Why are co-op share loans scarce?

A mortgage broker explains why few institutions make loans to buyers of shares of housing co-ops.

Residents of housing cooperatives know that there are few banks or credit unions willing to make loans to them secured by their shares of stock in the cooperatives, even though such loans are treated as loans on residential real property, just as loans to owners of condominia are.

Why the lack of competition in the market for co-op share loans? One California company in the business offers an explanation, rooted in the rarity of housing co-ops and the risks incurred by lenders in the event of a default.

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