Chapter 2

Mortgage Loan

Section 201	Registration and Multifamily Affordability Estimator

Requirements

You must:

register each Mortgage LoanMortgage 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 GatewayDUS 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 GatewayDUS 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'sProperty'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 ContractLender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. provides you with the delegated authority, you may underwrite, commit, and DeliverDeliverSubmission 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 LoanMortgage 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-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval before requesting a CommitmentCommitmentContractual 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 Pre-Review Mortgage LoanPre-Review Mortgage LoanMortgage Loan that is not delegated to you and requires Fannie Mae’s approval before Rate Lock. and any Mortgage LoanMortgage 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 is 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-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval request before submitting it.

Operating Procedures

The Pre-ReviewPre-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-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. request to the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. via DUS GatewayDUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. that includes, at a minimum:

a loan-sizing spreadsheet with the preliminary Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender 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 Pre-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. reasons; and
any additional information requested by Fannie Mae.

Step 2: Fannie Mae’s Pre-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. response will indicate:

Approval. You have Pre-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval to underwrite the Mortgage LoanMortgage 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 CommitmentCommitmentContractual 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.
Resubmission Required. You are authorized to underwrite the Mortgage LoanMortgage 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 you must resubmit it after full underwriting for Fannie Mae Pre-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval at least 10 Business DaysBusiness 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 requesting a CommitmentCommitmentContractual 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. .
Decline Approval. You do not have Fannie Mae Pre-ReviewPre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval and may not request a CommitmentCommitmentContractual 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 BorrowerBorrowerPerson 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 GatewayDUS 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 GatewayDUS 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 BorrowerBorrowerPerson who is the obligor per the Note. expressly accepted the credit; and you sent no adverse action letter.

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 BorrowerBorrowerPerson 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 GatewayDUS 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 GatewayDUS 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 BorrowerBorrowerPerson 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 CreditLetters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. posted as CollateralCollateralProperty, Personal Property, or other property securing a Mortgage Loan. for a Mortgage LoanMortgage 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 CreditLetter 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 CreditLetter 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 CreditLetters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:

Name Fannie Mae as the sole beneficiary.
Have a minimum term of 1 year.
Be issued or confirmed by a financial institution that meets the eligibility criteria in Part I, Chapter 2: Mortgage Loan, Section 204.02: Issuers and Ratings.

All Letters of CreditLetters 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 IssuerIssuerEntity 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 CreditLetter 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 CreditLetter 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 CreditLetter 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 CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is posted as CollateralCollateralProperty, Personal Property, or other property securing a Mortgage Loan. for a Mortgage LoanMortgage 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 CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is required by the GuideGuideMultifamily 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 CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , include the Loan DocumentLoan 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 ManagementLender Risk ManagementTeam that can be contacted at [email protected]. .

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

You, one of your AffiliatesAffiliatesWhen 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 AffiliateAffiliateWhen 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 BorrowerBorrowerPerson who is the obligor per the Note. , may issue a Letter of CreditLetter 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 AffiliateAffiliateWhen 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 BorrowerBorrowerPerson who is the obligor per the Note. .

Fannie Mae, in its sole discretion, may prohibit you from obtaining a Letter of CreditLetter 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 CreditLetter 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 CreditLetter 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 ratings criteria:

a Standard and Poor’s long-term issuer rating of "A" or better; or
a 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 CreditLetter 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 CreditLetter 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 CreditLetter 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 OperationsMultifamily 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 CreditLetter 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 IssuerIssuerEntity 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 CreditLetter 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 PropertyPropertyMultifamily 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 LoanMortgage 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 CreditLetter 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.