I just had the most interesting conversation with an account executive at a national wholesale Cooperative loan bank. I’m working on creating a relationship with them so that my company can sell loans directly to them. This is how mortgage banking works: we process and underwrite the loan, close it in our name, then sell the loan into the secondary market.
In this case, I’m looking to expand the options available to my clients for Co-Op loans. The company I spoke with today offers Co-Op loans with 5% downpayment, which is unheard of in the business.
In any event, the young woman doesn’t know me from Adam. When I finished introducing myself and the explaining the purpose of my call, she responded rather oddly.
“You know that we are NOT a Sub-Prime Lender? We don’t do those types of loans, so…” I cut her off and said, “Yes, I know that, that’s not the reason why I called you.” I repeated the purpose of my call. She still seemed a little guarded, but eventually explained the automatic reply. “I get calls all day from mortgage brokers who want to send me loans with low credit scores. I’m tired of explaining to them we don’t do those loans.”
We chatted some more, about my experience in the business and the kinds of customers I work with for Co-Ops and she warmed up. She then regaled me with horror stories of mortgage “professionals” who don’t know a Co-Op questionnaire—“…a what?”—from a snowtire. It was a great chat and reinforces what I tell my wife quite frequently: “Any idiot can get into the mortgage business.” So many mortgage “professionals” out there are driving people crazy: both the customers like you and the Lenders they try to do business with. Bottom line: these folks just don’t know what they are doing!
I’m happy to report that as I’m writing this I have just received the email with the registration information so that I can sell loans to her company.
As a rule for Co-Op’s this is what you should know:
1. Maximum LTV (Loan To Value) is 95%. That means you need 5% down. There is no 100% financing available.
2. There will be PMI (Private Mortgage Insurance) on the loan. You can’t break Co-Op loans into 80/15’s to avoid the PMI.
3. You must verify—I usually do it for my clients—with the Co-Op if they will accept financing with only 5% down. Many Co-Ops require at least 20% downpayment, regardless of what a Lender is willing to give.
4. When I work with you to qualify for a Co-Op I do the following:
-Qualify YOU: Income, Assets, Credit
-Qualify the Cooperative: I contact the management company directly and have them complete a standard questionnaire.
-Advise you on making an offer (when necessary I check with my staff appraiser to comp a property for my clients) both on price and how to negotiate
-All that other “mortgage stuff” necessary to approve and close your loan once you have a real deal in contract
Co-Op loans can be difficult to deal with and many good, experienced mortgage pro’s don’t want to touch them. Too much work involved and too great a chance the loan doesn’t close. The loan might not close through no fault of the Lender, the Co-Op board might reject the buyer, or worse (and more commonly) the Cooperative corporation may not be qualified.