Eligible Properties 

• Must typically be managed by a property management firm with experience managing similar properties

• The cooperative organization must charge enough maintenance fees to achieve a balanced budget

• The cooperative must maintain a reserve balance of at least 10% of the property's annual maintenance fees

• In general. the sponsor cannot own more than 40% of the property's units

Advantages

• Competitive interest rates

• Most loans are non-recourse

• Supplemental loans are allowed

• 30- to 180-day rate locks available after commitment (extended rate locks also available)

• Loans are fully assumable with lender approval

Disadvantages

• Requires replacement reserves ($250 per unit minimum)

• Typically requires 85% physical occupancy and 70% economic occupancy 90 days before closing

• Requires third-party reports including an Appraisal, Property Condition Assessment, and a Phase I Environmental Assessment

• Requires a $12,500 application deposit and a $3,000 processing fee

Case Study: Renovating a Coop Apartment Building in Pittsburgh

In the vibrant city of Pittsburgh, Pennsylvania, let's look at a situation involving Emily, a stakeholder in a cooperative apartment building. This 35-unit property has been a staple in the community for over three decades, with residents collectively owning and managing the building. Emily's ownership includes 12 of these units.

After years of successful operation, the cooperative decided it was time for some significant property upgrades. They planned to modernize the building's communal areas, upgrade unit interiors, and improve the building's energy efficiency. However, this ambitious project required substantial funding.

Having a traditional loan structure wasn't an option due to the property's cooperative nature. The group was also interested in securing a loan that wouldn't become a financial burden for any single member. Emily, backed by the other residents, sought out a financing solution that would suit their unique needs.

After researching various options, Emily approached a Fannie Mae-approved lender about their Multifamily Cooperative Apartment Loan program. This seemed like an ideal fit, with the loan's structure allowing for the cooperative nature of the property.

Emily applied for a loan amount of $2.5 million. Given the value of the property at approximately $4.5 million, this represented an LTV ratio of approximately 56%, just above Fannie Mae's maximum of 55% for this type of loan. Fortunately, due to the property's strong financials and the cooperative's excellent management history, the lender agreed to work with them.

Emily's solid credit history, combined with the cooperative's strong financials and the property's excellent condition, made them an attractive candidate for Fannie Mae's loan. The application was approved, providing the cooperative with the funds necessary for their renovation plans. This successful refinance under the Fannie Mae Cooperative Apartment Loan program became a significant achievement for the cooperative and provided a solid platform for their property improvement ambitions.

This is a fictional case study provided for illustrative purposes.

In this article:

1. Sample Fannie Mae Terms for Multifamily Cooperative Apartment Loans in 2024
2. Eligible Properties  
3. Advantages
4. Disadvantages
5. Case Study: Renovating a Coop Apartment Building in Pittsburgh
6. Get Financing