Introduction
This topic contains information on loan eligibility for co-op share loans, including:
Co-op share loans finance the purchase or refinancing of the borrower’s ownership
interest in a co-op housing corporation and accompanying occupancy rights in a residential
unit in a co-op project owned by the co-op housing corporation. The property that
secures Fannie Mae’s first lien is the borrower’s ownership interest in a co-op housing
corporation that is represented by stock or shares in the co-op housing corporation
(or by a membership certificate or other contractual agreement evidencing ownership)
and an assignment of the borrower’s rights under a proprietary lease or occupancy
agreement with the co-op housing corporation.
Fannie Mae will purchase co-op share loans provided borrowers occupy the property
as a principal residence or second home. Investment properties are prohibited. Fannie
Mae does not purchase or securitize co-op share loans that are subject to subordinate
financing except for high LTV refinance transactions.
For the applicable credit score, minimum reserve requirements, and maximum debt-to-income
ratio requirements, see the
Eligibility Matrix.
The method for calculating the LTV ratio for a co-op share loan is based on whether
the borrower assumes their pro rata share of the blanket mortgage or does not. In
those markets where the borrower assumes their pro rata share of the blanket mortgage, the LTV ratio is determined by dividing the original
loan amount by the lower of
-
the sales price for the co-op unit (unencumbered by the unit’s pro rata share of the co-op project’s blanket mortgage(s)), or
-
the appraised value of the co-op stock or shares and the related occupancy rights
(unencumbered by the unit’s pro rata share of the project’s blanket mortgage(s)).
In those markets where the borrower does not assume their pro rata share of the blanket mortgage, then the LTV ratio is determined by dividing
the original loan amount by the lower of
-
the sales price for the co-op unit, or
-
the appraised value of the co-op stock or shares and the related occupancy rights.
Co-op share loans secured by units in co-op projects that require the payment of a
“flip tax” are eligible for delivery as long as the co-op project’s legal documents
permit the imposition of a flip tax and provide for one of the following:
-
the lender is exempt from paying the flip tax if the lender acquires the co-op unit
in foreclosure, in a transfer by the borrower in lieu of foreclosure, or any other
transfer of the borrower’s interest in the co-op unit in full or partial satisfaction
of the borrower’s obligations under the co-op share loan; or
-
the flip tax is payable when the sales price of the co-op unit exceeds the existing
unit owner’s purchase price (based on property appreciation) and then is assessed
only on the amount of the appreciation in value (this flip tax is profit-based).
If the flip tax does not meet one of these requirements and is due whether or not
the sales price exceeds the existing unit owner’s purchase price, then it may still
be eligible as long as the amount of the flip tax is less than or equal to 5% of the
value of the property (calculated as the lesser of appraised value or sales price)
and it is calculated in one of the following ways:
Fannie Mae does not publish multistate standard co-op share loan instruments because
of the variations in state laws pertaining to the co-op form of ownership. If a lender
elects to use the Fannie Mae fixed-rate note forms for co-op share loans, the lender
represents and warrants that the notes comply with all applicable laws and regulations
for co-op share loans in and are enforceable and negotiable under the laws of the
applicable jurisdiction.
Fannie Mae publishes state-specific documentation requirements for states in which
Fannie Mae purchases co-op share loans on Fannie Mae's website. Those requirements describe documents that must be delivered to the document custodian
(for example, co-op Recognition Agreement, assignments to Fannie Mae, and evidence
of share ownership) and documents that the lender must retain in the individual loan
file.
Co-op share loans may be delivered as whole loans in standard commitments. Co-op share
loans pooled in MBS may be eligible for delivery as long as they meet the requirements
in
The table below provides references to recently issued Announcements that are related
to this topic.