This is playing out across the city, smaller co-ops with large underlying mortgages. In each situation the mortgage may be granted due to a particular circumstance, such as need to for capital improvements, large footprint etc.
What are the details of the mortgage – 30, 40, 50 or interest only amortization schedule? What is the rate? What were the funds used for?
What I have found in 15 years of involvement with various co-ops is there is impression that maintenance can always be raised so the mortgage should not be an issue. The sponsor mindset and many but not all shareholders are defer as much as possible – keep the maintenance payments small, pay the mortgage down just enough to roll into the next refinance. Eventually the co-op will be in precarious situation of a large underlying mortgage with a higher rate and payment amount.
Evaluate your next moves. Is refinance period coming up, has maintenance been raised enough to cover the mortgage and are you contributing routinely to the reserve fund?
I applaud the co-ops that have taken steps to pay down mortgages and maintain finances in a conservative manner.
For those with a large sponsor presence – such as my building – we have an uphill battle to the responsible thing for all shareholders even if it costs a little bit more.

By the way –we are having this very debate right now, as our mortgage is due in December, 30 vs 40 is all the rage.

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One reason I can see that the sponsor wants to take an additional $350K of equity out of the building is to increase the capital reserve fund. If Billy Joe heard somewhere that the sponsor was doing this to make the units more attractive to buyers, having a healthy reserve fund is an important factor. Co-op mortgage lenders look closely at building finances before committing. An anemic capital reserve fund makes it much more difficult for a perspective buyer to get a mortgage.

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