source:
  type: guide
  id: fhlmc-5705.3
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.3 — Ineligible
    Cooperative Projects
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.3 — Ineligible
    Cooperative Projects.
  coverage_tier: operative
obligations:
- id: fhlmc-5705.3-full
  canonical_id: fhlmc-5705.3-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 5705.3 — Ineligible
    Cooperative Projects
  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 5705.3 — Ineligible
      Cooperative Projects
    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: '5705.3: Ineligible Cooperative Projects (09/30/25) This section
      contains requirements related to: ■ Ownership of Cooperative Project land and
      Cooperative Units ■ Cooperative hotel ■ Cooperative Project with multi-dwelling
      units ■ Cooperative Project with excessive commercial or non-residential space
      ■ Tenancy-in-Common Cooperative Project ■ Timeshare Cooperative Project with
      segmented ownership ■ Houseboat Cooperative Project ■ Ownership and use of Common
      Elements in Cooperative Project Freddie Mac Single-Family Seller/Servicer Guide
      Chapter 5705 As of 01/26/26 Page 5705-8 ■ Cooperative Project in litigation
      ■ Cooperative Project with excessive single-investor concentration ■ Continuing
      Care Retirement Community (CCRC) ■ Cooperative Projects composed of Manufactured
      Homes ■ Cooperative Project with mandatory dues or similar membership fees for
      use of Amenities such as clubhouses or recreational facilities ■ Limited equity
      Cooperative Project ■ Leasing Cooperative ■ Sponsor/developer interest in Cooperative
      Project ■ Project in need of Critical Repairs ■ Project with an evacuation order
      ■ Cooperative Projects terminating or involved in insolvency proceedings Except
      for Freddie Mac-owned “no cash-out” refinance Cooperative Share Loans delivered
      in accordance with the requirements in Section 5705.7 relating to Exempt from
      Review, Cooperative Share Loans in any of the following types of Cooperative
      Projects are ineligible for sale to Freddie Mac: (a) Ownership of Cooperative
      Project land and Cooperative Units Any Cooperative Corporation that does not
      own: ■ The land on which the Cooperative Project is located in fee simple; and
      ■ The Cooperative Units in the Cooperative Project (b) Cooperative hotel Any
      project that is a cooperative hotel or similar type of transient housing. Projects
      that have one or more of the following characteristics are considered a cooperative
      hotel, or similar type of transient housing, and are ineligible projects: ■
      Projects that include hotel type services and characteristics, such as registration
      services, rentals of Cooperative Units on a daily basis and restrictions on
      interior decorating Freddie Mac Single-Family Seller/Servicer Guide Chapter
      5705 As of 01/26/26 Page 5705-9 ■ Cooperative Projects that are conversions
      of a hotel (or a conversion of a similar type of transient housing) unless the
      Cooperative Project was a Gut Rehabilitation and the resulting Cooperative Units
      no longer have the characteristics of a hotel or similar type of transient housing
      ■ Projects with mandatory or voluntary rental-pooling and revenue-sharing agreements
      (or similar agreements that restrict the Shareholder’s ability to occupy the
      Cooperative Unit such as blackout dates and occupancy limits) to assure an inventory
      of Cooperative Units for rent on a frequent basis, such as daily, weekly, monthly
      or seasonally ■ Cooperative Projects that are licensed as a hotel, motel or
      similar type of transient housing The following are examples of personalized
      services and centralized systems that are common red flags of a Condominium
      Hotel or similar type of transient housing: ■ Personalized services ❑ Daily
      cleaning services ❑ Porters/luggage service ❑ Room service ■ Centralized systems
      ❑ Any central telephone service ❑ Central key systems If Shareholders of Cooperative
      Corporations in Cooperative Projects in resort locations rent their units (either
      individually or through a rental management company) on a short-term basis,
      the project has personalized services and/or the project has centralized systems,
      this alone does not indicate that the project is to be considered a cooperative
      hotel. Sellers must fully analyze all the characteristics of the project and
      related information to determine if the project is a cooperative hotel. Related
      informational resources may include, but are not limited to, Cooperative Project
      Documents (e.g., by-laws, project budgets and financial statements), offering
      statements (or their equivalent) and marketing materials, websites, contracts
      for sale and appraisal reports. (c) Cooperative Project with multi-dwelling
      units A Cooperative Project that permits a Cooperative Interest in more than
      one dwelling unit, with ownership of all owned Cooperative Units or Cooperative
      Shares financed by a single Cooperative Share Loan. Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-10 (d) Cooperative
      Project with excessive commercial or non-residential space A Cooperative Project
      in which more than 35% of its total above and below grade square footage (or
      more than 35% of the total above and below grade square footage of the building
      in which the Cooperative Project is located) is used as commercial or non-residential
      space. In calculating the amount of commercial or non-residential space, Sellers
      must determine: ■ The total square footage of the project (or the building in
      which the project is located) ■ The square footage of the commercial or non-residential
      space; and ■ The residential space square footage The Seller will then divide
      the total commercial or non-residential square footage by the total square footage
      of the project or building to determine the total amount of commercial or non-
      residential space. Below is a table illustrating what must be included or may
      be excluded from the calculation of commercial or non-residential space. Excessive
      commercial or non-residential space Type of commercial or non-residential space
      Include in the calculation? Retail and other commercial or non-residential space
      (for example, restaurants and stores) Yes Residential rental apartments, hotels,
      motels and other similar types of space, although such space may have residential
      characteristics Yes Non-residential space that the Cooperative Corporation does
      not own but that is owned by a private individual or entity outside of the Cooperative
      Corporation (for example, private fitness facilities that are membership-based
      rather than owned by the Cooperative Corporation for the sole use of the Shareholders)
      Yes The total square footage of commercial or non-residential space even when
      the Cooperative Corporation representing the Shareholders is different from
      the association representing the commercial owners Yes Commercial parking facilities
      No Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26
      Page 5705-11 Excessive commercial or non-residential space Type of commercial
      or non-residential space Include in the calculation? Project Amenities and facilities
      that are residential in nature, owned by the Cooperative Corporation and allocated
      for the sole use of the Shareholders No (e) Tenancy-in-Common Cooperative Project
      A Cooperative Project owned by several owners as tenants-in-common. Individuals
      have an undivided interest in the Cooperative Project (including the Cooperative
      Units) and land on which the Cooperative Project is located and may or may not
      have the right of exclusive occupancy of a specific Cooperative Unit. (f) Timeshare
      Cooperative Project with segmented ownership A Cooperative Project in which
      there is an arrangement under which a Shareholder receives an interest in real
      estate and the right to use a Cooperative Unit, Amenities or both for a specified
      period and on a recurring basis (such as the 15th week of the year) or ownership
      that is for a limited period (such as for the subsequent five years). (g) Houseboat
      Cooperative Project A Cooperative Project composed of boats that have been designed
      or modified to be used primarily as dwelling units. (h) Ownership and use of
      Common Elements in Cooperative Project Except as stated below, a Cooperative
      Corporation must be the sole owner of and the Shareholders must have the sole
      right to the use of the Common Elements, including all buildings, roads, parking,
      facilities and Amenities. The sponsor/developer must not retain any ownership
      interest in the Common Elements, facilities and Amenities, except as a Holder
      of Unsold Shares. A Cooperative Project that shares Amenities with one or more
      other residential projects is eligible if the projects share the Amenities (e.g.,
      recreational or fitness facilities, swimming pools and clubhouses) for the sole
      use of the Shareholders and unit owners, if applicable. The term “residential
      projects” includes only residential Condominium Projects, Cooperative Projects
      and Planned Unit Developments (PUDs). The residential projects must have an
      agreement specifying: 1. A description of the shared Amenities and the terms
      of Shareholders’ and unit owners’ permitted use of the shared Amenities Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-12
      2. How the shared Amenities will be funded, managed and maintained; and 3. The
      method for resolving disputes between the projects regarding the shared Amenities
      The Common Elements, including Amenities such as parking and recreational facilities,
      must not be subject to a lease between the Cooperative Corporation (as lessee)
      and the sponsor/developer or any affiliate of the sponsor/developer (as lessor).
      Parking provided under commercial leases or permit arrangements with parties
      unrelated to the developer are acceptable. (i) Cooperative Project in litigation
      A Cooperative Project in which: (i) the Cooperative Corporation is named as
      a party to pending litigation or the Seller discovers that the Cooperative Corporation
      is a party to an Alternative Dispute Resolution (ADR) proceeding, such as arbitration
      or mediation, or (ii) the project sponsor or developer is named as a party to
      pending litigation or the Seller discovers that the project sponsor or developer
      is a party in an ADR proceeding and, in either case, the dispute relates to
      the safety, structural soundness, functional use or habitability of the Cooperative
      Project. If the Seller determines that the pending litigation or ADR proceeding
      involves only minor matters that do not affect the safety, structural soundness,
      functional use or habitability of the Cooperative Project, the Cooperative Project
      is eligible if the litigation or ADR proceeding is limited to one of the following:
      1. The litigation amount is known, the insurance company has committed to provide
      the defense and the litigation amount is covered by the insurance policy; 2.
      The litigation amount is unknown, the Seller has documented the Mortgage file
      with a copy of the complaint, or the most recent amended complaint, and with
      an attorney letter that supports the Seller’s determination that the litigation
      involves minor matters. The attorney letter must state all of the following:
      i. The reason for the litigation; ii. That the insurance company has committed
      to provide the defense; and iii. That any potential monetary judgment against
      the Cooperative Corporation or settlement with the Cooperative Corporation,
      including punitive damages, will likely be covered by the Cooperative Corporation’s
      insurance policy. If the attorney letter indicates that the matter will not
      likely be fully covered by the Cooperative Corporation’s insurance policy, then
      the Cooperative Project is ineligible. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-13 3. The matter involves any of
      the following: i. A non-monetary neighbor dispute or right of quiet enjoyment,
      whether litigated or in an ADR proceeding; ii. A dispute in which the Cooperative
      Corporation is the plaintiff in a foreclosure action; iii. A dispute in which
      the Cooperative Corporation is the plaintiff in the litigation or a party to
      an ADR proceeding and is seeking reimbursement for expenditures made to repair
      the Cooperative Project’s component(s). The expenditures may have included items
      that related to the safety, structural soundness, functional use or habitability
      of the project, provided that the repair permanently resolved the defect or
      issue, and the expenditures did not significantly impact the financial stability
      or future solvency of the Cooperative Corporation. 4. The estimated or known
      amount in the dispute in the litigation or ADR proceeding is known and is not
      covered by the insurance policy but is not expected to exceed 10% of the Cooperative
      Project’s funded reserves, provided that use of the project’s funded reserves
      to pay for project litigation or dispute resolution does not violate the applicable
      jurisdiction’s laws and regulations. The Seller must retain documentation to
      support its analysis that the reason for the dispute meets Freddie Mac’s requirements
      for minor matters as described above. (j) Cooperative Project with excessive
      single-investor concentration Any Cooperative Project in which a single entity
      owns Cooperative Shares that represent more than the following: Excessive single
      investor concentration Number of units in the project Total number of units
      owned by individual or single entity Two to four One Five to 20 Two 21 or more
      20% 1. The following may be excluded from the single investor concentration
      calculation: i. Vacant Cooperative Units being actively marketed by the sponsor/developer
      (or Holder of Unsold Shares). Any units leased by the sponsor/developer must
      be included in the calculation of the developer’s percentage of ownership. Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26 Page 5705-14
      ii. Cooperative Units that a non-profit entity controls or owns for the purpose
      of providing affordable housing iii. Cooperative Units held in affordable housing
      programs (including units subject to non-eviction rent regulation codes), and
      iv. Cooperative Units retained for workforce housing by higher-education institutions
      Exceptions: 2. For purchase transactions, a project with single investor concentration
      greater than specified above will be eligible provided: i. The purchase transaction
      will result in a reduction of the single investor concentration ii. The single
      investor must not own more than 49% of the units in the project iii. The Seller
      obtains evidence that the single investor is marketing units for sale with the
      goal to decrease the single investor concentration to 20% or less of the units
      in the project iv. The single investor is current on all Maintenance Fees and
      assessments; and v. There are no planned or current special assessments in the
      project 3. When a sponsor/developer (or Holder of Unsold Shares) has been prevented
      from selling Cooperative Interests due to the need to comply with rent control
      or tenant-protection laws, the 20% single entity ownership limitation may be
      increased to 49% if all of the following requirements are met: i. The Cooperative
      Interests owned by the sponsor/developer in excess of 20% must be subject to
      rent control or tenant-protection laws ii. The Seller must retain documentation,
      such as a regulation agreement, evidencing that the Cooperative Units retained
      by the sponsor/developer (or Holder of Unsold Shares) are subject to rent control
      or tenant-protection laws; and iii. The Seller meets one of the following: A.
      Seller must document that the rental income from the tenant-protected and/or
      leased Cooperative Units owned by the sponsor/developer is sufficient to cover
      the Pro Rata Share of the Cooperative Project’s financial obligations that are
      applicable to the tenant-protected, leased, and vacant Cooperative Units; or
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 5705 As of 01/26/26
      Page 5705-15 B. If the rental income from the tenant-protected and/or leased
      Cooperative Units owned by the sponsor/developer is not sufficient to cover
      the Pro Rata Share of the Cooperative Project’s financial obligations that are
      applicable to the tenant protected, leased, and vacant units, the sponsor/developer
      (or Holder of Unsold Shares) must have demonstrated the ability and willingness
      to meet any shortfall in the payment of the Pro Rata Share of the Cooperative
      Project’s financial obligations that are applicable to these units. In such
      cases, 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 project in which they own or hold
      more than 10% of the Cooperative Shares ■ Have sufficient funds to meet any
      shortfall in the payment of the Pro Rata Share of the Cooperative Project’s
      financial obligations that are applicable to the tenant-protected, leased and
      vacant Cooperative Units; 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 sponsor/developer (or Holder
      of Unsold Shares) ownership (k) Continuing Care Retirement Community (CCRC)
      A CCRC is a residential Cooperative Project specifically designed to meet the
      evolving health and housing needs of seniors. Unlike age-restricted communities,
      residents in CCRCs sign a contract in advance for a lifetime commitment of care
      from the facility, regardless of future health or housing needs. CCRCs may also
      be known as Life-Care Facilities. (l) Cooperative Projects composed of Manufactured
      Homes A Cooperative Project composed of one or more Manufactured Homes. (m)
      Cooperative Project with mandatory dues or similar membership fees for use of
      Amenities such as clubhouses or recreational facilities A Cooperative Project
      with mandatory dues or similar membership fees, including initiation or joining
      fees, that allows for the use of Amenities, such as clubhouses or recreational
      facilities, unless both of the following are met: ■ The Cooperative Corporation
      solely owns the Amenities; and ■ Only Shareholders are members, with full rights
      and privileges to the use of these Amenities being the primary benefit of membership
      (n) Limited equity Cooperative Project Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-16 A Cooperative Project that limits
      gain from appreciation upon resale of the Cooperative Shares associated with
      the Cooperative Unit, except as permitted for Cooperative Share Loans subject
      to stock transfer fees under Section 5705.5(f). Cooperative Projects located
      on land owned by Community Land Trusts are also ineligible Cooperative Projects.
      (o) Leasing Cooperative A Cooperative Project that involves the leasing of both
      the land and the improvements to the Cooperative Project including the Common
      Elements, even if the Cooperative Corporation owns part of the building. (p)
      Sponsor/developer interest in Cooperative Project The sponsor/developer (or
      any Holder of Unsold Shares) cannot retain any ownership interest in the Cooperative
      Project except for its interest in any unsold Cooperative Units. (q) Project
      in need of Critical Repairs Cooperative Share Loans secured by Cooperative Interests
      in Cooperative Projects in need of Critical Repairs, as defined in the Glossary,
      are not eligible for sale to Freddie Mac. For both current and planned (i.e.,
      Shareholders approved but the board has not initiated collection yet) special
      assessments, Seller must obtain and review the following information for each
      special assessment to determine if the funds are for a Critical Repair: ■ The
      purpose of the special assessment, ■ When the special assessment was approved,
      ■ The original amount of the special assessment, ■ The amount remaining to be
      collected, and ■ The expected date the special assessment will be paid in full
      If a structural and/or mechanical inspection has been completed within 3 years
      of Seller’s project review date, Seller must review that inspection report.
      There must not be any Critical Repairs needed, as well as no current evacuation
      orders or similar regulatory actions. Projects in need of Critical Repairs remain
      ineligible until the required repairs and/or inspection report have been completed
      and documented. Sellers must review an engineer’s report or substantially similar
      document to determine that the repairs resolved the building’s safety, soundness,
      structural integrity, or habitability concerns. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5705 As of 01/26/26 Page 5705-17 If damage or deferred maintenance
      is isolated to one or a few units and does not affect the overall safety, soundness,
      structural integrity, or habitability of the project, then this project eligibility
      requirement does not apply. This requirement does not apply to Routine Repairs,
      as defined in the Glossary. Sellers may need to review a combination of documents
      to determine a project meets our physical condition requirements. Some examples
      include but are not limited to: ■ Cooperative board meeting minutes ■ Engineer’s
      reports ■ Structural and/or mechanical inspection reports ■ Reserve studies
      ■ List of necessary repairs provided by the Cooperative Corporation or management
      company, and/or ■ Other substantially similar documentation This list is not
      prescriptive or exhaustive. Sellers are responsible for determining which documents
      they need to review to ensure compliance with this requirement. (r) Project
      with an evacuation order A project with an evacuation order due to an unsafe
      condition, either for a partial or total evacuation of the project’s building(s),
      is ineligible until the unsafe condition has been remediated and the building(s)
      is safe for occupancy. (s) Cooperative Projects terminating or involved in insolvency
      proceedings A Cooperative Corporation must not be the subject of any action
      that would cause the Cooperative Project to cease to exist, including termination,
      deconversion or dissolution of the corporation’s legal structure. In addition,
      a Cooperative Corporation must not be the subject of a voluntary or involuntary
      bankruptcy, insolvency, liquidation or receivership proceedings or any substantially
      similar action under State or federal law. This includes a Cooperative Corporation
      that has voted or is in the process of voting on any of the actions or proceedings
      described above.'
  judgment: false
