Fannie Mae Multifamily Cooperative Apartment Loans
A co-op loan underwrites a corporation, not a rent roll. Fannie runs two coverage tests at once, 1.00x on actual operations and 1.55x on market rental operations, and caps LTV at 55%.
Lending Against a Corporation, Not a Rent Roll
A housing cooperative is a corporation. Residents own shares, and those shares carry the right to occupy a unit under a proprietary lease. Nobody pays rent. Shareholders pay maintenance fees, and those fees exist to cover the building's costs rather than to produce a profit.
That single structural fact reshapes the entire loan. Fannie Mae's cooperative properties execution underwrites the corporation's budget and its market rental potential in parallel, and the numbers it publishes look nothing like a conventional apartment loan.
| Term | Five to 30 years |
|---|---|
| Amortization | Up to 30 years |
| Rate | Fixed rate only |
| Maximum LTV | 55%, on a market rental basis |
| Minimum DSCR | 1.00x on actual cooperative operations and 1.55x on cooperative market rental operations |
| Operating reserve | Must equal or exceed 10% of annual maintenance fees |
| Maintenance fees | Must be sufficient to achieve a balanced budget |
| Property condition | Overall rating of two or better |
| Concentration | Ownership above 40% by one sponsor or investor requires additional due diligence |
| Prepayment | Voluntary prepayment upon payment of yield maintenance |
| Assumption | Typically not assumable by another entity |
| Supplemental financing | Available |
| Recourse | Non-recourse available, with standard carve-outs for bad acts such as fraud and bankruptcy |
Terms confirmed against the Fannie Mae Cooperative Properties term sheet at multifamily.fanniemae.com/financing-options/cooperative-properties, fetched July 31, 2026.
Why Are There Two Coverage Ratios?
Because Fannie is measuring two different things. The 1.00x test asks whether the co-op's actual budget covers its actual debt service, which is the right question for an entity designed to break even. The 1.55x test asks what the building would cover if it were operated as a rental property at market rents.
The second test is the lender's real protection. If the co-op fails, the asset that secures the loan is an apartment building, and 1.55x on market rents plus a 55% LTV ceiling is a large equity cushion. That is also why the LTV is calculated on a market rental basis rather than on the aggregate value of the shares.
Is 55% Really the Ceiling?
Yes, and it is the number that surprises every sponsor arriving from conventional multifamily, where 80% is routine. A co-op is not an income property. It has no rent growth to underwrite, its board can vote against fee increases, and the collateral only converts to a rental building through a slow legal process.
The compensating benefit is that co-op loans are typically small relative to the building's value, so the debt service per unit is modest and the maintenance fee stays competitive against neighboring rentals.
What Fannie Wants From the Board
Three things beyond the numbers, and boards routinely underestimate all of them.
An operating reserve of at least 10% of annual maintenance fees. Not a capital reserve, an operating reserve. If your annual fees total $2,400,000, you need $240,000 sitting available.
A balanced budget. Maintenance fees have to be sufficient to cover the building's costs. A co-op that has held fees flat for six years while deferring the roof will not clear this, and fixing it means a fee increase the board has to pass before closing.
Property management with co-op experience. Fannie requires the management company to have experience with cooperative properties of similar size and market. A strong conventional apartment manager does not satisfy this.
What About Sponsor Concentration?
Ownership above 40% by a single sponsor or investor triggers additional due diligence. That situation is common in older buildings where the original sponsor never sold out, and it is not disqualifying. It does mean Fannie will look hard at whether the building is genuinely resident-controlled or is effectively a rental property wearing a co-op structure.
Are Limited Equity Co-ops Eligible?
Yes. Limited equity cooperatives serving low- and moderate-income families are explicitly eligible, and escrows are typically required for them. If the building also carries recorded rent or income restrictions, price it against Fannie's affordable housing preservation execution, which may offer better terms.
What Should the Board Prepare?
Three years of audited financials, the current budget with the fee schedule, the reserve balances broken into operating and capital, the offering plan and proprietary lease, a shareholder list showing concentration, and the building's capital plan. Standard third-party reports are required, including appraisal, Phase I environmental site assessment, and property condition assessment.
Send us the financials and the fee schedule. We will tell you what the building supports at 55% and 1.55x before the board spends money on reports.
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