Mortgage Monday

The criterion for “top” is not based on rate or fees but on the opportunity to obtain financing for a cooperative mortgage with less of a nightmare experience.  Of course rates are important, and more than likely Wells Fargo will have the best rate in the bunch. Fees and costs are also important but we have to assume that most lenders have the same fee structure and that they will vary by a few hundred dollars either way.

Remember, a cooperative unit differs from a condominium in that the ownership is of shares of stock rather than real property. The mortgage lien is on the shares of stock in the corporation which owns the building. In essence the mortgage lender is loaning the money to the individual but using the strength of the corporation as the security. The lender must assess the risk of both in order to qualify the borrower.

This gets tricky when a bank has to review the financials, reserves and strength and stability of the building corporation. Some lenders are better at it than others and have the flexibility to approve more loans. Many national and regional banks prefer not to lend in coops, others will lend but do not have the experience and wherewithal to understand all of the idiosyncrasies of coop loans. This is how the list below was made.

Note that this is of the opinion of the author and not supported by any government or industry standard. This is a list from experience.   

1.    NCB

2.    Wells Fargo

3.    Citi Mortgage

4.    Bank of America

5.    Never mind- I can only truly think of these four-

National Cooperative Bank (NCB) makes it their primary business to lend in coops since it was formed to do just that. They are nationwide, know their stuff, and make many exceptions to approve buildings that other lenders will not. The drawback of NCB is that the rates are high and they push adjustable rate mortgages to reduce their long term risk. Wells Fargo typically has the best fixed rate terms and does many coop mortgages. Wells might be a bit of a stickler when approving the building and paper the borrower to death, but if one has the time and the stomach, Wells will provide the lowest rate. Citi, not one of this author’s favorites, would be next in line for rate and has the same underwriting standards as Wells Fargo. Bank of America might be the largest bank out there, but they have the worst customer service and outrageous fees. I would call this lender the bank of last resort. I could not properly come up with a number five, but there are the local lenders and credit unions they may be shopped by the borrower prior to knocking on the door of the big boys.

Wherever you wind up going to obtain your coop loan, the key is experience and understanding of the mortgage loan officer and the bank. Ask how many coop loans the loan officer does in a year, ask if your building is on the “approved building” list for the banks and also inquire as to how long the process is and if the rate is the same for a coop loan.

One last word, make sure your attorney has great experience with cooperative transactions as it is very different from an ordinary real estate transaction.