Does anybody know if co-ops that have non-amortizing mortgages on the co-op as a whole are now in danger? What is the average size of a mortgage on the co-op relative to the co-op's total maintenance/mortgage revenue? Do co-ops have the right to demand additional payments from members of the co-op to pay down the co-op's mortgage if the banks refuse to refinance?

I'm no expert on non-amortizing mortgages, but I'd think a building would only refinance if it finds a better mortgage. If the banks refused then the building would just keep its current mortgage.

As for the impact of a mortgage on the building's profits, you'd have to consult the finanicals and teh terms of the mortgage. A mortgage is a balance sheet item, and servicing the mortgage (principal & interest) payments would be expenses, not revenues appearing on the income statement. The building wouldn't earn revenue from a mortgage.

If your building's is able to meet its current mortgage obligations, today's current situation shouldn't affect anything. Not sure what would happen if it needs to find a new loan, you'd have to check the coop bi-laws.

Other factors would pull a building into bankruptcy, such as multiple shareholders defaulting on their mortgages or not paying maintenance fees. This is why coops are (or should be) so strict w reviewing potential tenants.

I think also, like any other loan, if the owner can't meet his or her obligation the co-op board will put a lien on the property and sell it at market. The building will just get another tenant who can pay the maintenance fee. The former owner will take the loss.

pgj267, the question was about the building's underlying/wraparound mortgage, not the mortgage on a particular unit's shares.

pj267, are you implying that the coop would have to put the entire building up for sale if it defaults on its mortgage?

I wonder if this has ever happened...anyone out there know?

ethanandwendy, I'm not any sort of expert either but I saw this a couple of times in the 1990s. It was very difficult for the co-op to refinance the mortgage but since banks are not in the business of running tenant owned co-op buildings, they were ultimately refinanced. Having said this, interest rates were ugly plus there were hefty fees. Let's say the banks had the buildings over a barrel and they took full advantage of the situation.

End result, higher maintenance fees to reflect higher financing costs which can make the apts less attractive. A special assessment may also be levied to recover operating funds.

why is it that these buildings have non-amortizing mortgages? I always thought that was a bit silly.

jrd, agreed. Unless someone (or a coop corp) has really bad financials, why would anyone take a non-amortizing mtg?? seems dumb. IMO, part of the beauty of a mtg is that it amortizes. Might as well take an unsecured loan rather than take a non-amortizing mtg.

Are such coops in trouble? maybe. Scrutinize their financials