Part I

Mortgage Loan

Chapter 1

Overview
Section 101

Using the Guide
101.01

Organization

Requirements

The Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. is divided into 3 categories:

  • Requirements are mandatory conditions that must be satisfied for all Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. -delegated Mortgage Loans Mortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. and activities.  You must obtain Fannie Mae’s prior approval to Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. or perform an activity that does not comply with any requirement.
  • Guidance are best practices to inform and support a Lender’s Lender’sPerson Fannie Mae approved to sell or service Mortgage Loans. delegated analysis and decision-making.  Fannie Mae expects you to exercise your delegated authority in a prudent manner, and will review your analysis and delegated decisions. 
  • Operating Procedures are required steps or processes that must be followed.

The Lender Contract Lender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. provides Fannie Mae with certain rights, remedies, and corrective actions if you fail to satisfy requirements, follow the operating procedures, or exercise delegated authority in a prudent manner.

If the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. does not specify a category, then the information is a requirement.

101.02

References

Requirements

The following rules apply:

  • a reference to the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. includes any:
    • update, amendment, restatement, modification, or supplement; and
    • referenced exhibits, appendices, or other forms;
  • a reference to any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). also includes the Person's Person'sLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). successors and assigns;
  • a reference to any Loan Document Loan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , statute, regulation, or standard, also includes all amendments, modifications, or restatements made from time to time;
  • for any inconsistency between the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. and the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. regarding a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. or Portfolio Mortgage Loan Portfolio Mortgage LoanMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. , the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. will govern; and
  • whenever you make a representation “to your knowledge” or “to the best of your knowledge,” you mean the actual state of knowledge of your officers and employees responsible for the underwriting, origination, servicing, or sale of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. regarding the matters expressly set forth in the representation, in each case without having conducted any independent inquiry into such matters, and without any obligation to do so (except as expressly set forth herein).  All information contained in documents which are part of or required to be part of your Servicing File Servicing FileYour file for each Mortgage Loan serviced. is deemed to be within your knowledge.

Registered and unregistered trademarks can be found on Fannie Mae’s trademarks website.  You must include the appropriate trademark symbols when using Fannie Mae’s protected words and phrases, and comply with the instructions on the website.

Section 102

Delegation and Underwriting

Requirements

You must comply with the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. in its entirety.  Your Lender Contract Lender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. describes your delegated authority to underwrite and Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. Mortgage Loans Mortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .

For underwriting and Delivery DeliverySubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. to be fully delegated to you, you must underwrite the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to meet the requirements provided in

  • the Multifamily Underwriting Standards ( Form 4660 ),
  • Part I,
  • Part II, and
  • the applicable chapters of Part III based on the specific products and features of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .

If the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. does not comply with the applicable requirements, it is a Pre-Review Mortgage Loan Pre-Review Mortgage LoanMortgage Loan that is not delegated to you and requires Fannie Mae’s approval before Rate Lock. (see  Part I, Chapter 2: Mortgage Loan, Section 203: Pre-Review Mortgage Loans ).

Section 103

Transaction Approval Memo

Requirements

Your Transaction Approval Memo must:

  • document
    • your analysis of all reasonably identifiable strengths and weaknesses of the proposed Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. transaction, and
    • all due diligence findings required by the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. ; and
  • address and mitigate the following:
    • Property’s Property’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). financial performance, trends, and value;
    • Property’s Property’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). current physical condition and expected condition over the term of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. ;
    • environmental conditions and seismic risk impacting the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
    • ability of the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). to be refinanced at the Maturity Date Maturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. ;
    • Borrower’s Borrower’sPerson who is the obligor per the Note. , Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ’, and Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ’ financial capacity and experience;
    • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). market’s performance and trends;
    • any other factors that could impact the transaction during the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. term or at the Maturity Date Maturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. ; and
    • analysis and support for your decisions on any matters covered by requirements or guidance in Parts I, II, and III.

Guidance

Fannie Mae will consider the quality and thoroughness of your analysis, and the appropriateness and quantity of adjustments made

  • in the underwriting,
  • during the monitoring process, and
  • when exercising the remedies or corrective actions provided in the Lender Contract Lender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. .
Section 104

Representations

Requirements

When you Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to Fannie Mae you represent that:

  • At all times during the origination and underwriting of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , you were authorized to transact business in the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). jurisdiction.  If you were not authorized, then none of your activities related to the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. requires authorization to transact business in the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). jurisdiction.
  • If the laws of the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). jurisdiction do not require you to be authorized to do business, then this lack of authorization will not adversely affect the mortgagee’s ability to enforce the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .
  • You are the sole owner and holder of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. and have full right and authority to sell the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to Fannie Mae.
  • Your right to sell the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to Fannie Mae is not subject to any other party’s interest or Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , or to any agreement with any other party.
  • You complied with all applicable federal or state laws, regulations, or other requirements regarding
    • fair lending,
    • fair housing,
    • consumer credit,
    • equal credit opportunity,
    • truth-in-lending, and
    • the prohibition of redlining and other forms of discrimination.
  • Unless modified by Fannie Mae’s Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval, the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. meets
    • the requirements of the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. ,
    • the  Form 4660 , and
    • all applicable requirements of your Lender Contract Lender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. .
  • No Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). on the Restricted Person List  performed any service for, or was involved in any way with, the Mortgage Loan's Mortgage Loan'sMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement.
    • underwriting,
    • closing, or
    • Delivery DeliverySubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. .
  • The Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. either meets or is exempt from any usury laws or regulations.
  • The Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. you deliver to Fannie Mae are the appropriate and correct forms for the particular transaction under the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. and contain the same provisions as those provided to you by Fannie Mae (except for completion of blanks, deletion of bracketed information which is not applicable, and other changes approved by Fannie Mae).
  • The Borrower BorrowerPerson who is the obligor per the Note. is not in default under any of the terms of the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. and would not be in default under any of the terms of the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. with the passage of time, the giving of notice, or both.
  • The terms and conditions of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. (as reflected in the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. ) have not been amended, modified, or supplemented by
    • any other agreement or understanding of the parties, or
    • waiver of any of the material provisions of those Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
  • All documents that evidence, secure, or otherwise relate to the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. have been delivered to Fannie Mae.  If you are not the actual party assigning the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to Fannie Mae because of the financing structure (e.g., a variable rate bond transaction), you make this representation only to the best of your knowledge.
  • The Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. has not been satisfied, cancelled, released, or subordinated, and Fannie Mae has approved in writing any material modification to the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. occurring after the Mortgage Loan Origination Date Mortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , including any change in the:
    • Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. amount, Gross Note Rate Gross Note RateMortgage Loan interest rate stated in the Loan Documents. , Maturity Date Maturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , amortization period, or timing of payments;
    • Collateral CollateralProperty, Personal Property, or other property securing a Mortgage Loan. or Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. priority;
    • reserve types required per the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. or their release provisions;
    • Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. recourse provisions, including the addition of new non-recourse carveouts;
    • Borrower's Borrower'sPerson who is the obligor per the Note. organization type; or
    • Persons PersonsLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). personally liable for the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , including any Payment Guaranty Payment GuarantyGuaranty executed by a Key Principal on Form 4502 series or Form 6020 series, or approved by Fannie Mae. or additional credit enhancement.
  • The Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on the Collateral CollateralProperty, Personal Property, or other property securing a Mortgage Loan. identified in the Transaction Approval Memo is valid.
  • The Borrower BorrowerPerson who is the obligor per the Note. has properly signed the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. ; they are valid and enforceable obligations of the Borrower BorrowerPerson who is the obligor per the Note. , subject to bankruptcy, reorganization, or insolvency laws, or other general principles of equity.
  • To the best of your knowledge, as of the Delivery DeliverySubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. of the Mortgage Loan:
    • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). does not have any subordinate loans that have not been pre-approved by Fannie Mae;
    • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has not been damaged by any Catastrophic Event Catastrophic EventNatural or man-made hazard resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the natural environment, such as earthquake, flood, terrorist attack, or windstorm. ;
    • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has not been condemned or been a part of any proceeding that would impair
      • the value of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. ,
      • the value of the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , or
      • the usefulness of the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). for the contemplated purpose; and
    • there are no proceedings – pending or contemplated – to partially or totally condemn the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
  • To the best of your knowledge:
    • the credit reports and financial statements relating to the Borrower BorrowerPerson who is the obligor per the Note. (s) (and to any other person or entity required by the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. ) correctly reflect the financial condition of these person(s) without material exception; and
    • as of the Delivery DeliverySubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , none of the following is the subject of an existing or contemplated bankruptcy, reorganization, insolvency, or comparable proceeding
      • any Borrower BorrowerPerson who is the obligor per the Note. ,
      • any general partner of a Borrower BorrowerPerson who is the obligor per the Note. ,
      • any Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ,
      • any Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or
      • any other party whose bankruptcy could negatively impact one of these parties.
  • If the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. is insured or guaranteed by any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). , including any governmental authority
    • you have ensured that insurance or Guaranty GuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. is in effect, and
    • you have complied with all applicable provisions of the insurance or Guaranty GuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. that covers the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .
  • The Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is free of all mechanics’, materialmen’s, or similar Liens LiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , and there are no rights outstanding that could cause such liens.  (The only exceptions are mechanics’ or materialmen’s Liens LiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. which attach automatically under the laws of any governmental authority when work is started or materials are delivered to the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and the Borrower BorrowerPerson who is the obligor per the Note. is not delinquent in the payment for this work or materials).
  • You have not made or knowingly received from others, any advance of funds (directly or indirectly) on behalf of the Borrower BorrowerPerson who is the obligor per the Note. connected with the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. transaction, except for funds permitted in the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. or related to interest paid from the earliest of the:
    • date of the Note NoteInstrument evidencing a Mortgage Loan obligation, including  Form 6010 series,  any other Fannie Mae-approved note, and  all applicable addenda, schedules, and exhibits.  ;
    • date the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. proceeds were disbursed to the Borrower BorrowerPerson who is the obligor per the Note. ; or
    • date 1 month before the first installment of P&I P&IPrincipal and interest  on the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. is due.
  • To the best of your knowledge, based solely on the survey and the title insurance policy connected with the origination of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. (except for encroachments that do not materially and adversely affect the current marketability or principal use of the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , or that are insured against by the title insurance policy):
    • all material improvements used to determine the appraised value of the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). when the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. was originated are within the boundaries of the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
    • no material improvements on adjoining parcels encroach onto the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and
    • no material improvements encroach onto any easements.
  • To the best of your knowledge, nothing involving the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , or the Borrower BorrowerPerson who is the obligor per the Note. can reasonably be expected to:
    • cause private institutional investors to regard the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. as an unacceptable investment;
    • cause the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to become delinquent; or
    • adversely affect the Mortgage Loan's Mortgage Loan'sMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. value or marketability.
  • If the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. provides that the interest rate or principal balance may be adjusted, Fannie Mae may enforce the terms of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , and these adjustments will not affect the priority of the Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. .
  • All Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. proceeds were funded on the Mortgage Loan Origination Date Mortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower.
    • directly to or for the benefit of the Borrower BorrowerPerson who is the obligor per the Note. , or
    • to fund reserves or escrows per the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
  • All electronic data you submit is accurate and complete.
  • If Fannie Mae’s interest in the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. is a Participation Interest Participation InterestUndivided interest in a Mortgage Loan per the participation certificate for a specified percentage of principal (and proportionate rights and benefits of the Participation Interest seller in any Mortgage Loan collateral or guaranty), and a specified yield. , all of the information and statements in any participation certificate that you deliver are complete, correct, and true.

Guidance

Redlining is illegal and occurs when a lender provides unequal access to credit, or offers unequal credit terms, because of the race, color, national origin, or other prohibited characteristics of the residents of the area in which the mortgaged property is located.

You may consider locational factors when appraising and underwriting if your risk analysis applies Fannie Mae's guidelines in a consistent, equitable, and legal manner.

Chapter 2

Mortgage Loan
Section 201

Registration and Multifamily Affordability Estimator

Requirements

You must:

  • register each Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. in DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. ; and
  • submit the Multifamily Affordability Estimator (MAE), and all other required affordability data, in DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. at the earlier of when you:
    • request a pricing quote, if it will incorporate the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). affordability; and
    • place the transaction under application.

Operating Procedures

You must submit:

  • the MAE;
  • all required data fields, including the following based on the completed MAE:
    • “% Mission Driven” in the “Deal Overview” section;
    • percent of AMI in the “Property Detail” section:
      • “% of Units <= 80% of AMI”;
      • “% of Units <= 60% of AMI”; and
      • “% of Units <= 50% of AMI”; and
    • loan options based on the proposed transaction structure.
Section 202

Delegated Mortgage Loans

Requirements

If your Lender Contract Lender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. provides you with the delegated authority, you may underwrite, commit, and Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. any fully-delegated Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. (see  Part I, Chapter 1: Overview, Section 102: Delegation and Underwriting ).

Section 203

Pre-Review Mortgage Loans

Requirements

You must obtain Fannie Mae’s Pre-Review approval before obtaining a Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. for any

  • Pre-Review Mortgage Loan Pre-Review Mortgage LoanMortgage Loan that is not delegated to you and requires Fannie Mae’s approval before Rate Lock. , and
  • Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. not fully delegated to you.

You must ensure that your Chief Underwriter, or a delegated employee directly supervised by your Chief Underwriter, reviews and approves all material supporting the Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval request before submitting it.

Operating Procedures

The Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval process must follow these steps:

Step 1:  You submit a Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. request via DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. , including at a minimum:

  • a preliminary loan-sizing spreadsheet with
    • the preliminary Underwritten NCF NCFAt underwriting or for any specified period, the amount calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. , and
    • a refinance risk analysis;
  • a narrative describing the overall transaction, including risks and mitigating factors for each Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. reason; 
  • any additional information requested by Fannie Mae; and
  • the following items.

Pre-Review Category

Required Submission

Credit Facility

Include an aggregate

 

  • summary of the overall transaction, and
  • loan-sizing spreadsheet roll-up of all Properties PropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .

Crowdfunding Equity
Delaware Statutory Trust (DST)
Forward Commitment Your preliminary analysis of the construction and/or rehabilitation and feasibility review per  Part III, Chapter 19: Forward Commitments .
Near Stabilized Property

Your analysis of the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). monthly historical and projected lease-up schedule, including:

 

  • a spreadsheet presenting the Property’s Property’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). monthly underwriting operating data and a lease-up schedule, including:
    • DSCR DSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of:  principal, interest, and required Mezzanine Financing or Hard Pay Preferred Equity payments. ;
    • cumulative economic occupancy;
    • bad debt;
    • cumulative physical occupancy;
    • concessions, incentives, discounts, and allowances for all
      • new move-ins, and
      • lease renewals;
    • expiring leases/renewals;
    • unit move-ins and move-outs since leasing inception; and
    • projected move-ins and move-outs through the stabilized occupancy period and beyond; and
  • a rent-comparable survey including:
    • each rent-comparable’s
      • occupancy,
      • concessions, and
      • rent level; and
    • an analysis of the comparable rents, net of concessions.

 

Your submission must:

 

  • analyze the impact of the competitive supply of new apartments entering the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). submarket during the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). lease-up period;
  • note the target Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. date; and
  • present the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management company's experience leasing up newly constructed properties.
Preferred Equity

Step 2:  Fannie Mae’s Pre-Review response will indicate:

  • Pre-Review Approval.  You have Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval to underwrite the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. and request a Commitment CommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. on the proposed terms without further Fannie Mae approval before purchase.
  • Pre-Review Resubmission Required.  You are authorized to underwrite the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. on the proposed terms and pricing, but at least 10 Business Days Business DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. before Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. , you must resubmit the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. for final Fannie Mae Pre-Review approval, along with: 
    • the applicable required resubmission documentation per the Multifamily Underwriting Standards (Form 4660 Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ); and
    • any additional requested documentation.
  • Enhanced Pre-Review Resubmission Required.  You are authorized to underwrite the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. on the proposed terms and pricing, but at least 15 Business Days Business DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. before Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. , you must resubmit the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. for final Fannie Mae Pre-Review approval, along with: 
    • the applicable required Enhanced Pre-Review resubmission documentation per the Multifamily Underwriting Standards (Form 4660 Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ); and
    • any additional requested documentation.
  • Decline Approval.  You do not have Fannie Mae Pre-Review approval and may not request a Commitment CommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. on the proposed terms.  Fannie Mae will issue a notice of denial containing its rationale. 

If you...

Within 30 days of Fannie Mae's notice of denial, you must...

Either:

 

  • deny the Borrower credit; or
  • offer the Borrower another quote, commitment, or credit option (from a source other than Fannie Mae) that the Borrower does not expressly accept
  • issue the Borrower BorrowerPerson who is the obligor per the Note. an adverse action letter including Fannie Mae’s denial reasons; and
  • upload into the Deal Documents section of DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. your:
    • copy of final adverse action letter; and
    • issuance evidence (e.g., email, certified mail receipt, courier receipt, etc.).

Offer the Borrower another quote, commitment, or credit option (from a source other than Fannie Mae) that the Borrower expressly accepts

upload into the Deal Documents section of DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. a statement confirming:

 

  • the Borrower BorrowerPerson who is the obligor per the Note. expressly accepted the credit; and
  • you sent no adverse action letter.

 

Section 204

Letters of Credit
204.01

Generally

Requirements

You must comply with this Section for all Letters of Credit Letters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. posted as Collateral CollateralProperty, Personal Property, or other property securing a Mortgage Loan. for a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .

You must obtain Fannie Mae’s approval for any new or renewal Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , regardless of whether the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is required by you or Fannie Mae.

All Letters of Credit Letters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:

All Letters of Credit Letters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must meet the requirements in the Irrevocable Letter of Credit Instructions ( Form 4663 ), including the form of sight draft on the Issuer IssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. .

Operating Procedures

How do you request approval to use a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ?

Step 1:  Complete the Letter of Credit Authorization and Certification Form ( Form 4664.B ) that states

  • whether the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is new or will renew or confirm an existing Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , and
  • that the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is posted as Collateral CollateralProperty, Personal Property, or other property securing a Mortgage Loan. for a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .

Step 2:  Indicate whether the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is required by the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. or is required by you as additional collateral.  If you require the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , include the Loan Document Loan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. imposing the requirement.

Step 3:  Send the completed  Form 4664.B to Lender Risk Management Lender Risk ManagementTeam that can be contacted at [email protected]. .

What do you do after Fannie Mae has approved a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ?

Step 1:  Send the original Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. :

  • to be delivered the following business day; and
  • addressed to Multifamily Certification and Custody Multifamily Certification and CustodyTeam responsible for taking custody of and certifying Mortgage Loans that can be contacted at  [email protected], (800) 940-4646, or for submissions:  Fannie Mae (Multifamily) Certification and Custody 21240 Ridgetop Circle Suite 125-130 Sterling, VA  20166. , Attention: Manager, Multifamily Operations - Recourse and Collateral.

Step 2:  Include  Form 4664.B in the Mortgage Loan Delivery Package Mortgage Loan Delivery PackageLoan Documents and underwriting material required in connection with the Delivery of a Mortgage Loan.

Step 3:  Retain a copy of  Form 4664.B in your Servicing File Servicing FileYour file for each Mortgage Loan serviced. .

204.02

Issuers and Ratings

Operating Procedures

Who is eligible to issue a Letter of Credit?

A financial institution that satisfies the ratings criteria may issue or confirm a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .

You, one of your Affiliates AffiliatesWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… , or an Affiliate AffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of the Borrower BorrowerPerson who is the obligor per the Note. , may issue a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , but only if it is confirmed by a financial institution that is not an Affiliate AffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of you or the Borrower BorrowerPerson who is the obligor per the Note. .

Fannie Mae, in its sole discretion, may prohibit you from obtaining a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. (or confirming a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ) from a specific financial institution.

What ratings do Issuers need to satisfy?

A financial institution is eligible to issue or confirm a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. if it satisfies the following rating criteria:

Letter of Credit Rating Criteria
If rated by only 1 of the following rating agencies, the financial institution must have... If rated by both of the following rating agencies, the financial institution must have...

Either a:

 

  • Standard and Poor’s long-term issuer rating of "A" or better; or
  • Moody’s long-term issuer rating of “A2” or better.

Both a:

 

  • Standard and Poor’s long-term issuer rating of "A" or better; and
  • Moody’s long-term issuer rating of “A2” or better.

 

204.03

Verifying Issuer Ratings

Requirements

You must monitor and verify the rating of any financial institution issuing or confirming a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit.

  • throughout the term of the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ,
  • on each anniversary of the date of issuance, and
  • on the date of any renewal, replacement, or amendment.

If the ratings of the financial institution issuing or confirming the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. fall below the ratings criteria you must

  • contact Multifamily Business Operations Multifamily Business OperationsTeam that can be contacted at [email protected].  promptly, and
  • use a financial institution that satisfies the ratings criteria to replace or confirm the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .

A change from “stable” or “positive outlook” to “negative outlook” or “on watch for downgrade” would represent a fall below the ratings criteria.

204.04

Restrictions on Issuer Collateral

Requirements

You must ensure that the Issuer IssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. does not collateralize the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. with a lien on

  • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , or
  • any personal property that secures the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .
204.05

Drawing on Letter of Credit

Operating Procedures

You may, with Fannie Mae’s written approval, instruct the issuing bank to honor a draw on the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. by depositing the proceeds into an account designated by Fannie Mae.

Chapter 3

Borrower, Guarantor, Key Principals, and Principals
Section 301

Generally

Requirements

You must:

  • perform a risk assessment of the Borrower BorrowerPerson who is the obligor per the Note. , Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and Principals PrincipalsPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… based solely on objective credit standards;
  • for any Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , search the internet for
    • any negative press,
    • current or prior lawsuits, and/or
    • fair housing violations or other sanctions;
  • ensure all:
  • document all due diligence findings in the Transaction Approval Memo.

Prohibited practices include:

  • basing the risk assessment on any characteristic protected by any fair housing or fair lending law, including
    • race,
    • color,
    • religion,
    • sex,
    • handicap,
    • familial status, or
    • national origin of the prospective
      • Borrowers BorrowersPerson who is the obligor per the Note. ,
      • Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ,
      • Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ,
      • Principals PrincipalsPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… ,
      • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). occupants, or
      • residents of the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code).  neighborhood; or
  • using
    • unsupported assumptions,
    • personal opinions, or
    • unsupported perceptions.

You must:

  • complete a credit review by analyzing information about the Borrower's Borrower'sPerson who is the obligor per the Note. , Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ', and Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. '
    • organizational structure,
    • multifamily business experience and qualifications,
    • general credit history, and
    • current and prospective financial condition; and
  • ensure the financial strength, experience, qualifications, and credit history of the Borrower BorrowerPerson who is the obligor per the Note. , Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. support the transaction's
    • size,
    • complexity,
    • structure, and
    • risk.
Section 302

Borrower Organizational Structure
302.01

Single-Asset Entity

Requirements

You must ensure:

  • the Borrower BorrowerPerson who is the obligor per the Note. is a domestic single-asset entity formed for the sole purpose of owning the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
  • if the Borrower BorrowerPerson who is the obligor per the Note. is ultimately owned by foreign persons or entities, it has at least 1 domestic tier of ownership; and
  • you review
    • the Borrower's Borrower'sPerson who is the obligor per the Note. complete formation documents, and
    • all amendments or restatements.

Guidance

As you analyze the Borrower BorrowerPerson who is the obligor per the Note. and its organizational documents to confirm that it has been a single-asset entity since formation, consider the following questions:

  • Can the Borrower BorrowerPerson who is the obligor per the Note. acquire any additional real property, personal property, or assets?
  • Can the Borrower BorrowerPerson who is the obligor per the Note. participate in any business other than managing and operating the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?
  • Are the Borrower’s Borrower’sPerson who is the obligor per the Note. assets or funds commingled with anyone else’s?  If so, can these assets or funds be separated and identified?
  • Are the Borrower’s Borrower’sPerson who is the obligor per the Note. financial statements, accounting records, and other organizational documents maintained with anyone else’s?
  • Has the Borrower BorrowerPerson who is the obligor per the Note. assumed, guaranteed, or obligated itself to cover anyone else’s liabilities?

Requirements

If the Borrower BorrowerPerson who is the obligor per the Note. owns more than a single asset, the Borrower BorrowerPerson who is the obligor per the Note. may still qualify as a single asset entity if you:

  • Obtain an operating statement for each real property owned.
  • Obtain proof that the Borrower BorrowerPerson who is the obligor per the Note. has no existing debt secured by a Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on any of the Borrower’s Borrower’sPerson who is the obligor per the Note. real property, other than a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. purchased by Fannie Mae.
  • Obtain proof that no direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. is subject to mezzanine financing.
  • Ensure that the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. prohibit the Borrower BorrowerPerson who is the obligor per the Note. from
    • acquiring any additional debt (except for supplemental debt on existing Fannie Mae loans),
    • increasing any existing debt, or
    • acquiring any additional real property.

Guidance

As you analyze the Borrower BorrowerPerson who is the obligor per the Note. that owns more than a single asset, you should consider whether its other real estate assets are only

  • multifamily properties, or
  • other types of real estate that do not pose an environmental risk to the Borrower BorrowerPerson who is the obligor per the Note. .
302.02

Co-Tenant Borrowers

Requirements

You must ensure that any Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. meets these eligibility requirements:

302.02A

Tenancy-in-Common Agreement

Requirements

You must ensure that a validly executed Tenancy-in-Common Agreement is in place prior to or at the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. closing.

You must review the agreement to ensure that:

  • each co-tenant is bound by the terms of the agreement;
  • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has a manager of its day-to-day business and affairs, which can be
    • a single co-tenant (or the Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. of such co-tenant) known as the “co-tenant representative”, or
    • a validly-appointed property manager; and
  • distributions to the co-tenant representative are subordinate to
    • all payments under any Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. secured by a Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , and
    • the terms and conditions of any such Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .

Guidance

As you analyze the Tenancy-in-Common Agreement, consider the following questions.  The term “co-tenant” also includes any Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. who has the rights of the co-tenant.

Representation

  • Have the Co-Tenant Borrowers Co-Tenant BorrowersBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. given the co-tenant representative the power to deal with the Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. through the Tenancy-in-Common Agreement or an irrevocable power-of-attorney?
  • Has each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. waived its right to reside in the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?

Buy outs

  • Does each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. have buy out rights to any other co-tenant?
  • Is each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. financially able to buy out any other co-tenant?

Communication

  • Does each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. have a name, address, telephone number, and percentage of ownership interest listed?
  • Has each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. agreed to promptly notify all other Co-Tenant Borrowers Co-Tenant BorrowersBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. and you if their address or telephone number changes?
  • Has a single Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. of the co-tenant representative agreed to receive any communication from you on behalf of all Co-Tenant Borrowers Co-Tenant BorrowersBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. ?
302.02B

Key Principal Execution of Guaranty

Requirements

You must ensure that:

  • each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. names at least 1 Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ; and
  • if a Guaranty GuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. is required per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 311: Execution of Non-Recourse Guaranty , a Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. from each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. must become a Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. and execute either a Non-Recourse Guaranty Non-Recourse GuarantyGuaranty executed by a Key Principal on Form 4501 series or Form 6015 series, or approved by Fannie Mae. or Payment Guaranty Payment GuarantyGuaranty executed by a Key Principal on Form 4502 series or Form 6020 series, or approved by Fannie Mae. .
302.03

Joint and Several Borrowers with Multiple Properties

Requirements

If a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. not in a Credit Facility Credit FacilityStructured Transaction governed by a Master Credit Facility Agreement requiring Mortgage Loans and Properties to be cross-defaulted, and cross-collateralized. is secured by multiple Properties PropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and any Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is owned by a different Borrower BorrowerPerson who is the obligor per the Note. , you must require each Borrower BorrowerPerson who is the obligor per the Note. to:

  • execute a single set of Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. with joint and several liability for the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. ;
  • comply with the “single purpose entity” requirements per Modifications to Multifamily Loan and Security Agreement (Co-Borrowers) ( Form 6274 );
  • be owned, directly or indirectly, by the same Persons PersonsLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). having the same percentage ownership interests;
  • be Controlled ControlledPossessing, directly or indirectly, the power to direct or cause the management and operations of an entity (e.g., through the ownership of voting securities or other ownership interests, or by contract). by the same Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ;
  • execute  Form 6274 , restricting Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). Transfer/Assumption Transfer/AssumptionTransaction changing the ownership of the Borrower or Property. or release during the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. term;
  • execute an acceptable Contribution Agreement complying with  Form 6274 ; and
  • if separate Security Instruments Security InstrumentsInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. are recorded to encumber Properties PropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). in different counties, execute separate Modifications to Security Instrument (Co-Borrowers) ( Form 6322 ) for each Security Instrument Security InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. .

Each Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. must:

Section 303

Key Principals, Principals, and Guarantors
303.01

Generally

Requirements

For every Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , you must:

  • identify and underwrite the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , any Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , and all Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. and Principals PrincipalsPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… of the Borrower BorrowerPerson who is the obligor per the Note. ; 
  • require the Borrower BorrowerPerson who is the obligor per the Note. to disclose any foreign Persons PersonsLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). whose direct or indirect ownership interest in the Borrower BorrowerPerson who is the obligor per the Note. , in the aggregate, is 10% or greater; and
  • ensure the Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty.  
    • is not a foreign person or a foreign entity, and
    • either has an ownership interest in the Borrower BorrowerPerson who is the obligor per the Note. or ensure that the Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. has adequate legal consideration to enter into the Guaranty GuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. .

You must:

  • not deliver a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. with
    • undisclosed Principals PrincipalsPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or
    • a Blocked Person Blocked PersonAny Person who is: on the FHFA SCP List; sanctioned or blocked by OFAC; or identified on: HUD's “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List”; or General Services Administration’s “System for Award Management (SAM) exclusion list”… as a 
      • Borrower BorrowerPerson who is the obligor per the Note. ,
      • Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , 
      • Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or
      • Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… ;
  • review the complete, unredacted organizational documents, and any amendments and restatements;
  • comply with Part III, Chapter 15: Mezzanine Financing; Preferred Equity and Structured Common Equity, Section 1502: Preferred Equity and Structured Common Equity , if the Borrower's Borrower'sPerson who is the obligor per the Note. organizational structure includes any:
    • Structured Common Equity Structured Common EquityEquity interests in the Borrower's organizational structure (not including Preferred Equity) where the investor has: Forced Sale rights; or Control Takeover rights. ; 
    • Hard Pay Preferred Equity Hard Pay Preferred EquityPreferred Equity structure in the Borrower including the Preferred Equity investor's right to a Control Takeover while the Mortgage Loan is outstanding if the Preferred Equity investor fails to receive returns required to be paid regardless of: available Excess Net Cash Flow; or whether the… ;
    • Mandatory Pay Preferred Equity Mandatory Pay Preferred EquityPreferred Equity structure in the Borrower including the Preferred Equity investor's right to a Forced Sale while the Mortgage Loan is outstanding if the Preferred Equity investor fails to receive returns that are required to be paid, regardless of: available Excess Net Cash Flow; or  … ; or
    • Soft Pay Preferred Equity Soft Pay Preferred EquityPreferred Equity structure specifying: any returns due to the Preferred Equity investor are only required to the extent of available Excess Net Cash Flow for so long as the Mortgage Loan is outstanding; and if Excess Net Cash Flow is not available, any returns owed to the Preferred Equity… .

Guidance

You should refer to the Equity Checklist ( Form 6441 ) for additional information on Borrower BorrowerPerson who is the obligor per the Note. ownership structures with:

  • Structured Common Equity Structured Common EquityEquity interests in the Borrower's organizational structure (not including Preferred Equity) where the investor has: Forced Sale rights; or Control Takeover rights. ;
  • Hard Pay Preferred Equity Hard Pay Preferred EquityPreferred Equity structure in the Borrower including the Preferred Equity investor's right to a Control Takeover while the Mortgage Loan is outstanding if the Preferred Equity investor fails to receive returns required to be paid regardless of: available Excess Net Cash Flow; or whether the… ;
  • Mandatory Pay Preferred Equity Mandatory Pay Preferred EquityPreferred Equity structure in the Borrower including the Preferred Equity investor's right to a Forced Sale while the Mortgage Loan is outstanding if the Preferred Equity investor fails to receive returns that are required to be paid, regardless of: available Excess Net Cash Flow; or  … ; and
  • Soft Pay Preferred Equity Soft Pay Preferred EquityPreferred Equity structure specifying: any returns due to the Preferred Equity investor are only required to the extent of available Excess Net Cash Flow for so long as the Mortgage Loan is outstanding; and if Excess Net Cash Flow is not available, any returns owed to the Preferred Equity… .

Requirements

You must identify:

  • as a Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). required per the Equity Checklist ( Form 6441 ); and
  • Principals PrincipalsPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… based on the aggregate of all direct and indirect ownership interests in the Borrower BorrowerPerson who is the obligor per the Note. held per the following table.

If the Borrower (or the Person owning an interest in the Borrower) is a...

Then a Principal is...

General Partnership or Joint Venture

any general partner or joint venturer.

Limited Partnership
  • all general partners;
  • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns, directly or indirectly, an aggregate 25% or more limited partnership interest in the Borrower BorrowerPerson who is the obligor per the Note. through any single limited partner; and
  • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns, directly or indirectly, an aggregate 25% or more limited partnership interest in the Borrower BorrowerPerson who is the obligor per the Note. through multiple limited partners.

Privately-Held Corporation

any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns 25% or more of the voting stock in the Borrower BorrowerPerson who is the obligor per the Note. .

Limited Liability Company
  • all non-member managers or member-managers;
  • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns, directly or indirectly, an aggregate 25% or more membership interest in the Borrower BorrowerPerson who is the obligor per the Note. through any single member; and
  • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns, directly or indirectly, an aggregate 25% or more membership interest in the Borrower BorrowerPerson who is the obligor per the Note. through multiple members.
Co-Tenant Borrower any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns, directly or indirectly, a 25% or more ownership interest in each co-tenant.

Trust Borrower (other than a Land Trust)
  • the grantor (if the trust is a revocable trust or if the grantor or settlor has retained powers); 
  • any trustee; and
  • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who has a 25% or more beneficial interest in the trust.
Trust owning, directly or indirectly, an aggregate 25% or more interest in the Borrower
  • the grantor (if the trust is a revocable trust or if the grantor or settlor has retained powers); 
  • any trustee; and
  • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns an aggregate 25% or more direct or indirect interest in the Borrower BorrowerPerson who is the obligor per the Note. , including their beneficial ownership in the trust.

Land Trust

any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who has

 

  • the power of direction, and
  • a 25% or more beneficial ownership interest in the land trust.

Guidance

For example:  Borrower BorrowerPerson who is the obligor per the Note. of ABC Apartments, LLC has the following ownership structure:

Equity Owner Role Direct Ownership % in Borrower Member Equity Owner and % Interest Aggregate Indirect Ownership % in Borrower
ABC Reality, LLC Managing Member 1% John Doe - 100% 1%
Member A, LLC Non-managing Member 19.80% Bob Smith - 50% 9.9%
Others - 50% 9.9%
Member B, LLC Non-managing Member 19.80% Bob Smith - 50% 9.9%
Others - 50% 9.9%
Member C, LLC Non-managing Member 19.80% Bob Smith - 20% 3.96%
XYZ Owner, LP - 80% 15.84%
Member D, LLC Non-managing Member 19.80% Bob Smith - 50% 9.9%
Sally White - 50% 9.9%
Member E, LLC Non-managing Member 19.80% Bob Smith - 50% 9.9%
Others - 50% 9.9%

In addition, the ownership interest of XYZ Owner, LP is:

Equity Owner Role Direct Ownership % in XYZ Owner, LP Aggregate Indirect Ownership % in Borrower
987 Investor, LLC General Partner 1% 0.16%
Sally White Limited Partner 99% 15.68%

You must identify:

  • Bob Smith as a Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… of ABC Realty based on his aggregate 43.56% indirect ownership interest in the Borrower BorrowerPerson who is the obligor per the Note. ; and
  • Sally White as a Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… of ABC Realty based on her aggregate 25.58% indirect ownership interest in the Borrower BorrowerPerson who is the obligor per the Note. .

It is immaterial that:

  • neither Bob Smith nor Sally White has any direct ownership interest in the Borrower BorrowerPerson who is the obligor per the Note. or the managing member of the Borrower BorrowerPerson who is the obligor per the Note. ; and
  • none of the non-managing members of the Borrower BorrowerPerson who is the obligor per the Note. owns greater than the 25% direct interest in the Borrower BorrowerPerson who is the obligor per the Note. that would qualify for being identified as a Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… .
303.02

Entity Review

Guidance

When you review an entity, consider the following questions:

  • If it is an existing entity (e.g., a corporation, limited liability company, limited liability partnership, or other acceptable structure) that is not newly formed, does it comply with the requirements for a Borrower BorrowerPerson who is the obligor per the Note. owning more than a single asset per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 302.01: Single-Asset Entity ?
  • Is it a well-capitalized, stable, ongoing business that would be expected to:
    • Remain financially healthy?
    • Support the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?
    • Meet all Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. requirements and obligations under the Guaranty GuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. ?
    • Have assets and net worth that are significantly greater than what would be minimally acceptable for an individual Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ?
303.03

Fund Review

Guidance

When you review a fund, consider the following questions:

  • What is the experience and performance history of the fund manager with similar funds?
  • Can the fund raise equity from financially substantial investors?
  • What is the performance of the fund?
  • What is the leverage level of the fund?
  • What is the net worth and liquidity of the fund?
  • What is the type and quality of
    • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and market,
    • other existing properties and markets, and
    • any potential additional properties and markets targeted by the fund pursuant to its agreements?

Additionally, you should review the organizational documents and private placement memorandum (if applicable) for the following information:

  • the fund’s expiration date;
  • any extension to the fund’s existence and conditions to approve that extension; and
  • the process for winding up the business affairs of the fund, including whether the fund is organized in a state that requires the orderly dissolution of investment funds, such as Delaware or Illinois.
Section 304

Limited Experienced Owner

Requirements

You must determine if any Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. is a Limited Experienced Owner Limited Experienced OwnerAny Person who has not been a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor for a Fannie Mae multifamily Mortgage Loan in the last 10 years before the Commitment Date. Regardless, a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor is not a Limited… .

To determine if a Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. is a Limited Experienced Owner Limited Experienced OwnerAny Person who has not been a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor for a Fannie Mae multifamily Mortgage Loan in the last 10 years before the Commitment Date. Regardless, a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor is not a Limited… , you:

  • must analyze the Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). named as the co-tenant representative per  Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 302.02: Co-Tenant Borrowers ; and
  • may exclude from the analysis any:
    • passive Tenant in Common Member, who is solely named a Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. to comply with  Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 302.02: Co-Tenant Borrowers ; or
    • Borrower BorrowerPerson who is the obligor per the Note. whose Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. is owned by a Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. that does not meet the definition of a Limited Experienced Owner Limited Experienced OwnerAny Person who has not been a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor for a Fannie Mae multifamily Mortgage Loan in the last 10 years before the Commitment Date. Regardless, a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor is not a Limited… .

For each Limited Experienced Owner Limited Experienced OwnerAny Person who has not been a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor for a Fannie Mae multifamily Mortgage Loan in the last 10 years before the Commitment Date. Regardless, a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor is not a Limited… :

  • verify the identity of the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). and each Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. , using a current
    • driver’s license or passport,
    • personal residence, and
    • business address (not a P.O. Box); 
  • ensure your Credit Underwriting or Screening team meets, in person or virtually, each individual:
    • identified as, or on behalf of, the Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ; or
    • who owns, directly or indirectly, a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in
      • the Borrower BorrowerPerson who is the obligor per the Note. ,
      • any Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or
      • any Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ;
  • for any individual identified as a Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or who owns a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. :
    • obtain a resume; and
    • verify employment history using
      • a Lexis-Nexis report, or
      • other industry standard background reporting tool;
  • review, for each Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. , their:
    • investment profile;
    • business goals; and
    • primary sources of income, which must be consistent with business activities;
  • obtain evidence of the origin of transaction funds for
    • an Acquisition AcquisitionAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. , or
    • cash-in refinances requiring the Borrower BorrowerPerson who is the obligor per the Note. to deposit additional funds at closing; and
  • determine any appropriate adjustments to the reported liquidity and net worth of the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). and each Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , including:
    • verifying liquidity based on 3 consecutive months of bank or brokerage statements for accounts (a bank or brokerage letter alone is insufficient to verify liquidity); and
    • using best efforts to verify the value (including ownership interest and debt outstanding) of all real estate owned, directly or indirectly, using
      • K-1 statements,
      • CoStar or similar service, or
      • mortgage loan verification from other creditors.

Guidance

You should consider if the additional underwriting requirements are appropriate for any Borrower BorrowerPerson who is the obligor per the Note. , Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. with whom you have never originated a multifamily Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , even if they are not a Limited Experienced Owner Limited Experienced OwnerAny Person who has not been a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor for a Fannie Mae multifamily Mortgage Loan in the last 10 years before the Commitment Date. Regardless, a Sponsor, Cooperative Property Sponsor, Key Principal, or Guarantor is not a Limited… .

Section 305

Financial Statements

Requirements

You must:

For all financial statements, you must collect:

  • a list of all other assets, including
    • notes receivable from related entities, and
    • an estimate of the market value of each asset with the basis for calculating value estimates; and
  • all liabilities and contingent liabilities, including
    • debts under lines or letters of credit,
    • personal guaranties,
    • unmet obligations to partnerships or other entities, and
    • other future obligations, with their amount and timing.

For all Mortgage Loans Mortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , you must determine any:

  • appropriate adjustments to the reported net worth and liquidity of the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). and each Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ; and
  • other factors that may impact the party’s financial position immediately or during the term of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. (including any known threat of potential lawsuits that may arise from the parties’ business operations).
Section 306

Schedule of Real Estate Owned (SREO) (Form 4526)

Requirements

You must:

  • obtain an SREO SREOCertified document listing all real estate equity interests the Person owns. ( Form 4526 ) from the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). (if the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). is not the named Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. and/or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ), Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty.  for all real estate assets;
  • fully comply with the Instructions tab in  Form 4526 ; and
  • fully analyze:
    • the SREO SREOCertified document listing all real estate equity interests the Person owns. , including non-multifamily properties;
    • your identification and mitigation of underperforming properties;
    • upcoming maturities; and
    • recourse debt.

Guidance

You should review  Form 4526 and financial statements to determine whether the named Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. and any Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. have sufficient:

  • multifamily real estate expertise to manage the
    • Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , and
    • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and
  • unencumbered financial wherewithal to provide necessary support for the
    • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , and
    • Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .

You do not need to obtain a separate  Form 4526 from the Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). if:

  • a Mortgage Loan’s Mortgage Loan’sMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). is not the named Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ; and
  • you determined the Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. and/or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. have sufficient multifamily real estate experience and the financial capacity to support the
    • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , and
    • Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .
Section 307

Certifications
307.01

Multifamily Underwriting Certificate (Form 6460)

Requirements

You must:

  • obtain the appropriate Multifamily Underwriting Certificate Multifamily Underwriting CertificateMultifamily Underwriting Certificate (Form 6460 series) , and/or other agreement approved by Fannie Mae that provides underwriting information for a Mortgage Loan. (Form 6460) from
    • the Borrower BorrowerPerson who is the obligor per the Note. ,
    • any Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , and
    • each Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ; and
  • retain a copy of each  Form 6460  in your Servicing File Servicing FileYour file for each Mortgage Loan serviced. . 

You must ensure the  Form 6460 : 

  • is signed and certified as
    •  true,
    • correct, and
    • complete;
  • has all corresponding financial documents attached;
  • includes representations by the Borrower BorrowerPerson who is the obligor per the Note. , Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. that, to their knowledge, all
    •  financial statements and schedules
      •   are dated within 15 months of the certification date,
      •   were prepared by the Borrower BorrowerPerson who is the obligor per the Note. , Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. or their independent accounting firm,
      •   are true, correct, and provide a current and accurate account of the financial condition of the
        •    Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ,
        • Borrower BorrowerPerson who is the obligor per the Note. ,
        • Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and
        • Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ; and   
    •  Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). condition information provided to you or to the PCA Consultant PCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. is correct as of the date provided; and
  • either:
    • is dated within 90 days before the Commitment Date Commitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. ; or
    • includes a certification of no material adverse changes to the financial condition shown in the financial statements delivered per the  Form 6460     from each of the
      • Borrower BorrowerPerson who is the obligor per the Note. , 
      • Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and
      • Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. .
307.02

Brokered Transaction Certifications

Requirements

For any Brokered Transaction Brokered TransactionAny Mortgage Loan sourced by you using a third party (e.g., a Mortgage Loan Broker or Correspondent) for which the third party receives a referral or other similar fee paid by you or by, or on behalf of, the Borrower.  The following are not Brokered Transactions, even when a referral or other… , you must ensure the Borrower BorrowerPerson who is the obligor per the Note. , all Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and any Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. directly deliver all:

  • financial statements and schedules to you, including:
    • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). rent rolls;
    • Cooperative Maintenance Fee Cooperative Maintenance FeePeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property. schedules;
    • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operating statements;
    • Borrower BorrowerPerson who is the obligor per the Note. financial statements; and
    • other related documents; and
  • Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). condition information to you or the PCA Consultant PCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. , including:
    • inspection records;
    • maintenance records;
    • pre-site visit questionnaire;
    • capital improvement plans; and
    • other relevant information.

For any Brokered Transaction Brokered TransactionAny Mortgage Loan sourced by you using a third party (e.g., a Mortgage Loan Broker or Correspondent) for which the third party receives a referral or other similar fee paid by you or by, or on behalf of, the Borrower.  The following are not Brokered Transactions, even when a referral or other… , you must certify in your Transaction Approval Memo that you directly, not through a Broker BrokerThird-party Person who arranges Mortgage Loan financing on the Borrower’s behalf, or Transfers/Assumptions on behalf of the new Borrower for an assumption, or transferee for a transfer. or Correspondent:

  • obtained and reviewed all underwriting source documents from the
    • Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). /Borrower BorrowerPerson who is the obligor per the Note. ,
    • Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , and
    • Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ;
  • underwrote the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. ;
  • engaged all third-party reports/consultants; and
  • entered accurate and complete Broker BrokerThird-party Person who arranges Mortgage Loan financing on the Borrower’s behalf, or Transfers/Assumptions on behalf of the new Borrower for an assumption, or transferee for a transfer. or Correspondent information into
    • DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. , and
    • Multifamily Committing and Delivery Systems Multifamily Committing and Delivery SystemsElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .
Section 308

Fraudulent Conveyance

Requirements

You must not obtain a Commitment CommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. for any Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. if you believe that the Borrower BorrowerPerson who is the obligor per the Note. , Key Principals Key PrincipalsPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , Principals PrincipalsPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or Guarantors GuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. intend to delay, hinder, or defraud creditors.

Guidance

To show that you have made the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. in good faith, consider the following questions:

  • Have you carefully reviewed the facts so that you have a clear defense to potential fraudulent conveyance or fraudulent transfer claims?
  • Have you obtained a Form 6460  that confirms the Borrower’s Borrower’sPerson who is the obligor per the Note. good faith?
Section 309

Applicant Experience Check

Requirements

For all Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. applications and any Transfer/Assumption Transfer/AssumptionTransaction changing the ownership of the Borrower or Property. , you must:

  • perform an ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application.  per the timing below for
    • the Borrower BorrowerPerson who is the obligor per the Note. ,
    • each Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ,
    • each Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… ,
    • each Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , and
    • any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). who owns a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in an entity
      • Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or
      • Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ; and
  • receive a "You can proceed" response.
ACheck Timing
For all... You must perform an ACheck for each of the following events...

Mortgage Loans
  • upon accepting a signed application when you receive the
    • Social Security Number, or
    • Tax Identification Number;
  • before you obtain a Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. ; and
  • before the Mortgage Loan Origination Date Mortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

Transfers/Assumptions
  • when the Borrower BorrowerPerson who is the obligor per the Note. submits the request and you receive the Transferee’s/Assignee’s
    • Social Security Number, or
    • Tax Identification Number; and
  • before any required Amendment to the Loan Agreement is executed.

Guidance

When entering your final Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. data per  Part IV, Chapter 4: Delivery, Section 402.01: Data and Documents , the Multifamily Committing and Delivery System Multifamily Committing and Delivery SystemElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. runs an ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. on all listed participants.  The Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. will not reach “Submitted” status unless a “You can proceed” response is received.

For any extended Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. (e.g., 180 days), you should consider performing an additional ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. between Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. and Delivery DeliverySubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. .

Operating Procedures

The ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. application is available at https://multifamily.fanniemae.com/applications-technology/acheck.

ACheck Frequently Asked Questions
Question Answer
What information do you need to perform an ACheck?

The applicant’s

 

  • tax identification number, or
  • Social Security number.
How do you view ACheck results?

The ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. application will immediately respond either

 

  • “You can proceed”, or
  • “Do not continue processing”.
What must you do if you receive a "You can proceed" response?

For each applicant, you must:

 

  • receive a “You can proceed” response to proceed with the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. application;
  • complete full credit underwriting; and
  • not interpret this ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. response to mean the applicant is approved.
What must you do if you receive a "Do not continue processing" response?

If the ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. response is “Do not continue processing the transaction involving this applicant” (or similar wording), you must:

 

  • comply with all ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. instructions; and
  • not proceed with the application by omitting any Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. who received a “Do Not Process” response.
What about confidentiality? 
  • Fannie Mae will not provide any information regarding a “Do not continue processing” response for a particular
    • Borrower BorrowerPerson who is the obligor per the Note. ,
    • Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ,
    • Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or
    • Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. .
  • You must establish procedures ensuring all ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. responses remain confidential.
Section 310

Compliance

Requirements

You must:

  • unless you are subject to, and complying with, the Bank Secrecy Act Bank Secrecy ActFinancial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970 (31 U.S.C. 5311 et seq.). , establish and maintain effective procedures and controls (including employee training), similar to those required by the Bank Secrecy Act Bank Secrecy ActFinancial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970 (31 U.S.C. 5311 et seq.). , to prevent, identify, and report potential:
    • mortgage fraud; and
    • other suspicious activity; and
  • confirm every Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. is not a Blocked Person Blocked PersonAny Person who is: on the FHFA SCP List; sanctioned or blocked by OFAC; or identified on: HUD's “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List”; or General Services Administration’s “System for Award Management (SAM) exclusion list”… .

Operating Procedures

If you identify  Potential Red Flags for Mortgage Fraud and Other Suspicious Activity :

  1. Do not inform the Borrower BorrowerPerson who is the obligor per the Note. , any Borrower BorrowerPerson who is the obligor per the Note. Affiliate AffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. .
  2. Evaluate the red flags to determine if a plausible business explanation exists.
  3. Immediately report any unresolved red flags indicative of mortgage fraud or other suspicious activity to:
  4. Maintain all documentation relating to the potential mortgage fraud or other suspicious activity.
  5. Promptly provide all related documentation to Fannie Mae upon request.
  6. Do not provide any information to Fannie Mae that would indicate whether you have filed a Suspicious Activity Report Suspicious Activity ReportReport made by a financial institution to the Financial Crimes Enforcement Network (FinCEN), regarding suspicious or potentially suspicious activity. (SAR) with the Financial Crimes Enforcement Network (FinCEN).

If you identify any Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… , or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. as a Blocked Person Blocked PersonAny Person who is: on the FHFA SCP List; sanctioned or blocked by OFAC; or identified on: HUD's “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List”; or General Services Administration’s “System for Award Management (SAM) exclusion list”… :

  1. Report the Blocked Person Blocked PersonAny Person who is: on the FHFA SCP List; sanctioned or blocked by OFAC; or identified on: HUD's “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List”; or General Services Administration’s “System for Award Management (SAM) exclusion list”… to Lender Assessment Oversight Lender Assessment OversightTeam that can be contacted at [email protected]. within 24 hours.
  2. Maintain all documentation relating to your searches.
  3. Promptly provide all related documentation to Fannie Mae upon request.
  4. Do not
  • Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , or
  • proceed with the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. by omitting any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private).  that is a Blocked Person Blocked PersonAny Person who is: on the FHFA SCP List; sanctioned or blocked by OFAC; or identified on: HUD's “Limited Denial of Participation, HUD Funding Disqualifications and Voluntary Abstentions List”; or General Services Administration’s “System for Award Management (SAM) exclusion list”… .
Section 311

Execution of Non-Recourse Guaranty

Requirements

You must obtain a Non-Recourse Guaranty Non-Recourse GuarantyGuaranty executed by a Key Principal on Form 4501 series or Form 6015 series, or approved by Fannie Mae. from a Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. (the Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ) for any Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. that has:

  • an Underwritten DSCR Underwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and… less than
    • 1.35 for fixed rate, or
    • 1.10 for variable rate; or
  • an LTV LTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.   greater than 65%.

You do not need to obtain a Non-Recourse Guaranty Non-Recourse GuarantyGuaranty executed by a Key Principal on Form 4501 series or Form 6015 series, or approved by Fannie Mae. if the

  • Borrower BorrowerPerson who is the obligor per the Note. is a Cooperative Organization Cooperative OrganizationCorporation or legal entity where each shareholder or equity owner is granted the right to occupy a unit in a multifamily residential property under a proprietary lease or occupancy agreement. , or
  • Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. (who would otherwise be the Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ) is a Publicly-Held Entity Publicly-Held EntityAny: entity with a class of equity securities registered under Sections 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (including any real estate investment trust with voting shares or beneficial interests so registered); or pension fund controlled by any United States… .
Section 312

Conflict Mortgage Loans
312.01

Description

Requirements

Conflict Mortgage Loan Type

Conflict Mortgage Loan
  • Any Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. in which:
    • you, or any of your Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. Affiliates AffiliatesWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… or Lender Senior Executives Lender Senior ExecutivesFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance…
      • owns (or will own) any direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. , or
      • directly or indirectly controls the Borrower BorrowerPerson who is the obligor per the Note. ; or
    • any of your employees, or a group of your employees, owns (or will own) more than a 5% direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. .
  • Any Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. with DLA Mezzanine Financing DLA Mezzanine FinancingMezzanine Financing provided by an approved mezzanine lending affiliate of a DUS Lender. .

 

Note:  The following are not considered when determining if the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. is a Conflict Mortgage Loan:

 

  • any equity interest you acquire in the Borrower BorrowerPerson who is the obligor per the Note. relating solely to obtaining the associated LIHTCs LIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. (see  Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 709: LIHTC Properties – Lender Equity Interest ); and
  • ownership by a Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… in a Publicly-Held Entity Publicly-Held EntityAny: entity with a class of equity securities registered under Sections 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (including any real estate investment trust with voting shares or beneficial interests so registered); or pension fund controlled by any United States… that has a direct or indirect ownership in the Borrower BorrowerPerson who is the obligor per the Note. , if the Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… has no:
    •  Control ControlPossessing, directly or indirectly, the power to direct or cause the management and operations of an entity (e.g., through the ownership of voting securities or other ownership interests, or by contract). over the Publicly-Held Entity Publicly-Held EntityAny: entity with a class of equity securities registered under Sections 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (including any real estate investment trust with voting shares or beneficial interests so registered); or pension fund controlled by any United States… ; or
    • influence over its investment in the Borrower BorrowerPerson who is the obligor per the Note. . ​​​​ 
Prohibited Conflict Mortgage Loan

Any Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. in which:

 

  • you or any single Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… of yours owns more than a 5% direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. ; 
  • any group of your Lender Senior Executives Lender Senior ExecutivesFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… together owns more than a 10% direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. ; or
  • you or any of your Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. Affiliates AffiliatesWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… is the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager.
Controlling Conflict Mortgage Loan

Any Conflict Mortgage Loan where:

 

  • you
    • can (other than through the exercise of a lender's rights and remedies under the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. ) require changes to the management, operations, or decision-making of the Borrower BorrowerPerson who is the obligor per the Note. , the Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). holding a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or any Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or
    • own any Preferred Equity Preferred EquityA direct or indirect investment in the Borrower, for which the organizational documents provide that equity investor with: an asset management fee or other fee before dividends, distributions, payments, or returns are paid to the investors; or preferred or unequal rights to receive… in the Borrower BorrowerPerson who is the obligor per the Note. ; 
  • any of your Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. Affiliates AffiliatesWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… or any employees or any group of employees of yours or any of your Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. Affiliates AffiliatesWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key…
    • can require changes to the management, operations, or decision-making of the Borrower BorrowerPerson who is the obligor per the Note. , the Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). holding a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or any Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , 
    • individually or together own a 25% direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. or in any Person PersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). holding a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the Borrower BorrowerPerson who is the obligor per the Note. at or after loan origination (including any interest acquired as part of a Transfer/Assumption Transfer/AssumptionTransaction changing the ownership of the Borrower or Property. ), 
    • own any Preferred Equity Preferred EquityA direct or indirect investment in the Borrower, for which the organizational documents provide that equity investor with: an asset management fee or other fee before dividends, distributions, payments, or returns are paid to the investors; or preferred or unequal rights to receive… in the Borrower BorrowerPerson who is the obligor per the Note. , or
    • exercises rights under DLA Mezzanine Financing DLA Mezzanine FinancingMezzanine Financing provided by an approved mezzanine lending affiliate of a DUS Lender. that results in a Controlling Conflict Mortgage Loan under these requirements; or
  • any of your Lender Senior Executives Lender Senior ExecutivesFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… owns or Controls ControlsPossessing, directly or indirectly, the power to direct or cause the management and operations of an entity (e.g., through the ownership of voting securities or other ownership interests, or by contract). any direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. .

You must not

  • Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. a Prohibited Conflict Mortgage Loan, or
  • cause any Portfolio Mortgage Loan Portfolio Mortgage LoanMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. to become a Prohibited Conflict Mortgage Loan.
312.02

Restrictions
312.02A

Underwriting

Requirements

You must ensure that no Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. employee or other person involved in Conflict Mortgage Loan underwriting and approval owns any direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. .

You must include the following in your Transaction Approval Memo:

  • the amount of any direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. owned by any Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… , other Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. employee or group of employees; and
  • answers to the following questions, including an explanation if your answer to a question is yes:
    • Does any Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… , other Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. employee or group of employees, or any person who participated in the underwriting or approval of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , own any direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. ?
    • Can any Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… , other Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. employee or group of employees, or any person who participated in the underwriting or approval of the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , require changes to the management, operations, or decision-making of the Borrower BorrowerPerson who is the obligor per the Note. ?

In addition, your underwriting submission must include:

  • copies of the Borrower's Borrower'sPerson who is the obligor per the Note. organizational documents and financial statements;
  • copies of all organizational documents and financial statements for any Lender Affiliate Lender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. that holds a direct or indirect equity ownership interest in the Borrower BorrowerPerson who is the obligor per the Note. ; and
  • an organizational chart or diagram showing the:
    • Borrower's Borrower'sPerson who is the obligor per the Note. complete ownership structure;
    • relationship among the Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. , Borrower BorrowerPerson who is the obligor per the Note. , and applicable Lender Affiliate Lender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. ; and
    • percentage ownership of each entity.

Operating Procedures

You must designate the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. as a Conflict Mortgage Loan in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .

312.02B

Servicing

Requirements

As Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. of a Controlling Conflict Mortgage Loan, you must not

  • participate in loss mitigation or special asset management decisions if it becomes a Non-Performing Mortgage Loan Non-Performing Mortgage LoanMortgage Loan with an uncured default. , or
  • be notified of, or participate in, any negotiations or communications between Fannie Mae and the Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… (or any Affiliate AffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of any of them).

Fannie Mae will make reasonable efforts to provide copies of written communications between Fannie Mae and other parties.

These servicing restrictions apply as long as the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. is considered a Controlling Conflict Mortgage Loan.

Operating Procedures

  1. Fannie Mae has sole discretion to decide what action, if any, to take regarding any Controlling Conflict Mortgage Loan, any Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing a Controlling Conflict Mortgage Loan, or any Borrower BorrowerPerson who is the obligor per the Note. or Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. .
  2. If Fannie Mae decides that a Controlling Conflict Mortgage Loan has a material risk of default or other characteristics of increased risk, it can
    • designate a substitute servicer or subservicer, or
    • terminate (with or without cause) your right to service the Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .
  3. Fannie Mae will comply with the  Program Rules Part 3 Sections B and C relating to Fannie Mae initiated servicing transfers.  After servicing is transferred, you will retain your loss sharing obligation.
312.02C

No First Right of Refusal

Requirements

You will not have any First Right of Refusal to purchase a Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). that secured a Conflict Mortgage Loan, even if the Loss Sharing Addendum to the MSSA MSSAProgram Documents per the Multifamily Selling and Servicing Agreement. grants you this right.

312.02D

Additional Disclosure

Operating Procedures

For an MBS MBSMortgage-Backed Security backed by a Conflict Mortgage Loan, you must indicate in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system.

  • that additional disclosure is required, and
  • whether it is the Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. , a Lender Affiliate Lender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. , a Lender Senior Executive Lender Senior ExecutiveFor any Lender any:   a.  senior executive officer serving as its president, chief executive officer, chief financial officer, chief operating officer, chief production officer, chief underwriter, chief asset manager, chief legal officer, chief information security officer, chief compliance… , a Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. employee, or group of employees who has a Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. or a non-Controlling Interest Controlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. .
312.02E

Notifications

Requirements

If, after delivering a Mortgage Loan Mortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , it becomes a Conflict Mortgage Loan, you must deliver all materials described in this Section to Multifamily Asset Management Multifamily Asset ManagementTeam that can be contacted at [email protected]. within 30 days after acquiring each equity interest.