We have a standing 80% limit, but folks rarely reach 80% as the income to debt ratios are applied.

On the other hand, we do not allow any financing or new financing within five years of admissions.

This prevents folks from “qualifying” and then immediately changing their financial picture with a new debt burden.

We had a recent occurrence wherein a buyer was approved at admissions to then appear at closing with a new loan package. The monthly costs in the new loan package were higher and our co-op attorney declined to proceed with the closing.

In the last 90 days, we also had buyers come before the admissions committee and seek a waiver. In effect, the buyers “didn’t realize” there was no financing and or refinancing within five years and wanted to obtain a “larger” loan to cover refurbishing the apartment.

We declined the waiver, e.g.: no exceptions, but approved the buyers.

Refinancing goes through the attorney and transfer agent. When a refinancing or credit line is requested, shareholders need to fulfill the same as an admissions package by way of financial information and credit report. If the financial starts looking strained, we may ask for an escrow of four months maintenance /18-months if they wish to proceed with their refinance.

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Ted makes some valuable comments.

refusing a refi/etc. within a certain amount of time after the initial closing is a great option. This eliminates the people who buy all cash, look great, are approved on the basis of a cash sale, then refinance because they have to pay back the relative that they borrowed all the cash from to begin with.

Also, to maintain 80% which is becoming more common now (as opposed to the traditional 90%) permits the cooperative a little more leverage in an unstable market. this figure should remain constant however at all times, as Ted said, not exceptions.

the paragraph below, as example, is excerpted directly from one of my purchase applications:

** Added Requirements If Apartment is Financed A copy of the commitment letter, loan application and three signed Recognition Agreements (Aztec form) which have been executed by the bank and prospective purchaser(s) are required if there is bank financing; additionally, copies of all documentation submitted to the bank in obtaining the loan must be submitted; no other form of Recognition Agreement will be accepted. The maximum financing allowed by the Board is 75% of the total purchase price. Purchases made with “all cash” will hold an 18 month refinance restriction.

I usually insert something to this effect in the second page of the purchase application, along with the other items that we want them to pre-agree to; this form gets signed and returned with he pkge, so there is no confusion later.

~AR