By Jonathan Stempel

NEW YORK (Reuters) - Co-op City, the largest affordable housing cooperative in the United States, will loosen its policy against owning pets to accommodate disabled residents who require service dogs or other animals, under a federal consent decree announced on Wednesday.

Riverbay Corp, which manages the complex in the Bronx, will also pay up to a $50,000 civil fine plus up to $600,000 to compensate people harmed by its prior discriminatory practices, the U.S. Department of Justice said.

Co-op City, which has about 15,372 units housing 60,000 people, was accused of violating the federal Fair Housing Act by having long made it too burdensome or impossible for disabled residents to get waivers from its strict "no-pets" rule dating to 1965.

The Justice Department said the co-op, from January 2005 to November 2011, denied 28 out of 42 requests for reasonable accommodations, and at times even threatened disabled residents with eviction unless they gave up their service animals.

Under the consent decree, Co-op City may still require residents to provide letters from medical or social services workers indicating a need for the animals.

It also said the complex "prefers but does not require" that emotional support animals weigh no more than 25 pounds, be spayed or neutered and not have a strong bite.

U.S. Attorney Preet Bharara in New York said the accord should result in Co-op City "improving housing accessibility for all of its residents and in providing for a more caring and compassionate environment for Bronx residents."

The co-op said it did not admit wrongdoing in agreeing to settle.

Jeffrey Buss, a lawyer for Co-op City, said the co-op views the accord as "a model for other housing communities," in part because it accommodates people with mental illnesses and psychological disabilities who might benefit from the emotional support of animals.

(Reporting by Jonathan Stempel in New York; Editing by Bernadette Baum and Cynthia Osterman)