Page 7 - CooperatorNews New York December 2021

COOPERATORNEWS.COM COOPERATORNEWS — DECEMBER 2021 7 WWW.ANDYO.ORG Sponsored by: WETANKNY.COM ࣗ զ ڭ ֶ SELF TEACHING FELLOWSHIP AS SEEN IN “CACOPHONY” LOOKING GLASS Agency lenders include the Federal Na- tional Mortgage Association and the Fed- eral Home Loan Mortgage Corporation— the government-sponsored enterprises (GSEs) commonly known as Fannie Mae and Freddie Mac. By packaging up loans and selling them off in a securitized port- folio, they are able to offer some of the low- est rates. However, there is usually a high yield maintenance, which is the prepay- ment penalty associated with paying off the loan early to compensate for the for- gone interest that the lender would have received over the remaining loan term. Agency lenders also can be more restric- tive on subordinate financing and require a commitment issuance before the rate can be locked. Portfolio lenders are your neighbor- hood savings banks. Being local, they have the benefit of geographical familiarity with the buildings and communities, and main- taining the loan under their aegis for the duration of the term. Portfolio lenders can generally lock the interest rate up front and offer a sliding scale prepayment pen- alty, which Pagnotta says is usually never higher than 3% of the outstanding balance and can reduce to 0% in the last year. They also offer the ability to make principal paydowns of up to 10% per year without a penalty. Many can provide an unsecured credit line in addition to the first mort- gage. They might not be the best option for longer-term financing, given that they generally don’t go beyond 10 years to avoid the potential risk of rates varying more widely in a longer duration. Pagnotta says that the CMBS lender is the type depicted in the film “The Big Short”—ones that “make the loans, put it in a box with a bunch of other loans, and then sell it off in a big pool somewhere to a bunch of bond buyers.” Their product does have its advantages, including some of the lowest interest rates, and unique offerings, like building some of the closing costs into the pricing. But borrowers of this product type are subject to yield maintenance or defeasance penalties, and if they need a line of credit, they have to go to a different lender. Swap lenders require the borrower to enter into what’s known as an ISDA agreement, which stands for International Swaps and Derivatives Association—the organization that manages risk associated with these products. Their rates are com- petitive, according to Pagnotta, and they can structure the loan to be paid out in separate installments, or tranches—a use- ful option for a corporation that needs a bulk of proceeds up front for a major proj- ect but can then spread future payments over a longer span of time. However, such loans are subject to availability in the swap market, and their credit lines are often se- cured, meaning that they require a collat- eral guarantee. Enter the B Corp Relatively new to the economy is a type values, a number of financial institutions climate change while fortifying themselves of business called a Certified B Corpora- tion, or ‘B Corp.’ These are for-profit en- tities that are legally required to balance a means to a greater end: positive impact ly vulnerable to the increasingly volatile profits with the social and environmental for their employees, communities, and weather events caused by the climate cri- impacts that their decisions and business the environment. New among them is St. sis,” says Cucci. “We have severe storms practices have on the world. There are B Petersburg, Florida-based Climate First and hurricanes down here, not to mention Corps in all types of industries, from hos- pitality to apparel to food and beverage. Also on that list is banks. As more launched a condo association and co-op people around the globe want to put their corporation finance program focused on money somewhere that aligns with their helping multifamily communities combat have become certified B Corps, with stat- ed missions to use profits and growth as Bank, whose senior vice president Chris Cucci tells CooperatorNews that they just against its devastating effects. “Florida’s condominiums are especial- COOPERATORNEWS.COM continued on page 13