U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan today announced a $621 million deal to refinance a previous mortgage at Co-op City, a large cooperative housing community that is home to more than 57,000 residents in the Bronx, New York.
HUD and Wells Fargo Bank N.A. closed on the loan that will preserve long-term affordable housing for these families and significantly lower annual interest payments for the building’s owner over the next 35 years. The new mortgage is backed by the Federal Housing Administration’s (FHA) General Insurance and Special Risk Insurance (GI/SRI) Fund.
By guaranteeing the mortgage, FHA’s Section 223(f) Program allows this 35-year loan to be financed with Government National Mortgage Association (GNMA) Mortgage-Backed Securities. This eligibility for purchase in the secondary mortgage market improves the availability of loan funds and permits more favorable interest rates. As a consequence, FHA and GNMA’s security is helping Riverbay Corporation, the owner of Co-Op City, to save an estimated $400 million in interest payments over the life of the mortgage.
“This is about preserving affordable housing for the next generation of families living and working in one of the nation’s highest cost rental markets,” said Donovan. “Working closely with the State of New York and New York City, we’re making certain that working families have a decent and affordable place to call home while saving private owners of affordable housing significant money that they can reinvest back into their properties.”
Located in the Baychester section of the Bronx, Co-op City is situated on 330 acres located along the west bank of the Hutchinson River. In addition to 15,372 units in 35 residential structures, the site includes three shopping centers, a 25-acre educational park, eight parking garages, three elementary schools, two middle schools, a high school, a weather station, 14 gymnasiums, two swimming pools, 15 churches, six nursery schools and day care centers, four basketball courts, five baseball diamonds, numerous restaurants, a power plant and a multiplex movie theater.
The cooperative is organized under the State of New York’s Mitchell Lama Program which was designed to provide affordable housing to the State’s low- and middle- income residents through low-interest loans and real estate tax exemptions. Co-op City will remain in the Mitchell Lama program for the 35-year term of the FHA-insured loan and will continue to provide affordable housing to its residents.
The State of New York Mortgage Agency (SONYMA) will provide mortgage insurance and New York City Housing Development Corporation (HDC) will provide a Guaranty for the first $70 million or 11.25 percent of the loan ($55 million and $15 million coverage of the loan, respectively). This risk-sharing arrangement reduces FHA’s risk and makes mortgage financing even more affordable for the cooperative’s owner.
Since 2004, over $310 million in renovations have been completed at Co-op City. This FHA-insured loan will be used to refinance the existing mortgage and provide capital for an additional $26 million in repairs. A portion of these repairs were made possible by J-51 tax abatements, which are administered by the City of New York.