Fidelity bond (Employee Dishonesty) Insurance coverage for the coop is not enough, What can I do to get the mortgage

Asked by Sherry, Kew Garden Hills, Queens, NY Thu Apr 1, 2010

Hi, I am applying a Coop in Queens and applying the mortgage with Bank of America. The Bank told me last week that the Coop's fidelity bond coverage was not enough. the coop has $250,000. the bank's minimum requirement is $259,000. The management doesn't want to increase the coverage.
Per Bank of America, instead of increasing the coverage, they need the copy of fidelity bond. However, the managing agent refuse to give out the copy.
Any suggestions in this kind of situation? If I change a bank, is that possible to get a waiver?
Thanks a lot

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14
bakeman, , Sebring, FL
Thu Oct 17, 2013
I blong to a Verteran. it has and E board that access to $1020.000 at any time. My question if should the officers that access to the $120.000 br bonded for the full amout???? Or should they bonbed for all the money that handle through out the year????
0 votes
Fairyeric, , Astoria, NY
Tue Jun 22, 2010
Hi Sherry, I am currently working for a Direct Lender (which means have money in own pocket )and can help you getting a loan from our portfolio products. If you still have hard time with your bank there, contact me with fairyyunfeng@gmail.com or phone:(718)261-2000 ask for Fairy. :)
0 votes
Miri, Home Buyer, New York County, NY
Thu Jun 17, 2010
Also find out if the management company also has Fidelity Bond insurance. If they do, then the co-op does not need to have an equivalent of 3 month's assessment (maintenance) for Fidelity Bond insurance to comply with Fannie Mae's guidelines. Another thing you can do is to find out if the board members only have a right to sign checks and not the management company (in other words only the board members can sign checks). If either of the above conditions are true, then the co-op does not need to have an equivalent of three month's of maintenance in Fidelity Bond insurance.
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Miri, Home Buyer, New York County, NY
Thu Jun 17, 2010
This is the answer I got from Alison Rogers, a real-estate agent:
You don’t mention which bank you’re using, but at this point, most lenders in the conforming space — which for big-city co-ops is any loan up to $729,750 — are going to adhere to Fannie Mae guidelines. That includes the requirement for Fidelity Bond Insurance, which protects the co-op from events like embezzlement — it’s protection against the board treasurer running to the Caymans with a bunch of money. So it’s unlikely that this three-month Fidelity Bond Insurance requirement is something you can get around by simply switching from, say, Citi to Chase.

You can try going to what’s called a “portfolio lender” — a smaller regional bank that makes mortgage loans, and then, instead of reselling them, holds them in its portfolio. In the Northeast, M&T Bank is an example.

However, before you do that, I’d mention this problem to the seller. (You’re probably not talking directly to the seller, so if you’re using real estate agents, your agent can talk to the seller’s agent, or you can have the conversation go from your attorney to the seller’s attorney.)

The conversation should go something like this: “Look, I’d really like to buy your apartment. I’ve been approved for a loan by _____ {Insert the name of the big bank you’re working with here}. But they have a Fidelity Bond Insurance requirement, and that traces back to Fannie Mae, so all the big lenders are going to have it. Can you please sit down and talk to your co-op board, as a shareholder, and point out that until they buy the insurance, no big bank is going to lend on their building? If Wells Fargo and Citi and Chase and Bank of America aren’t going to write mortgages to buyers, your apartment, and the apartment of every board member, becomes really tough to sell. I know buying the insurance is expensive, but explain to them that not having it is worse.”

In my experience, once the seller has this conversation with the board, the board usually caves and buys the insurance.

However, be warned that this whole process can take a couple of weeks — the board members first have to research the situation and realize that the seller is right, and then have to buy the insurance — so you’ll have to keep working with your mortgage broker or loan officer to make sure they keep your mortgage commitment extended till this gets done.

Stay on top of it. My rule of thumb on this one would be to talk to your loan pro and the seller’s side every day. A pain, I know, but I’m sure you’ll end up with your dream apartment!
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Miri, Home Buyer, New York County, NY
Thu Jun 17, 2010
I am in a similar situation. I called Citibank, HSBC bank, Wells Fargo bank, Emigrant savings bank, Chace bank, Astoria Federal Savings bank, and Bank of America. None of these banks will give the loan since the Co-op does not have the equivalent of 3 months maintenance in Fidelity Bond Insurance. Banco Popular's mortgage loan officer was extremely nasty and rude but he said their bank can give me the loan to buy the co-op. My bank (Bank of America) who also denied the loan says that Banco Popular does not sell their loans to Fannie Mae; therefore, they'll probably can give me the loan.
If your co-op still refuses to increase the Fidelity bond insurance (eventually they will when they have 6 or more buyer's loans denied) you can also get in touch with a small community bank such as M&T bank and see what they say.
I'm still looking for a bank that does not follow Fannie Mea's guide lines as far as Fidelity Bond Insurance. Good luck
0 votes
Kewgardener, , Queens, NY
Sat May 29, 2010
So what did you end up doing? Im in a similar situation.
0 votes
Michael Rich…, , New York, NY
Fri Apr 2, 2010
The requirement for fidelity bond coverage for a coop comes from Fannie Mae. The amount required should be dependent upon the coop's circumstances, not which bank is making the loan on a particular transaction.
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Anna M Brocco, Agent, Williston Park, NY
Fri Apr 2, 2010
Your attorney, should contact the co-op attorney regarding the issue.
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Sherry, Home Buyer, Kew Garden Hills, Queens, NY
Fri Apr 2, 2010
Hi Anna,

Do you mean the Coop's attorney or Seller's attonery?
Thanks
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Sherry, Home Buyer, Kew Garden Hills, Queens, NY
Fri Apr 2, 2010
Thank you all for the advise.

Hi Robin, I emailed you the Coop name. Maybe changing a bank is a way out.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Fri Apr 2, 2010
Ask your attorney to handle the situation regarding a copy of the bond with the co-op attorney, oftentimes a resolution can be found--if all else fails switch lenders.
0 votes
Robin Silver…, Mortgage Broker Or Lender, Garden City, NY
Fri Apr 2, 2010
I have never found Bank of America to be good as far as rates go, so not sure why people would want to use them. This has become a much more common problem with all banks as far as Fidelity Bond insurance goes. I am not sure if you would need a waiver if you change banks. Are you locked in? Rates have gone up, so be prepared if you are.
If you would like to e-mail me the name of the co-op corporation through my profile, I will check with one of my lenders who has a published list of approved co-ops.
0 votes
shai megiddo, Agent, Kew Gardens, NY
Fri Apr 2, 2010
Hi Sherry,
I do a lot of co-op business with Bank of America. They are "famous" for giving a hard time with the co-op insurance policies.
My advice to you is to change banks. Of course all parties involved will have to be notified, and you might need some more time......but with that said if you are buying a co-op in Queens and your credit and income are satisfactory, I know a few lenders that compete well with Bank of America in terms of rate/terms.




Regards,
Shai Megiddo
(646)541-2183
shaimegiddo@gmail.com
0 votes
Angel Torres, , Queens, NY
Thu Apr 1, 2010
I had the same situation with a borrower and Borrower) offered to pay for the increase in coverage and got it done!! We had to contact the President of the management company and he offered to oblige..We had to be persistent though...
0 votes
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