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Coop Term Sheet

Cooperative Housing Mortgage Insurance Criteria


Eligible Lenders

Financial institutions as defined under the Public Authorities Law section 2426 including banks, trust companies, savings banks, savings and loan associations, pension funds and certain New York State public benefit corporations such as the New York State Housing Finance Agency and the New York City Housing Development Corporation (together the "Lender").

New Lenders must submit an "Approval of Mortgagee Application" and receive State of New York Mortgage Agency Mortgage Insurance Fund ("the MIF") approval before submitting an application for mortgage insurance.

The MIF also reserves the right to approve the mortgage loan servicers for such Lenders, as well as any other third party contractors, including but not limited to appraisers, engineers, environmental or market consultants.

Eligible Projects

New construction, rehabilitation or refinance of cooperative properties. For existing properties, at least 40% of the units shall have been sold (i.e., no longer held by the sponsor) and at least 75% of sold units shall be owner-occupied. The latter may be waived by the MIF in extenuating circumstances. Projects with less than ten units will be considered on a case-by-case basis.

Eligible Borrower

The cooperative board members must have a demonstrated track record in successfully managing the property or must hire a real estate management firm with experience in managing cooperative properties.

Borrowers will be required to submit:

  1. the Offering Plan and all amendments;
  2. audited financial statements for the preceding three fiscal years and any other documentation as may be required by the MIF.

The MIF will carefully review the financial statements and record of an existing sponsor, if any, and its role in the operation of the property. The MIF discourages the sponsor's control of the cooperative's Board.

Eligible Loans

First lien mortgage loans that provide permanent financing for eligible properties. Loans in excess of $20,000,000 will be considered on a case-by-case basis.

Rehabilitation Requirement

Twenty percent (20%) of the insured loan amount must cover the cost of new construction or rehabilitation as determined by the MIF.

Refinance Requirement

Cooperatives that were established on or before June 15, 1994 may refinance their loans and are exempt from the aforementioned rehabilitation requirement. However, such financing should not otherwise be available and such financing should promote or accommodate the sale of shares for individual units, thereby facilitating home ownership opportunities. Evidence of recent unit sales within  the project may be also required.

Affordability Requirement

The MIF insures loans for affordable cooperative projects located in all areas. Affordability is based on area median income and maintenance charges.

Amount of Mortgage Insurance:

Insurance Coverage

Insurance coverage for a refinance loan is up to 50% of the loan amount. The following is the percentage insurance coverage for lenders of a rehabilitation loan:

  • Public Benefit Corporations - Up to 100% of the loan amount
  • Public Pension Funds - Up to 100% of the loan amount
  • Conventional Lenders - Up to 75% of the loan amount

Mortgage Loan Underwriting Criteria:

Loan Amount

For conventional cooperative projects, the maximum loan to value is 60%. In addition, the average pro rata share of the underlying mortgage per individual unit should not exceed 67% of the selling price per unit.

For limited equity cooperative projects having no share / end loans, the maximum loan to value ratio shall be determined on a case-by-case basis. The loan amount is also subject to the income to expense ratio requirement set forth below.

Income to Expense Ratio

The MIF-required income-to-expense ratio is calculated by dividing effective gross income by total projected operating expenses, including debt service and mortgage insurance premium.

The minimum income to expense ratio 1.00:1.00. However, the MIF reserves the right to underwrite a project at a 1.05:1.00 when a high percentage of units are sublet to renters.

No vacancy and / or collection loss is required for sold units. A 5% vacancy and / or collection loss is required for sublet and unsold units. The vacancy and / or collection loss for non-residential income is the greater of 10% or market.

Loan Terms

The maximum loan term is 30 years. Loans must also be self-amortizing. The loan may be structured with a balloon payment; however, the balloon payment will not be insured by the MIF.

Debt service should be accelerated to take into account the expiration of any real estate tax abatement or exemption.

Subordinate Financing Subordinate mortgages are permitted; however, such loans must be fully subordinated in terms of collateral and remedies and subject to a subordination agreement approved by the MIF. Debt service on such loans will be included in the income to expense ratio unless it is based on cash flow.

Equity Requirement

There is no minimum cash equity requirement.

Developer Fee

Not permitted.

Building Reserve Requirement

A minimum annual deposit to a reserve for replacement of 1.5% of effective gross income is required. A greater amount may be required based on a physical needs assessment. An up-front deposit to the replacement reserve may also be required for projects needing rehabilitation work within a few years which is not covered by the insured loan.

Third Party Reports

Lenders must provide the following independent third party reports from contractors acceptable to the MIF:

  1. an appraisal,
  2. a Phase I environmental study,
  3. a construction engineering review, including the adequacy of the construction budget for projects requiring rehabilitation.

Appraisal Report

Valuation shall be based on the project's Gross Sellout Value. For Projects having less than sixty percent of units sold, the appraisal report shall also include the following two income/expense valuation scenarios:

Income Approach to value based on current maintenance for sold units plus actual rents for unsold units and expenses as if rental property (i.e., maintenance and repairs for individual units factored in as landlord's responsibility).

Income Approach to value based on current market rents for sold units plus actual rents for unsold units and expenses as if rental property (i.e., maintenance and repairs for individual units factored in as landlord's responsibility).

Cooperative Share Loans

Cooperative properties where the MIF has insured the underlying mortgage loan are eligible for end loan mortgage insurance through MIF-approved, single-family lenders. Call Michael Esposito, Assistant Vice President and Chief underwriter of Single Family Mortgage Insurance, at (212) 688-4000, extension 707 for details.

Special Conditions

Maintenance decrease requires consent of the MIF.
Lender to receive collateral assignment of cooperative corporation-held shares (where not previously pledged).

Where aggregate rental income on sponsor-owned units is less than sponsor's aggregate maintenance obligation, the sponsor will be required to fund a gap escrow account in the amount of two times the annual shortfall. In addition, the lender may be required to receive collateral assignment of sponsor-held shares.

Conditions Precedent to Permanent Mortgage Insurance:

Required Documentation

The following is a partial list of documentation in a form satisfactory to the MIF which must be received prior to mortgage insurance being declared effective:

A Final Certificate of Occupancy or a Temporary Certificate of Occupancy and a Certificate of Substantial Completion for rehabilitation loans. Where rehabilitation is incomplete, a pre-funded punch list of 150% of all costs required to complete the project may be required.

A Certification of the MIF's Maintenance Achievement Level, evidenced by executed sales or contracts. The Maintenance Achievement Level means that the project has the applicable income-to expense ratio.

Evidence that real estate tax abatements or exemptions, if any, are in place for the property.

Evidence of compliance with zoning and all applicable building codes.

Certification that there has been no adverse changes in the borrower's financial status.

Satisfaction of any project-specific requirements contained in the MIF Commitment to Insure and the Certificate of Insurance

Special Conditions.

SONYMA MIF Mortgage Insurance Costs and Fees:

Application Fee

0.10% of the insured loan amount, but not less than $250.

Initial Premium

0.50% payable at closing.

Annual Premiums

0.50% of the outstanding principal balance payable in advance.

Processing Fees

None for a standard project. However, for a complex project, processing fees may be charged to include, but not be limited to, the cost of third party reports commissioned by the MIF and special counsel.


This term sheet is a summary and does not purport to be a complete description of the MIF's criteria for mortgage insurance. The criteria described herein are subject to change without notice.

For detailed information and application packages, please contact:

Sheldon Goldman
Vice President
641 Lexington Avenue
New York, New York 10022
Telephone: (212) 688-4000, ext. 706
Fax: (212) 872-0706

Last updated: 11/14/2008 6:13:36 PM