New York COOP and CONDO Mortgage Loans

If you are buying a co-op in New York City, it's important to use a mortgage lender well versed in cooperative apt. loans. Many lenders do not offer loans for co-ops, while other lenders may not be knowledgeable about coop apartment mortgages. We can help you find a mortgage lender who can present you with a number of options for financing your coop.

More about COOPS:

In New York City, another significant factor in the rise of co-op and condominium ownership is strict and complicated rent control laws that have made many landlords want to get out of the rental property market. In New York, cooperatives are scattered throughout New York City itself, Westchester County, New York (which borders the city to the north) and towns in New Jersey that are immediately across the Hudson River from Manhattan, such as Fort Lee, Edgewater, or Weehawken.

Unlike in other parts of the world, most of these housing co-ops did not develop as a result of social engineering. Apartment buildings and multiple-family housing simply make up a more significant share of the housing stock in the New York City area than in most other US cities, and the cooperative form of ownership has dominated over the condominium form. Reasons suggested to explain why cooperatives are relatively more common than condominiums in the

New York City area are:

1. Inspired by Abraham Kazan, Cooperatives appeared at least as far back as the 1920s while a legal basis for condominium form of ownership was not available in New York State until 1964. Passage of the Condominium Act then opened a wave of construction of condominium buildings.
2. The cooperative form can be advantageous as a building mortgage can be carried by the cooperative corporation, leaving less financing to be obtained by each co-op owner. Under condominium ownership only the separate condo owners provide financing. Particularly when interest rates are high, a conversion sponsor may find unit buyers more easily under the cooperative arrangement as buyers will have less financing to arrange on their own; the apparent purchase price of a unit in a cooperative building holding an underlying mortgage is lower than a condo purchase. Cooperative unit buyers may not accurately weigh their share of the building's mortgage.
3. Also, later in a building's life after conversion, major new investments required to repair or replace building systems can be raised by a new central mortgage in a cooperative, while in a condominium funds could only be raised by onerous assessments being required of each individual unit owner. However, New York's condominium law was amended in 1997 to allow condominium associations to borrow money.
4. The 1974 creation and then subsequent influence on policy by the Urban Homesteading Assistance Board, a housing advocacy group, which enabled the conversion of over 1,600 foreclosed, city-held rentals into limited-equity, resident-controlled co-ops.
5. A co-op building's board can exercise its own business discretion to impose restrictions on shareholders, and reject prospective purchasers without explanation, as long as the board does not violate federal and state housing or civil rights laws.

Most of the housing cooperatives in the Greater New York area were converted to that status during the 1980s; generally they were large buildings built between the 1920s and 1950s that a single landlord or corporation owned and rented out that became unprofitable as rental properties. To encourage individual ownership of units, the initial buyers of units (buying from the owner of the entire building) did not have to be approved by a board. Also, the rental tenants living in the building at the time of the conversion were usually given an option to buy at a discount. If the tenants were rent controlled, the law usually protects them by allowing them to stay as renters and the unit may not be occupied by a purchaser until said tenant dies or moves out. Many of these buildings, especially in Manhattan, are actually quite luxurious and exclusive; many celebrities live in them and some famous people are even rejected by the board. In the 1990s and 2000s some rental buildings in the Chicago, Washington, DC, and Miami-Fort Lauderdale-West Palm Beach areas went through a similar conversion process, though not to the degree of New York.

Many of the cooperatives originally built as co-ops were sponsored by trade unions, such as the Amalgamated Clothing Workers of America. One of the largest projects was Cooperative Village in Lower East Side of Manhattan. The United Housing Foundation was set up in 1951 and built the Co-op City in Bronx, and were built by architect Herman Jessor. One of the first subsidized, fixed-value cooperatives was Morningside Gardens in Manhattan's Morningside Heights.

Another dynamic also contributed to the large number of cooperatives established in the 1980s and 1990s in New York City – in this case by low- and moderate-income tenant groups.

In the 1970s, many New York City private landlords were struggling to maintain their aging properties in the face of high interest rates, redlining, white flight and rising fuel costs.

The period also saw some landlord-induced arson to obtain insurance proceeds and widespread non-payment of real estate taxes – over 20% of multi-family residential properties were in arrears in the mid-1970s.

In 1977, the city passed Local Law #45, which allowed the city to begin foreclosure proceedings after just one year of non-payment of taxes, not three, resulting in the takeover of thousands of buildings, many of them occupied, by the city of New York through a legal action known as an in rem foreclosure. In September 1978, the city’s housing agency, the New York City Department of Housing Preservation and Development (HPD), created a series of new housing programs designed to give building residents and community groups control and eventual ownership of in rem buildings.

The Urban Homesteading Assistance Board (UHAB), established in 1974, began to assist residents of these buildings to manage, rehabilitate and acquire their buildings, and form limited-equity housing co-operatives. Working with the city’s housing agency, its existing loan programs and the power to dispose of abandoned property to non-profit organizations, as well as the state laws governing the establishment of co-operatives, UHAB was able to provide low-income people with the tools – seed money, legal advice, architectural plans, bookkeeping training – to build and run limited-equity housing co-operatives. Through a long-standing contract with the city to provide training and technical assistance to residents of buildings in the Tenant Interim Lease (TIL) Program, UHAB has worked with more than 1,600 coops, preserving over 30,000 units of affordable housing.

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