The Evolution of the End Loan The Lending Industry's Relationship with Shareholders

Remember the early 1980s? Reagan was president, the national economy was strong, property values

were skyrocketing and co-op sponsors were converting multi-unit residential buildings in the New York area faster than you could say offering plan. If you wanted to purchase a co-op apartment in Manhattan, all you had to do was walk into a savings bankthe few commercial banks that are now making cooperative end loans didn't enter the picture until recentlyand apply for a loan. Of course, back then you weren't applying for a co-op loan, because co-op loans didn't exist. In those days, you applied for a personal or consumer loan. And, in most cases (assuming you were creditworthy) you got it.

Then, as the decade neared its close, dastardly events began to unfold. Unable to sustain their unprecedented inflated levels, real estate values plummeted. And the wave of co-op conversion activity was replaced by defaulting sponsors and shareholders. Lending institutions, increasingly saddled with non-performing loans, began to realize that they had better start looking more closely at the cooperative landscape. For a timewhile some lenders pulled out of the cooperative market altogether and others analyzed it to become more familiar with the intricacies of the cooperative lifestyle and its attendant lending risksit seemed almost impossible to get a loan to buy a cooperative unit.

But, the economy is traditionally cyclical and a snapshot of the city's cooperative market today reveals stabilized pricing, an increasing number of owner residents, a marked decline in the roles of sponsors, and a more savvy lending community which is now ready, willing and able to make informed loans to prospective co-op shareholders.

A Complicated Undertaking

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