HFDC Coops: Disclosure and Mortgage Issues
A friend recently was shown a one bedroom coop by a licensed RE broker. His bid was accepted, a contract signed and a binder delivered. Six weeks later, his bank rejected his mortgage application after it discovered that the building was Housing Development Fund Corp. (HDFC) building. Question 1: Does the broker or owner have…
A friend recently was shown a one bedroom coop by a licensed RE broker. His bid was accepted, a contract signed and a binder delivered. Six weeks later, his bank rejected his mortgage application after it discovered that the building was Housing Development Fund Corp. (HDFC) building. Question 1: Does the broker or owner have any liability for failing to disclose this fact to potential buyers? Question 2: Can he recoup his app fees if they do bear such liability? Question 3: Who writes mortgages on HDFC buildings? The buyer can only put down 10% (or, maybe, 15%).
I just got an HDFC coop building approved with one of my lenders. I took me a good solid month of submitting paperwork over and over again but I got news yesterday that they approved the project for lending. This is for the HDFC coop on Adam Clayton Blvd in Manhattan.
Let me know if I can be of any help
Adam Dahill
adahill@wcslending.com
@ invisible – Yes, I can see that too..
What I wanted to say was that my HDFC life was really laid back and without most restrictions.
I never felt any disadvantages over another co-op or condo until I put the place on the market.
That’s when I found out that some buyers lost interest after hearing that the coop had HDFC in its name.
(even though there was nothing HDFC about it anymore)
Still got the place sold in less than a momth in a tough market o not sure how material it really was afterall.
Not sure I’m making any more sense now..
lambretta your conclusion contradicts what you said.
The first (and last) co-op I ever bought into was an HDFC. I didn’t get warned about this by the realtor, the lawyer or anyone else.
My due diligence didn’t unearth anything unusual in the offering plan either. Turns out it was an HDFC that had years ago voted to rid itself of all those crippling restrictions (income, flip tax, etc) and was really just a laid back “commune”.
When selling the unit again, I had a few buyers interested until they found out that the name of the coop included HDFC.
So while a lot of people like to stay clear of HDFCs, I can only say my expericance was a good one and not all HDFCs are alike.
It is against the law in NYS to enter into a RE contract w/out a lawyer. Of course, their competence varies widely, but this seems like a no-brainer. It sounds like he’s out the mortgage application fees and whatever he paid his attorney – and that he should certianly get back if his lawyer didn’t warn him about the HDFC status.
My understanding is, with HDFC, building keeps most of the equity in an HDFC and owner can’t recoup market gains. Seems pretty material. I assume your friend had no lawyer because this would have been picked up right away from the docs.
How much is your friend out of pocket? This probably isn’t worth the trouble, unless your friend had no mortgage contingency and is in default. Problem is, friend’s case might be tough if co op docs (prospectus, etc.) disclosed HDFC status. Ordinary prudence would be to review these before signing contract. Broker should have been forthcoming, but not sure this is worth much as a case against broker.
The buyer’s lawyer should certianly have discovered this during due diligence, even if the broker didn’t mention it; your friend probably won’t get much out of the owner and broker, but it never hurts to ask. Your friend should also talk to a mortgage broker about which banks write mortgages for HDFC buildings; they are out there. Generally there are income limitations on these purchases as well, so your friend should make sure he qualifies there as well.