with ISC.

Return to footnote 1 referrer

Footnote 2

The Family Homes on Reserves and Matrimonial Interests or Rights Act (FHRMIRA) establishes provisional federal rules which provide matrimonial real property rights and protections for residents living on reserves unless or until a First Nation develops and enacts its own laws. For example, in the absence of a First Nation matrimonial real property law, section 15(1) of the FHRMIRA establishes that a spouse or common-law partner who holds an interest or right in or to the "family home" (the structure where the spouses or common-law partners habitually reside) must not dispose of or encumber that interest or right during the conjugal relationship without the free and informed consent in writing of the other spouse or common-law partner whether or not that person is a First Nation member or an Indian. Thus, individual applications for MLGs are likely to involve additional matrimonial real property and FHRMIRA related considerations and requirements.

Return to footnote 2 referrer

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Date modified:: 2022-06-15