source:
  type: guide
  id: fhlmc-5705.4
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.4 — Cooperative
    Project eligibility
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.4 — Cooperative
    Project eligibility.
  coverage_tier: operative
obligations:
- id: fhlmc-5705.4-full
  canonical_id: fhlmc-5705.4-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.4 — Cooperative
    Project 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 5705.4 — Cooperative
      Project 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: '5705.4: Cooperative Project eligibility (03/05/25) This section
      contains the following subsections: Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-18 ■ Cooperative Project completion
      requirements ■ Owner-occupancy requirements ■ Cooperative Project budget requirements
      ■ Financial obligations of Cooperative Project ■ Market acceptance ■ Minimum
      number of Cooperative Units ■ Subsidies or other benefits for Cooperative Project
      ■ Requirements for the underlying Blanket Mortgage for Cooperative Project ■
      Prior Cooperative Project financing 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, the Cooperative Project must comply
      with all of the following eligibility requirements: (a) Cooperative Project
      completion requirements The Cooperative Project, including all Cooperative Units
      and Common Elements within the Cooperative Project, must be complete and cannot
      be subject to additional phasing or annexation. (b) Owner-occupancy requirements
      Cooperative Interests (i.e., both ownership and the accompanying occupancy rights)
      that represent at least 50% of the total number of Cooperative Units in the
      project must have been sold and conveyed or, for New Cooperative Projects (as
      defined in Section 5705.1(c)(ii)), must be under contract for sale to Shareholders
      who occupy their Cooperative Units as a Primary Residence or second home. (c)
      Cooperative Project budget requirements The Cooperative Project’s budget must
      meet all the following requirements: (i) Financial strength and viability of
      Cooperative Project Seller must underwrite the Cooperative Project to determine
      the financial strength and viability of the Cooperative Project. If the most
      recent budget is not available, the Seller Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-19 may rely on a review of the Cooperative
      Corporation’s most recent audited financial statements or corporate tax returns.
      The Cooperative Project’s most recent operating budget, audited financial statements
      or corporate tax returns must: ■ Be consistent with the nature of the Cooperative
      Project; ■ Except as stated in Section 5705.4(c)(ii) below, provide for adequate
      cash flow to service the current debt and operating expenses; and ■ Provide
      for adequate replacement and operating reserves For an existing building that
      is converted to a Cooperative Project and is undergoing or has undergone a Non-Gut
      Rehabilitation, the sponsor/developer must have contributed to the replacement
      reserve fund for the expired life of the components that were used prior to
      the conversion of the building(s). (ii) Negative cash flow of Cooperative Project
      The negative cash flow for the present year will not exceed 5% of the Cooperative
      Project’s annual operating budget as demonstrated by the most recent audited
      financial statements, provided that the prior year’s cash flow was not negative
      by more than 5%. The negative cash flow must be attributable to an isolated
      expense, or the Cooperative Project must have supplemental income from sources
      (e.g., stock transfer fee/flip taxes or assessments), that demonstrates the
      Cooperative Project has adequate cash flow to service all obligations. If the
      negative cash flow is attributable to tenant-protected, leased and vacant Cooperative
      Units, the sponsor/developer (or Holder of Unsold Shares) must: ■ Be current
      on all financial obligations for the subject Cooperative Project and on all
      financial obligations relating to any other Cooperative Project in which they
      own or hold more than 10% of the Cooperative Shares; ■ Not have pledged any
      Cooperative Shares of the Cooperative Project as security for any loan other
      than to secure the financing obtained to acquire the Cooperative Project; and
      ■ Provide financial statements of the Cooperative Corporation that indicate
      financial stability for the Cooperative Project with no negative impact to the
      Cooperative Project due to negative cash flow related to sponsor/developer (or
      Holder of Unsold Shares) ownership Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-20 Seller must retain documentation
      that demonstrates the Cooperative Project has adequate cash flow to service
      all of its obligations. (d) Financial obligations of Cooperative Project The
      Cooperative Project must have good financial management, including the following:
      (i) Payment of Blanket Mortgage, taxes and insurance The Cooperative Corporation
      has not been 30 or more days delinquent on any payments due under any underlying
      Blanket Mortgage or for taxes, insurance and other financial obligations in
      the last 12 months. (ii) Maintenance Fees No more than 15% of the Shareholders
      are more than 60 days delinquent in the payment of Maintenance Fees. (iii) Special
      assessments No more than 15% of the Shareholders are more than 60 days delinquent
      in the payment of each special assessment. (e) Market acceptance The Cooperative
      Project must be located in an area in which there is a demonstrated market acceptance
      of the cooperative form of ownership. (f) Minimum number of Cooperative Units
      The Cooperative Project must consist of two or more 1-unit dwellings. (g) Subsidies
      or other benefits for Cooperative Project If the Cooperative Project is the
      recipient of any subsidies or similar benefits (e.g., tax or assessment abatements)
      that will be reduced or eliminated within three years of the Note Date of the
      Cooperative Share Loan, Seller must assess the impact that the elimination of
      such benefits will have on the Cooperative Project and include any higher monthly
      fees in a Borrower’s monthly liabilities when qualifying the Borrower for the
      Cooperative Share Loan. (h) Requirements for the underlying Blanket Mortgage
      for Cooperative Project The Blanket Mortgage for the Cooperative Project may
      be either a conventional mortgage or an FHA-Insured Mortgage that has an interest
      rate that is at the market rate and not at a subsidized or otherwise reduced
      rate. Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26
      Page 5705-21 If the Blanket Mortgage is a balloon mortgage, the remaining term
      must be at least six months. If the Blanket Mortgage is an adjustable-rate balloon
      mortgage with a remaining term between six months and two years, then the current
      interest rate may not be subject to an interest rate adjustment. (i) Prior Cooperative
      Project financing The Seller represents and warrants that the Cooperative Project’s
      Blanket Mortgage is: ■ In compliance with the requirements imposed by the mortgagee
      of the underlying Blanket Mortgage; and ■ If the Blanket Mortgage includes a
      due-on-encumbrance clause and the Cooperative Project is located in a State
      in which Cooperative Share Loans are considered to be an encumbrance on the
      Cooperative Project, the mortgagee of the Blanket Mortgage must consent to the
      Cooperative Share Loan'
  judgment: false
