source:
  type: guide
  id: fnma-sel-b4-2.3-02
  authority: Fannie Mae Selling Guide B4-2.3-02 — Co-op Project Eligibility
  description: Fannie Mae Selling Guide B4-2.3-02 — Co-op Project Eligibility.
  coverage_tier: operative
obligations:
- id: fnma-sel-b4-2.3-02-full
  canonical_id: fnma-sel-b4-2.3-02-full
  section: Fannie Mae Selling Guide B4-2.3-02 — Co-op Project Eligibility
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B4-2.3-02 — Co-op Project Eligibility
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B4-2.3-02, Co-op Project Eligibility (05/06/2026) Introduction
      This topic contains information on co-op project eligibility, including: Co-op
      Project Eligibility Overview Request for Co-op Project Information Eligibility
      Requirements for Co-op Projects Eligibility Requirements for Condop Projects
      Co-op Project Eligibility Overview Fannie Mae purchases or securitizes co-op
      share loans for units in co-op projects from lenders specially approved to sell
      such loans to Fannie Mae. Lenders must determine the acceptability of a co-op
      project, unless the project is a newly converted non-gut rehabilitation of a
      co-op project. Such projects must be submitted via the Project Eligibility Review
      Service (PERS) to Fannie Mae for review. The lack of available co-op project
      data and the inconsistent reporting of co-op project information can be a barrier
      to obtaining aﬀordable ﬁnancing for co-op housing. Lenders are responsible for
      determining the most appropriate method for obtaining information about co-op
      projects and the accuracy of the information they obtain. For additional information,
      see: A2-1-01, Contractual Obligations for Sellers/Servicers, B4-2.3-04, Loan
      Eligibility for Co-op Share Loans, B4-2.2-06, Project Eligibility Review Service
      (PERS), Published May 6, 2026 686 B4-2.1-01, General Information on Project
      Standards. Request for Co-op Project Information The Request for Cooperative
      Project Information ( Form 1074) includes the project information that lenders,
      investors, and mortgage insurers may use in their evaluation of the eligibility
      of a co-op project, and provides an eﬃcient means of collecting basic project
      information from co-op project management agents, boards of directors, or sponsors/developers.
      Eligibility Requirements for Co-op Projects The table below provides project
      eligibility requirements for co-op projects. ✓ Full Review Eligibility Requirements
      – For New and Established Co-op Projects For a co-op share loan to be eligible
      for sale, the co-op project in which the secured unit is located must qualify
      as a cooperative housing corporation under Section 216 of the Internal Revenue
      Service Code. The lender’s loan or project approval ﬁle must contain evidence
      regarding the project’s compliance with Section 216. Note: If the co-op project
      does not meet Section 216 requirements, Fannie Mae will not purchase a co-op
      share loan from within the project. The co-op housing project must • be designed
      principally for residential use; • consist of two or more units; and • be located
      in an area that has a demonstrated market acceptance for the co-op form of ownership,
      as reﬂected by the availability of similar comparable sales for co-op units
      in the market area. The project may be owned in fee simple or be a leasehold
      estate (subject to a ground lease). Note: For additional information applicable
      to co-op projects subject to a ground lease, see B2-3-03, Special Property Eligibility
      and Underwriting Considerations: Leasehold Estates B2-3-03, Special Property
      Eligibility and Underwriting Considerations: Leasehold Estates Published May
      6, 2026 687 ✓ Full Review Eligibility Requirements – For New and Established
      Co-op Projects The lender is responsible for determining that the co-op cooperation
      holds title to the property of the co-op project, including the dwelling units.
      A type of co-op project that does not meet these requirements is one in which
      the borrower, not the co-op corporation, owns their dwelling unit in the project.
      Co-op share loans in these projects are commonly referred to as “land-home”
      or “land-lease” co-op projects and require special approval for delivery to
      Fannie Mae. The co-op corporation must have good and marketable title to the
      property, including the dwelling units and amenities. The project premises must
      be free and clear of liens and encumbrances in accordance with B7-2-05, Title
      Exceptions and Impediments. The blanket project mortgage may be a market-rate
      FHA-insured mortgage or a conventional mortgage. The blanket mortgage for the
      project may be a balloon mortgage. The remaining term may not be less than three
      months, provided reﬁnance terms have been secured, or the loan will be paid
      oﬀ before maturity. If the balloon mortgage incorporates an adjustable-rate
      feature, and the remaining term is less than three years but not less than six
      months, the current interest rate may not be subject to an interest rate adjustment
      prior to the maturity date. Fannie Mae purchases or securitizes co-op share
      loans regardless of whether Fannie Mae owns the blanket mortgage. However, if
      Fannie Mae owns an interest in the blanket co-op project mortgage, the maximum
      mortgage amount available to the borrower must be reduced by the portion of
      the unpaid principal balance of the blanket mortgage(s) that is attributable
      to the subject unit’s ownership interest. Fannie Mae will not purchase or securitize
      co-op share loans if the co-op project is an ineligible project type, regardless
      of the characteristics of the share loan. See B4-2.1-03, Ineligible Projects.
      The project must not be a manufactured housing project. The project must meet
      Fannie Mae’s insurance requirements, as stated in Subpart B7, Insurance. Co-op
      projects may be newly constructed or conversions of existing buildings. Published
      May 6, 2026 688 ✓ Full Review Eligibility Requirements – For New and Established
      Co-op Projects All newly converted non-gut rehabilitation of co-op share projects
      must be approved through the PERS process. A newly converted non-gut rehabilitation
      co-op project is deﬁned as follows: • a project for which the building has been
      recently converted from another use such as, but not limited to, apartment use,
      hotel building, or warehouse; • the renovation work did not involve structural
      or functional changes, such as the replacement of all HVAC and electrical components
      and was limited to cosmetic or design changes such as painting, ﬂooring, and
      appliances; and, • the project meets the criteria for being a new project because
      any of the following conditions exist with respect to the status of the project:
      ⚬ fewer than 90% of the stock or shares have been sold to purchasers; ⚬ the
      developer or sponsor is in control of the co-op corporation; ⚬ the project is
      not fully completed, such as proposed construction, new construction, or the
      proposed or incomplete conversion of an existing building to a co-op; or ⚬ the
      project is subject to additional phasing or annexation. The following newly
      converted projects may be reviewed by the lender through the standard co-op
      review process rather than being submitted to PERS: • any non-gut rehabilitation
      conversion project that was converted at least three years prior to the co-op
      share loan note date that is considered “newly converted” solely because more
      than 20% of the stock or shares are owned by the sponsor as described in the
      single entity ownership provisions in B4-2.3-05, Geographic-Speciﬁc Co-op Project
      Considerations; and • two- to four-unit non-gut rehabilitation conversions.
      All units, common areas, and facilities within the project must be 100% complete.
      The project cannot be subject to additional phasing or annexation. All construction
      and rehabilitation for the project must be completed in a professional manner
      before Fannie Mae purchases or securitizes the share loan, unless the Project
      Standards Team approves delivery at an earlier date. Phase I and II environmental
      hazard assessments are not required for co-op projects unless the lender identiﬁes
      an environmental problem through the performance of its project underwriting
      and due diligence. In the event that environmental problems are identiﬁed, the
      problems must be determined to be acceptable, as described in E-2-02, Suggested
      Format for Phase I Environmental Hazard Assessments. Published May 6, 2026 689
      ✓ Full Review Eligibility Requirements – For New and Established Co-op Projects
      Stock, share, or other contractual agreement evidencing ownership, and the accompanying
      occupancy rights that represent at least 50% of the total number of stock or
      shares in the co- op corporation and the related occupancy rights of units in
      the project must have been sold and conveyed (or, for new construction, must
      be under contract for sale) to principal residence purchasers. The project’s
      most recent operating budget and most recent two years audited ﬁnancial statements,
      or corporate tax returns must • be consistent with the nature of the project,
      • provide for adequate cash ﬂow to service the current debt and operating expenses,
      and • provide for adequate replacement and operating reserves. If the most recent
      budget is not available, the lender may rely on a review of the co-op corporation’s
      two most recent years audited ﬁnancial statements or corporate tax returns to
      determine that the ﬁnancial requirements in this section have been met. If there
      is any negative cash ﬂow for the present year, it may not exceed 5% of the co-op
      project''s most recent audited ﬁnancial statement and may not have two consecutive
      years'' operating loss. The negative cash ﬂow must be attributable to an isolated
      non-recurring expense. If negative cash ﬂow is from sponsor-held unsold units,
      the following requirements must be met: • such negative cash ﬂow (including,
      but not limited to, any principal and interest payments relating to the ﬁnancing
      obtained by the sponsor to acquire the co-op project) will not exceed an amount
      equal to 5% of the project''s annual operating budget; • if the sponsor fails
      to pay the monthly assessments relating to all co-op units owned by the sponsor,
      the monthly assessments of the co-op share owners other than the sponsor will
      not increase by more than 10%; • the sponsor is current on all ﬁnancial obligations
      relating to any other project in which the sponsor owns or holds more than 10%
      of the units; and • the sponsor has not pledged any of the shares of the co-op
      project as security for any loan other than to secure, in whole or in part,
      the ﬁnancing obtained by the sponsor to acquire the co-op project. The project
      must have a good ﬁnancial record, with no more than 15% of the owners being
      more than 60 days past due in the payment of their ﬁnancial obligations to the
      co-op corporation. Note: This includes payment of each special assessment. Published
      May 6, 2026 690 ✓ Full Review Eligibility Requirements – For New and Established
      Co-op Projects If the project is a recipient of subsidies or similar beneﬁts
      (such as tax or assessment abatements) that will terminate partially or fully
      within the next three years, the lender must evaluate the impact the expiration
      of such beneﬁt will have on the project. If the beneﬁt is scheduled to expire
      within three years from the note date, the lender must include the higher monthly
      fees in the borrower’s monthly liabilities for debt-to-income ratio qualifying
      purposes. The project and share loan documentation must comply with any speciﬁc
      legal requirements established for the state in which the project is located.
      The co-op corporation must have the sole ownership interest in the project’s
      facilities, common elements, and limited common elements, except as noted below.
      Shared amenities are permitted only when two or more residential projects share
      amenities for the exclusive use of the unit owners. The associations or corporations
      must have an agreement in place governing the arrangement for shared amenities
      that includes the following: • a description of the shared amenities subject
      to the arrangement; • a description of the terms under which unit owners in
      the project may use the shared amenities; • provisions for the funding, management,
      and upkeep of the shared amenities; and • provisions to resolve conﬂicts between
      the residential projects regarding the amenities. Examples of shared amenities
      include, but are not limited to, clubhouses, recreational or ﬁtness facilities,
      and swimming pools. The developer may not retain any ownership interest in any
      of the facilities related to the project. The amenities and facilities, including
      parking and recreational facilities, may not be subject to a lease between the
      unit owners or the co-op corporation and another party. Parking amenities provided
      under commercial leases or parking permit arrangements with parties unrelated
      to the developer are acceptable. Eligibility Requirements for Condop Projects
      A condop is a mixed-use development that is a condo project or two or more condo
      units in which one condo unit is an exclusively residential co-op project and
      the remaining unit(s) are used exclusively for commercial purposes. The land
      may be held in fee simple or under a ground lease by the condo project. Condop
      project refers to the co-op project that operates inside a condop development.
      The table below provides project eligibility requirements for condop projects.
      Published May 6, 2026 691 ✓ Full Review Eligibility Requirements – For Condop
      Projects The condop project must comply with all other requirements for co-op
      projects including those provided in: • B4-2.3-02, Co-op Project Eligibility,
      • B4-2.3-03, Legal Requirements for Co-op Projects, and • B4-2.3-04, Loan Eligibility
      for Co-op Share Loans. In addition to all other requirements for co-op projects,
      the condop project must account for the majority of the condo unit holders’
      square footage of non-common element space in the condo. A loan secured by a
      unit in a condop project must meet all other requirements for co- op loans.
      The co-op project must hold the majority of the undivided percent interest in
      the common elements. The common elements include interest in the land, foundations,
      and shared building systems and spaces that serve more than one dwelling or
      commercial unit, including parking. The project board of directors must exercise
      eﬀective control of the condo board, including voting rights proportional to
      their common interest in the condo project. However, the commercial condo unit
      owners may have other subordinate governance mechanisms relating exclusively
      to the use and operation of the commercial condo units. The current operating
      budget and most recent two years audited ﬁnancial statements or corporate tax
      returns for the co-op and the condo projects must show that each entity: • Generates
      revenue greater than expenses, and • Maintains suﬃcient liquid assets for unexpected
      events. If the most recent budget is not available, the lender may rely on a
      review of the co-op corporation’s two most recent years audited ﬁnancial statements
      or corporate tax returns to determine that the ﬁnancial requirements in this
      section have been met. Any loans between the condo and co-op projects must be
      in good standing. The co-op and condo components of the condop development must
      be evaluated together to ensure overall ﬁnancial and operational stability.
      Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Announcements Issue Date
      Announcement SEL-2026-05 May 06, 2026 Announcement SEL-2025-06 August 06, 2025
      Published May 6, 2026 692 Announcements Issue Date Announcement SEL-2025-05
      July 02, 2025 Announcement SEL-2024-07 November 06, 2024 Announcement SEL-2023-06
      July 05, 2023'
  judgment: false
