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!