With interest rates heading lower once again, now may be the ideal time to start
hunting for a new underlying mortgage. But don't go off half-cocked. Board members who prepare well before entering the mortgage jungle always bag the best deal. Unfortunately, as some boards have discovered, there are no short-cuts or alternate routes. But there are seven essential steps to any co-op refinancing which, if followed, will guarantee success.
Step One: Get the Facts
Be an expert on your building. Have enough information at your fingertips to capture, and keep, the attention of every loan officer. Before making any calls, assemble and review all of your important records. Then create several sets of the following for distribution to interested lenders: a basic fact sheet with the co-op's address, legal description and number of units plus a breakdown of units by size (studios, one-bedrooms, two-bedrooms, etc.); a description of your co-op's physical plant (i.e., heating system and fuel used, number of floors and elevators, condition of roof and windows and any other relevant data); a complete offering plan; all amendments, especially those containing your asbestos report and sponsor disclosures (if applicable); a current maintenance roll showing each apartment, its monthly maintenance charge and any arrears; a list of sponsor, investor and sublet apartments with rents and lease expiration dates; a description of your co-op's sublet policy; audited financial statements for the most recent three years; a list of all apartment sales during the most recent three years; recent statements for all bank accounts and investments; information about your current loan (lender, monthly payment, interest rate, due date, prepayment provisions and so on); an explanation of any tax issues like J-51 benefits or pending certiorari reductions; and any other important information about your cooperative.
Ownership information is crucial to all lenders and most have minimum criteria which your building must meet. If a sponsor or investor still owns any units, most lenders will have two main concerns. The first is whether rent exceeds maintenance for those units. A positive cash flow will enhance your chances while a negative one might cause problems. But even if sponsor cash flow is negative, you are not doomed; a few lenders are not frightened by such situations.