Limited Equity Cooperative Properties

Requirements

In addition to the rest of this Chapter, you must ensure that Limited Equity Cooperative PropertiesLimited Equity Cooperative PropertiesCooperative Organization that has income, rent, or equity build-up restriction (not including any transfer taxes), which may be dictated by a governmental entity, a third-party capital provider, or its own organizational documents. meet the following:

• Cooperative Maintenance FeesCooperative Maintenance FeesPeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property. :  You must ensure that:
  • monthly Cooperative Maintenance FeesCooperative Maintenance FeesPeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property. are not more than 90% of comparable unit market rents; and
  • if there are restrictions from the HUDHUDU.S. Department of Housing and Urban Development or others, then both HUDHUDU.S. Department of Housing and Urban Development and the Limited Equity Cooperative PropertyLimited Equity Cooperative PropertyCooperative Organization that has income, rent, or equity build-up restriction (not including any transfer taxes), which may be dictated by a governmental entity, a third-party capital provider, or its own organizational documents. ’s Board of Directors or managers must approve all Cooperative Maintenance FeeCooperative Maintenance FeePeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property. increases before the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. .
• Cooperative Operating ReserveCooperative Operating ReserveLiquid funds, including loan proceeds, controlled by the Cooperative Organization to cover operating and capital expenses, and comprised of unrestricted cash, less the sum of accounts payable. :  You must require a reserve equal to at least 6 months of P&IP&IPrincipal and interest  payments on the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .
• HUDHUDU.S. Department of Housing and Urban Development IRPIRPInterest Reduction Payment Loan:  You must require an IRPIRPInterest Reduction Payment reserve equal to 2 months of IRPIRPInterest Reduction Payment payments for the life of the IRPIRPInterest Reduction Payment Loan.  The funds in the IRPIRPInterest Reduction Payment reserve may only be used to compensate for late IRPIRPInterest Reduction Payment payments.
• Actual Cooperative Property NCF:  You must calculate Actual Cooperative Property NCF per Part III, Chapter 8: Cooperative Properties, Section 804.03: Actual Cooperative Property NCF, but the following exceptions apply:
  • Economic vacancy:  Use the greater of
    • 5%, or
    • the highest level experienced by the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). during the last 3 years.
  • Actual operating expenses:  Equal to 103% of the previous year's operating expenses.
  • Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. :  Use the greater of
    • the scheduled Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. per unit as determined by a PCAPCAAssessment of the Property's physical condition and historical operation. , or
    • $250 per unit per year.
• Unit Turnover:  Total unit turnover must not be greater than 20%.
• Escrows:  You must require monthly deposits for real estate taxes, insurance, and the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. .
• Cooperative Property SponsorCooperative Property SponsorPerson who invested in, converted, or is converting a residential rental apartment building to a Cooperative Property and continues to own unsold shares in the Cooperative Organization. :  There must be no SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). -owned units.
• PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management experience:  The PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management firm must have Limited Equity Cooperative PropertyLimited Equity Cooperative PropertyCooperative Organization that has income, rent, or equity build-up restriction (not including any transfer taxes), which may be dictated by a governmental entity, a third-party capital provider, or its own organizational documents. management experience.  If HUDHUDU.S. Department of Housing and Urban Development restrictions are in-place, the firm must also have a history of successfully complying with HUDHUDU.S. Department of Housing and Urban Development restrictions and reporting requirements.