Cash Out Analysis

Requirements

You must:

• examine the risk of allowing cash out to the BorrowerBorrowerPerson who is the obligor per the Note. (see Form 4660 for a description of cash out transactions); and 
• for New ConstructionNew ConstructionProperty recently developed/constructed with any certificates of occupancy received within 12 months before the Commitment Date. , consider 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. amount relative to 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). total development cost basis.

When underwriting a cash-out transaction, you must consider and document in the Transaction Approval Memo:

• the amount of hard equity remaining in 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). debt structure, excluding prior permanent financing costs, such as interest or prepayment premium;
• the length of time the BorrowerBorrowerPerson who is the obligor per the Note. has owned 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). ;
• 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).
  • effective age, and
  • current physical condition;
• over the ownership period, any improvement in
  • asset quality,
  • 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).  operations (i.e., its NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and…), or
  • value; 
• if 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).  value increased due to an increase in NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and…, rather than a decrease in the capitalization rate; and
• for New ConstructionNew ConstructionProperty recently developed/constructed with any certificates of occupancy received within 12 months before the Commitment Date. , 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). total development costs basis per the New Construction table: