source:
  type: guide
  id: fhlmc-5705.5
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.5 — Cooperative
    Share Loan eligibility
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.5 — Cooperative
    Share Loan eligibility.
  coverage_tier: operative
obligations:
- id: fhlmc-5705.5-full
  canonical_id: fhlmc-5705.5-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.5 — Cooperative
    Share Loan eligibility
  type: do
  tags:
  - regulator-direct
  - fhlmc
  - freddie-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.5 — Cooperative
      Share Loan eligibility
    source_class: fhlmc-guide
    source_url: https://guide.freddiemac.com/ci-guide
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-05-23T00:27:40Z'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '5705.5: Cooperative Share Loan eligibility (03/05/25) This section
      contains requirements related to: ■ Occupancy requirement for Cooperative Unit
      ■ Loan-to-value (LTV) ratios for Cooperative Share Loans ■ Borrower qualification
      ■ Maximum Pro Rata Share ■ Subordinate financing ■ Cooperative Share Loans subject
      to stock transfer fee (“flip tax”) ■ Cooperative Share Loan lien priority ■
      Cooperative Corporation’s approval ■ Cooperative Project that is not a Cooperative
      Housing Corporation All Cooperative Share Loans must comply with the following
      eligibility requirements: (a) Occupancy requirement for Cooperative Unit Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-22
      The Shareholder must occupy the Cooperative Unit as a Primary Residence or second
      home. The Shareholder must have a right to occupy the Cooperative Unit pursuant
      to a Proprietary Lease for a period of time that extends at least to the maturity
      date of the Cooperative Share Loan. (b) Loan-to-value (LTV) ratios for Cooperative
      Share Loans The LTV ratio is determined by dividing the original UPB of the
      Cooperative Share Loan by the lower of: ■ The sale price; or ■ The appraised
      value of the Cooperative Interest Note: The Cooperative Unit’s Pro Rata Share
      of the Cooperative Corporation’s debt is not included in the calculation of
      the LTV ratio. (c) Borrower qualification If the Cooperative Unit Maintenance
      Fees include unit utility charge, the Maintenance Fees may be reduced by the
      documented amount of unit utility charges that are included, prior to calculating:
      ■ Housing expense-to-income ratio; and ■ Debt-to-income ratio (d) Maximum Pro
      Rata Share The Pro Rata Share related to the Cooperative Unit must not exceed
      35% of the sum of the Cooperative Unit’s Pro Rata Share plus the lower of the
      (i) sales price or (ii) appraised value of the Cooperative Interest. However,
      the Pro Rata Share may be increased to 40% when there are significant and documented
      compensating factors to support the use of the higher percentage, such as a
      Cooperative Project in strong financial condition with significant cash reserves
      and good cash flow. If the Cooperative Corporation has obtained a line of credit,
      the Seller must include the full available amount of the line of credit as part
      of the Cooperative Corporation’s debt (i.e., Blanket Mortgage and, if applicable,
      second mortgage) when calculating the maximum Pro Rata Share. The following
      table provides an example of how to calculate the Pro Rata Share: Freddie Mac
      Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-23
      Calculating Pro Rata Share Variable Example value Blanket Mortgage balance $4,000,000
      Subordinate financing balance $1,000,000 Cooperative Shares issued and outstanding
      10,000 Subject unit’s Cooperative Shares 40 Sales price/appraised value of the
      Cooperative Interest (not including the Pro Rata Share of the Cooperative Corporation’s
      debt) $100,000 Pro Rata Cooperative Share of the Cooperative Corporation’s debt
      $20,000 Example: 1. Cooperative Corporation’s total debt = [Blanket Mortgage
      balance] plus [Subordinate financing balance] [4,000,000] plus [1,000,000] =
      $5,000,000 2. Pro rata debt by share = [Cooperative Corporation’s total debt]
      divided by [Cooperative Shares issued and outstanding] [5,000,000] divided by
      [10,000] = $500 3. Pro Rata Cooperative Share of the Cooperative Corporation’s
      debt = [Pro rata debt by share] times [Subject unit’s Cooperative Shares] [500]
      times [40] = $20,000 4. Pro rata % of value/price = [pro rata $ amount] divided
      by [pro rata $ amount + appraised value] [$20,000] divided by [$20,000 + $100,000]
      = 16.66% (e) Subordinate financing Subordinate financing is permitted for Cooperative
      Units that are Primary Residences. (f) Cooperative Share Loans subject to stock
      transfer fee (“flip tax”) Cooperative Share Loans that are subject to the payment
      of a flip tax are permitted so long as the Cooperative Project Documents permit
      the imposition of a flip tax and provide for one of the following: Freddie Mac
      Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-24
      ■ The Seller is exempt from paying the flip tax if the Seller acquires the Cooperative
      Unit as a result of a foreclosure, in a transfer by the Shareholder in lieu
      of foreclosure, or any other transfer of the Shareholder’s interest in the Cooperative
      Unit in full or partial satisfaction of the Shareholder’s obligations under
      the Cooperative Share Loan ■ The flip tax is payable when the sales price exceeds
      the existing Shareholder’s purchase price (i.e., based on property appreciation)
      and then is assessed only on the amount of the appreciation in value (flip tax
      is profit-based); or ■ The amount of the flip tax is less than or equal to 5%
      of the value of the Cooperative Interest (calculated as the lesser of appraised
      value or sales price of the Cooperative Interest) and is a flat fee, fee per
      share, percentage of the appraised value or sales price of the Cooperative Interest,
      or dollar amount per room (g) Cooperative Share Loan lien priority A Cooperative
      Share Loan must be a lien that has priority over all other claims or liens against
      the Shareholder’s Cooperative Shares in the Cooperative Project. Exceptions:
      ■ The lien may be subordinated to the Cooperative Corporation’s lien against
      the Cooperative Shares for unpaid assessments that represent the Pro Rata Share
      of the Cooperative Corporation’s payments for the Blanket Mortgage and/or the
      current year’s real estate taxes ■ For Cooperative Projects located in New York,
      a Cooperative Share Loan may additionally be subordinated to unpaid Maintenance
      Fees and assessments accrued after the origination date of the Cooperative Share
      Loan and collection expenses The Seller must also ensure that all the following
      requirements are met: 1. The Shareholder has the right to encumber his or her
      Cooperative Interest in the Cooperative Corporation 2. The Shareholder’s right
      to occupy the Cooperative Unit pursuant to the Proprietary Lease extends through
      the Maturity Date of the Cooperative Share Loan either by its term or through
      renewals 3. The Cooperative Share Loan is secured by a pledge or trust of the
      Cooperative Shares, the assignment of interest in the Proprietary Lease and
      any other documents appropriate under individual State or local laws, ordinances
      and practices 4. The Cooperative Share Loan is a valid, enforceable first lien
      on the Shareholder’s Cooperative Interest in the Cooperative Corporation Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-25
      5. All UCC-1 and renewal statements as applicable are current and valid. In
      States where Cooperative Units are considered real property, perfection of the
      lien must comply with applicable State or local laws. 6. The Seller has obtained
      the following: ■ An assignment of the Proprietary Lease for each Cooperative
      Share Loan sold to Freddie Mac ■ The stock power or other equivalent document
      authorizing the Seller/Servicer to transfer Cooperative Shares in the event
      of a default; and ■ Valid financing statements and assignments of financing
      statements (executed and filed if necessary) to perfect Freddie Mac’s security
      interest under the Uniform Commercial Code of the State in which the Cooperative
      Unit is located (h) Cooperative Corporation’s approval The Seller represents
      and warrants that if the purchaser’s right to a Cooperative Share or occupancy
      of a Cooperative Unit is subject to any right of the Cooperative Corporation
      to give approval, then the Seller is required to furnish evidence to clearly
      show that such approval has been given before the Cooperative Share Loan is
      eligible for Freddie Mac purchase or securitization (i) Cooperative Project
      that is not a Cooperative Housing Corporation For a Cooperative Share Loan to
      be eligible for Freddie Mac purchase or securitization, the Cooperative Project
      must meet Internal Revenue Service (IRS) requirements (Section 216) for a Cooperative
      Housing Corporation in effect as of the Delivery Date. Shareholders in a Cooperative
      Housing Corporation can claim their Pro Rata Share of Mortgage interest and
      real-property taxes as income tax deductions. 5705.6: Legal requirements for
      New Cooperative Projects (03/05/25) This section contains requirements related
      to: ■ Compliance with law ■ Right of first refusal ■ Amendments to Cooperative
      Documents Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of
      01/26/26 Page 5705-26 ■ Rights of Cooperative Shareholders and Sellers ■ Cooperative
      membership requirements ■ Cooperative Corporation’s lien position ■ Assignment
      of Shareholder’s Cooperative Interest ■ Cooperative Corporation responsibilities
      and lender rights Except for Freddie Mac-owned “no cash-out” refinance Cooperative
      Share Loans delivered in accordance with the requirements in Section 5705.7
      for Exempt from Review, when a Seller delivers a Cooperative Share Loan secured
      by a Cooperative Interest in a New Cooperative Project to Freddie Mac, the Seller
      represents and warrants all of the following: (a) Compliance with law The Cooperative
      Corporation is a validly formed Entity authorized to carry out its independent
      purposes and is compliant with all applicable State and local laws and ordinances.
      (b) Right of first refusal If the Cooperative Corporation has retained the right
      to provide a substitute purchaser, the right to have the first option to purchase
      a Cooperative Unit, or the right to approve a purchaser, those rights will not:
      ■ Be exercised in a way that could be interpreted as discrimination; or ■ Impair
      the marketability of the Cooperative Units in the Cooperative Project (c) Amendments
      to Cooperative Project Documents The Shareholders have the right to amend the
      Cooperative Project Documents. (d) Rights of Cooperative Shareholders and Sellers
      The Cooperative Corporation is legally bound to notify the Seller of any material
      adverse changes including, but not limited to, the following: 1. Threatened
      or actual condemnation, eminent domain proceeding or acquisition or any actual
      loss, whether covered by insurance, that affects any portion of the Cooperative
      Project or Cooperative Unit 2. The inability of Shareholders to deduct their
      Pro Rata Share of Mortgage interest from their taxable income per the Internal
      Revenue Code (i.e., the Cooperative Corporation no Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-27 longer qualifies
      as a Cooperative Housing Corporation pursuant to Section 216 of the Internal
      Revenue Code) 3. Any 30-day Delinquency by the Cooperative Corporation in payments
      due under any underlying Blanket Mortgage, whether the payments are for real
      estate taxes, assessments or charges imposed by a government entity or public
      utility or made under the terms of any ground lease 4. Any lapse, cancelation
      or material modification of any insurance or fidelity insurance coverage maintained
      by the Cooperative Project 5. Any 90-day Delinquency by the Shareholder that
      is related to the payment of his or her Maintenance Fees or other assessments;
      and 6. Any proposed action that requires the consent of a specified percentage
      of eligible lenders of Cooperative Share Loans (e) Cooperative membership requirements
      The Cooperative Project Documents must meet all the following requirements:
      1. Require that the sale or transfer of Cooperative Shares, stock or membership
      certificates in the Cooperative Corporation comply with federal and State security
      disclosure laws 2. Require the Shareholders to own Shares, stock or a membership
      certificate and permit the Cooperative Shares, stock or membership certificates
      to be pledged and registered in the Cooperative Corporation 3. Give the Shareholder
      a right to occupy the Cooperative Unit for a period that extends at least to
      the maturity date of the Cooperative Share Loan in accordance with the terms
      and conditions of the Proprietary Lease 4. Prohibit the Cooperative Corporation
      from imposing unreasonable limitations on the Shareholder’s ability to sell,
      transfer or convey his or her Cooperative Share (f) Cooperative Corporation’s
      lien position The Cooperative Corporation has a good and marketable title to
      the Cooperative Project land, Cooperative Units and Common Elements, and the
      Cooperative Project is free and clear of liens and encumbrances except the underlying
      Blanket Mortgage. (g) Assignment of Shareholder’s Cooperative Interest The Cooperative
      Project Documents and the Recognition Agreement must not permit the Cooperative
      Corporation to restrict the sale, conveyance or transfer of a Cooperative Unit
      owned by a lender, its successors or assigns or place any limits on the assignment
      of the Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26
      Page 5705-28 Proprietary Lease to the lender, its successors or assigns. The
      Cooperative Project Documents and the Recognition Agreement must also permit
      the lender, its successors or assigns to: ■ Transfer the Cooperative Shares
      and Proprietary Lease if the Shareholder defaults on the Cooperative Share Loan;
      and ■ Select a non-corporate designee for any transfer of the Cooperative Shares
      and Proprietary Lease in the event of a foreclosure if the Cooperative Project
      Documents require that a Shareholder be a natural person (h) Cooperative Corporation
      responsibilities and lender rights The Cooperative Project Documents or Recognition
      Agreement must include provisions to recognize specific rights of the lender
      that finances a Cooperative Share Loan and the Cooperative Corporation’s responsibilities
      to that lender, its successors or assigns. The Cooperative Project Documents
      must provide for at least the following corporation responsibilities and lender
      rights: (i) Corporation responsibilities The Cooperative Project Documents,
      Recognition Agreement or other legal documents include, but are not limited
      to, the following responsibilities of the Cooperative Corporation: (i) In the
      event of Shareholder’s default on the Cooperative Share Loan and at the request
      of the lender of the Cooperative Share Loan, the Cooperative Corporation must:
      ■ Evict the Shareholder; and ■ Terminate the Shareholder’s Proprietary Lease
      at the lender’s expense (ii) In the event of the Shareholder’s default on the
      Cooperative Share Loan, the Cooperative Corporation must also issue Cooperative
      Share(s) and the Proprietary Lease in the name of the lender or its designee
      (ii) Lender rights The Cooperative Project Documents or Recognition Agreement
      must grant the lender of a Cooperative Share Loan the right to: (i) Cure the
      Shareholder’s default in payment of Maintenance Fees or other assessments (ii)
      Review and approve the following actions: Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-29 ■ Any surrender, cancelation,
      modification, assignment or pledge of any documents evidencing ownership, possession
      and use of the Shareholder’s Cooperative Unit ■ Any further or additional pledge
      or Mortgage of any documents evidencing ownership, possession and use of the
      Cooperative Unit ■ Any action to change the size, existence or form of ownership
      of the Cooperative Project'
  judgment: false
