Co-op Share Loan Financing Proactive Boards Can Make Load Approval Easier

The economic boom of the last few years has been a remarkable period of prosperity for the real estate industry in general, and co-ops in particular. Shareholders no longer need to feel trapped; the time is now for co-op boards to tackle the share loan financing issue.

The Liquidity Factor

While the speculative boom of the late 1980s saw an uptick in the prices of moderately priced co-ops, these buildings were often more deeply affected by the recession than any other property type. The lack of liquidity–the inability of purchasers to obtain financing–may well have been the critical factor that made the recession more debilitating for co-ops–a factor which clearly exacerbated the normal effects of recession on many of them.

During the recession, two major factors accounted for the lack of liquidity. First, there was the heightening negative perception of co-ops by lenders. Second, there was a dearth of expertise within the lending community to carry out the highly specialized lending and servicing requirements from origination through default.

It has become very important for most co-ops converted during the 80’s to demonstrate that they have been able to bounce back with the improving economy. Now that the lack of liquidity has receded as an issue for many co-ops, there is a window of opportunity to address and to make information available on share loan financing alternatives. It is precisely during a stabilizing time period that co-ops are able to deal from a position of strength in focusing on the importance of viable share loan financing. For major co-op lenders such as CitiMortgage and their agency counterparts at FannieMae, this is a critical issue because of its implications for the long-term viability of co-ops.


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