Cohousing-L Mailing List: Re: Why are lenders afraid of Cohousing?

[Sharon Villines (sharon]

On Apr 20, 2009, at 6:40 PM, Susana Michaelis wrote:

> We are wanting to acquire information about cohousing-friendly  
> mortgage
> lenders and appraisers. We are in Nanaimo, BC Canada, so maybe our  
> rules
> are different, but Credit Union long-time members and even those with
> bank accounts are getting the run-around.

Bankers are totally risk-averse. They are lending someone else's money  
and they are evaluated on whether that money is repaid. If your  
project goes under they have lost millions of dollars of that someone  
else's money. If they do that very often, they are not only out of a  
job but quite probably will "never work in this town again." What  
other bank will hire them?

Plus it makes them feel like they have been taken advantage of -- by  
you. This is why bankers only want to loan money to sure things, as in  
"you can only get money if you have money."

Don't confuse the picture. Your aim for borrowing money is to build a  
residential community. As far as the bank is concerned it is financed  
like any similar real estate project.

Being a cohousing project only limits your ability to sell the units.  
To them, it would be like building a multi-million dollar project and  
restricting sales to people who like to eat vegetarian food in groups  
at tables that are too small. It will limit sales and re-sales. The  
banker knows this is a bad idea even if you already have all the units  
sold. Foreclosure in their dreams.

Go in with a standard story and all the papers to back it up. You  
aren't lying because you aren't borrowing the money to finance the  
cohousing part of your project. You are financing the real estate part.

Think about it for a minute -- no one goes in and says I want to  
borrow half a million dollars to build a house with a hot tub so we  
can invite our friends over, get drunk and high, and have group sex.  
Even if they are totally sound financial risks, bankers can't put that  
in the documents they present to the bank board (or whatever) that  
approves the loan. But if they leave it out, they are quite probably  
submitting false papers because that really really was the reason  
given for borrowing the money.

Lots of people want to borrow money and banks have their pick of the  
lot. They go for the sure thing. Do whatever you can to sound like a  
sure thing. No vegetarian food. To a banker it sounds like a  
personality disorder.

Sharon
----
Sharon Villines in Washington DC
Where all roads lead to Casablanca