Hi Carmen,

No, we no longer have a sponsor. We have 4 rental units left which are owned by the co-op and we sell them when the renters leave. No, I thought of the idea. The funds are transferred into the Capital Fund each month. Our NCB loan is self-amortizing and will be paid off in nine years (read no mortgage). The rate is 6.27% however the penalties to break the mortgage are too high to even consider a refinance (I was not on the Board when the mortgage was signed). Yes, I work in finance assisting to manage a large full funded pension plan. We also have a CPA as a treasurer. The permanent reserve is not used for operating expenses but only for capital projects.

You seem to have an agenda, your questions are accusatory and you seem to harbor a suspicion (or prejudice) against how co-ops operate. Not all co-ops are bad, Carmen.

Tell me, would you rather pay a $3,000 surprise assessment all at once or have a chance to pay it monthly where you can budget it? I know what the answer is for me - I would rather budget it.

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If your bank is NCB (National Cooperative Bank), you are doomed. NCB is a usurious bank for losers, that is, those coops who cannot qualify for regular bank's rates, which should be between 2.5 and 3%, top. What your are paying, 6.27% is extremely high, considering that the bank borrows its funds from the Federal Reserve for less than 1%. If your loan is compounded monthly, probably the APR (annual percentage rate) is much higher than 6.27%. As for the effective percentage rate, which applies to the duration of the loan (in your case, apparently 10 years), is much much higher than that, in the 60's and 70' percentile.
Can you reveal, in a private email, the total amount of the loan (including initiation fees)? With this data, plus the total number of months, I could calculate the EFFECTIVE APR. You can also add the amount of monthly payments multiplied by the total number of months for the duration of the loan (if ten years, then 120 months) and you will be horrified to find out what the service of the debt costs your coop.
Your asertion that the loan will "self-pay in 9 years" is probable false, and a deception.
I advise you to study USURY. You can find several articles on the subject in Wikkipedia. Also in the books by Michael Hudson,especially THE BUBBLE and BEYOND:FICTITIOUS CAPITAL, DEBT DEFLATION AND GLOBAL CRISIS.
My "agenda", as you called, is to expose the gigantic fraud by deception that the Coop system constists off, and the horrendous financial exploitation that they are subjecting the shareholders class (more than a million New Yorkers), thus creating the next financial bubble, which will explode in the nex 5 years or so. My husband and I are committed to this cause, and will dedicate the last years of our life and all of our savings and assets to this endeavor, in an effort to preserve property rights the American citizens, and reduce the homelessness caused by unaffordable housing in New York City. May the gods of justice protect our efforts and lead us to a great victory.
Carmen Bejarano & Gerard Grosof - Concernedcitizens4coopreform@outlook.com- P. O. Box 568 -Bronx 10463

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I think they often go fairly blindly with advice from managing agents, etc. and do not really sit and do deep research. It is very probable a majority of co-ops are paying way to much in various budget line-itmes. New Years Resolution: Co-op boards - do your research!

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Steve and Carl, I am glads your coops are running smooth and I hope you if you are on the board you are complying with your fugidity duty to all shareholders. Unfortunatly, most coops are a fraud bigger than ENRON. They advertized a apt home for sale and they sold as a very expensive membership to a club where we are abused, intimidated, victims of usury charges, etc. But the worst is that we have the only that is not protected in bankrutcy court, neither is any institution protecting our home like HAMP protects other people's home. We can be evicted in housing court for not being able to pay the usurary legal and other fees charge by the board. They do not have to give any explanation. They created the law and elected the politicians and judges to protect them not our home. Do not be naive. Check COOPABUSE.COM to read about abuses and lack of laws to protect our home. Register to make changes and to fight together. Email me and I can give you a summary of all the abuses and corruptions and how in American coop home owner are second class citizens. My email is ROSA.NAZAR@GMAIL.COM

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Carmen wrote:
>NCB is a usurious bank for losers, that is, those coops who cannot qualify
>for regular bank's rates, which should be between 2.5 and 3%, top.
>What your are paying, 6.27% is extremely high, considering that the
>bank borrows its funds from the Federal Reserve for less than 1%.

Carmen, I have no idea where you're getting those rates, but they're sheer fantasy. The average rate for a 30-year *individual* mortgage is currently around 4.5%. As corporations, co-ops don't qualify for that rate and typically pay more interest. Even the 10-year US Treasury note is just above 3% (as of this writing), so if you know a place where you could get a 10-year loan for 2.5%, please let the US Treasury know, as they would be most interested.

Banks do NOT get long-term loans for "less than 1%." That's a ridiculous fabrication promulgated by Elizabeth Warren, for whom I had a lot of respect before she made that outlandish statement. The 0.75% rate quoted by Warren is the overnight repo rate that applies to secured overnight loans. In other words, the bank gives the Fed $100,000 in US Treasuries to borrow $100,000 overnight to make their cash position meet requirements. The bank repurchases the USTs the following day for $100,000 plus 0.75% annualized interest. That situation is obviously inapplicable to any long-term loan that is not secured by liquid financial instruments.

And why in the world would you think that Steve's statement that his co-op's loan will self-amortize in nine years is "probably false"? Self-amortizing loans are perfectly well-understood and widely used. Why would you think that Steve's bank could violate the terms of their loan agreement and make his co-op keep paying money after their loan is 100% paid off? That's just crazy. Furthermore, the effective APR and total cost of the loan are always presented in conspicuous fashion in the closing documents for the loan, as required by law.

Finally, I really like Steve's idea about paying money into the reserve fund each month via capital assessment. That leaves his co-op well prepared to weather the expense of a major repair without a sudden large assessment. We did something similar a few years ago, but in reverse. We needed to overhaul our elevator, but the cost left our reserve fund lower than desirable. So we immediately instituted a long-term assessment to pay ourselves back the money we had borrowed from the reserve. We explained to the shareholders what we were doing. People seemed to understand and no one complained. And everyone was happy with an elevator that worked reliably for the first time in years!

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Thank you for your informative and clear response, Carl. At times these Board Talk comments mirror what happens in co-ops. One or two board members make up data and disseminate misleading information, leading to unnecessary dissension among shareholders. One can only hope that the majority of board members will take their roles seriously and perform competently.

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