17.1 Introduction and Background

A. The following provides processing instructions for refinancing Cooperative Housing Projects under Section 207 pursuant to Section 223(f). This applies solely to refinancing a project and does not apply to projects that include an acquisition. Please note that proposed conversions or projects undergoing conversion to Cooperatives are not eligible for refinancing under this chapter. Projects that were organized as a Cooperative must use the guidance in this chapter in order to refinance. If a project is to be refinanced pursuant to Chapter 3, Section 3.7, Section 207/223(f) Refinance or Acquisition, then the Cooperative must first be dissolved.

B. Cooperative ownership is popular in certain parts of the country, especially for low-to-moderateincome occupants. HUD already insures traditionally processed mortgage loans to facilitate the construction and substantial rehabilitation of Cooperative Housing projects under Section 213. Facilitating the refinancing of a Cooperative under Section 223(f) will further the Department’s mission by assisting eligible Cooperative projects to obtain refinancing to make necessary repairs and/or consolidate more expensive outstanding debt, thereby serving to preserve the affordable housing stock. Refinancing the existing underlying mortgage is considered to be a better alternative than expending a Cooperative’s reserve fund, which would have a negative impact on its financial stability and would help to avoid the need for a special assessment, which could harm low-to-moderate income occupants, especially those on a fixed income.