POLICY TO ENCOURAGE PREPAYMENT OF CHURCH EXTENSION FUND (C.E.F.) LOANS

INTRODUCTION

During the past year, there have been more requests from parishes for C.E.F. loans than could be granted because of shortage of funds in the C.E.F. The following suggested policy change is an attempt to increase the amount of loan money available by offering an incentive to parishes to pay more than the required amount of principal and interest in a given year. In addition to this incentive, prepayments result in a reduction in the total interest paid on the loan and makes the parish “mortgage free” sooner.

NEW POLICY

Parish income, from any source, used for prepayment of C.E.F. loans before the end of 2007, will be exempt from 50% of the apportionment due on the prepayment. The amount of the prepayment in any one year must be, at least, the smaller of $20,000 or 20% of the outstanding principal.

EXAMPLE

Outstanding Loan Principal: $125,000

Regular Semi-Annual Payments per loan agreement: $5,000

Prepayment (say 25% of Principal): $31,250

Effect for parish:

Ø Saving of 50% of the apportionment due on $31,250

i.e. apportionment rate is approx. 20%

therefore, 20% of $31,250 = $6,250

and exemption is 50% of $6,250 = $3,125 (savings)

Ø The parish will also save on the total interest payable on the loan as a natural consequence of prepaying