CREATIVE MORTGAGE REFINANCING

THE BANK MORTGAGE

The Garrison Apartments, Harlem, Manhattan, 29 units

THE NEED The building needed a great deal of work: façades, windows, electrical upgrades, new laundry, sidewalk, back yard, courtyard, and the roof.

AMOUNT RAISED AND LOAN DETAILS The co-op obtained a $1.6 million mortgage, plus half-a-million credit line, at 4¾ percent interest over 10 years.

LENDER AND/OR MORTGAGE BROKER  The lender was NCB; the broker was Patrick Niland, principal of the First Funding Group.

Often described as the first African-American co-op, this building was built in 1910 and converted in 1929; it is six stories high, originally with four apartments per floor (Adam Clayton Powell Sr. was part of the original co-op.) Constructed as a grand residence, the building saw its apartments broken up over the years into smaller units. Nonetheless, apartments were still selling at prices ranging from $450,000 to over $800,000 when First Funding's Patrick Niland was hired.

He worked with board president Dakota Tippings to develop a financing plan and attended several shareholder meetings at which the five-member board met with the shareholders and discussed different financing options. The meetings, says Niland, "were contentious, with lots of different opinions. There were people who had lived in the building for a long, long time, many of whom were on a fixed income, and they were very vocal. They didn't want to see their maintenance going up, and really didn't see the need for a lot of the work that was proposed. Then there were people who were more recent purchasers, who had paid a lot for their units and were disturbed at the deterioration of the building, and were also focused on maintaining and protecting their investment. They were not interested in doing things in installments, in less than high-quality, top-notch work. There was a lot of infighting over what should be done. It took a great deal of orchestrating on the part of the president to get all these people to agree."

Niland and the treasurer worked closely together; she was "extraordinarily helpful. Between the president and the treasurer, they were able to finesse an agreement," the broker observes. One important factor: because they didn't have an existing loan in place, they would have had the additional problem of the city's recording tax — $60,000 in this instance — if they hadn't gone with NCB, which is exempt from that tax.

THE INTEREST-ONLY MORTGAGE

Northridge Co-op Section 3, Jackson Heights, 400 units

THE NEED Extensive Local Law 11 work (new roofs, new parapets), elevator repairs required.

AMOUNT RAISED AND LOAN DETAILS $10 million, interest-only loan for 10-year term, 30-year amortization (six years ago) at 5.76 percent interest; took out second $2 million mortgage for 2-year term to expire with the first mortgage

LENDER AND/OR MORTGAGE BROKER Wells Fargo; Richard Cohen, Saturn Realty, mortgage broker

When Delorme saw how much work was needed in this co-op, the board solicited proposals from different banks. Wells Fargo offered a 10-year, interest-only loan, amortized over 30 years. Says Delorme: "My theory is that you'll always have a mortgage because you'll always have work to do. The days of paying it off are gone. At the end of the 10 years, they just refinance again. If you amortize over 30 years, the dent into your mortgage payment is almost nothing, so why give the bank anything [beyond interest]? Do interest-only."

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