Competition among lenders creating new mortgage opportunities for cooperatives.

Up until last year, cooperative apartment buildings with less than Class "A" credit had little hope of refinancing their mortgages at attractive new rates. Now, with the increasing number of lenders in the marketplace, heightened competition among those lenders and continuing lower interest rates, cooperative apartment buildings are benefiting from the most favorable borrowing conditions New York City has seen in a decade.

In the underlying mortgage market, even the wallflowers are being asked to dance by lenders, who are willing to underwrite new financing without the exorbitant rates or higher fees of recent years.

Approximately 25 percent of the cooperative apartment buildings in New York City are considered Class "B" or "C" credit risks. For these buildings, lower rates significantly reduce the portion of residents' monthly maintenance fees that go toward the underlying mortgage.

Nearly every cooperative has an underlying mortgage, with terms generally set at 10 years. The majority of buildings refinancing today last financed their underlying mortgage in 1988 or 1989.

Three conditions in the mortgage market are primarily responsible for the new ease with which cooperative apartments of all credit ratings are able to refinance.

In addition to the traditional lending sources available a decade ago, new lenders, including Wall Street investment banks, are fueling competition to provide loans. Government mortgage programs like Fannie Mac and Freddie Mac, which were significantly less active a decade ago. are also contributing to today's heightened competition.

The increasing number of financial institutions, many chasing the same deals, have led lenders to seek new lending opportunities and to reduce the margin, or spread, which is added to the yield on U.S. Treasury Bonds to create an all-in final mortgage rate. Today's reduced margins are resulting in underlying mortgages with rates of under 7 percent.

Adding to the competition and reduced margin equation are today's historically low interest rates. Even if the Federal Reserve Bank decides to raise interest rates, mortgage rates are likely to remain the lowest in 20 years.

These conditions are creating lending scenarios in the market which would have been unimaginable a few short years ago.

For example, we have seen cooperative buildings with recent bankruptcies obtain competing offers from different lenders in order to reestablish themselves financially. Buildings with a low number of units and with less than 50 percent of the apartments owner-occupied have received unusually large loans. Even a co-op that was paying more in maintenance costs on its unsold apartments than it was receiving in rents obtained a loan, regardless of its negative income. In the latter case, Time Equities refinanced the loan with no reserve and without having to pledge the unsold shares as collateral for the mortgage - a loan that would have been unthinkable a few years ago.

The borrower's market we have today and the ongoing health of a booming economy have moved Class "B" and "C" cooperative buildings seeking to refinance underlying mortgages from untouchable to highly desirable lending opportunities.