Section 310

Conflict Mortgage Loans

310.01

Description

Requirements

Conflict Mortgage Loan Type

Conflict Mortgage Loan
  • 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. in which:
    • you, or any of your LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. 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 Lender Senior ExecutivesLender 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 BorrowerBorrowerPerson who is the obligor per the Note. , or
      • directly or indirectly controls the BorrowerBorrowerPerson 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 BorrowerBorrowerPerson who is the obligor per the Note. .
  • 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. with DLA Mezzanine FinancingDLA Mezzanine FinancingMezzanine Financing provided by an approved mezzanine lending affiliate of a DUS Lender. .

 

Any equity interest you acquire in the BorrowerBorrowerPerson who is the obligor per the Note. relating solely to obtaining the associated LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. is not considered when determining if 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. is a Conflict Mortgage Loan (see Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 709: LIHTC Properties – Lender Equity Interest).
Prohibited Conflict Mortgage Loan

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. in which:

 

  • you or any single Lender Senior ExecutiveLender 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 BorrowerBorrowerPerson who is the obligor per the Note. ; 
  • any group of your Lender Senior ExecutivesLender 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 BorrowerBorrowerPerson who is the obligor per the Note. ; or 
  • you or any of your LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. 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… is 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). 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 DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. ) require changes to the management, operations, or decision-making of the BorrowerBorrowerPerson who is the obligor per the Note. , the Key PrincipalKey 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 PersonPersonLegal 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 InterestControlling 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 BorrowerBorrowerPerson who is the obligor per the Note. or Key PrincipalKey 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 PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. or GuarantorGuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , or
    • own any Preferred Equity in the BorrowerBorrowerPerson who is the obligor per the Note. ; 
  • any of your LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. 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 any employees or any group of employees of yours or any of your LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. 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…
    • can require changes to the management, operations, or decision-making of the BorrowerBorrowerPerson who is the obligor per the Note. , the Key PrincipalKey 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 PersonPersonLegal 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 InterestControlling 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 BorrowerBorrowerPerson who is the obligor per the Note. or Key PrincipalKey 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 PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. or GuarantorGuarantorKey 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 BorrowerBorrowerPerson who is the obligor per the Note. or in any PersonPersonLegal 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 InterestControlling 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 BorrowerBorrowerPerson who is the obligor per the Note. at or after loan origination (including any interest acquired as part of a Transfer/AssumptionTransfer/AssumptionTransaction changing the ownership of the Borrower or Property. ), 
    • own any Preferred Equity in the BorrowerBorrowerPerson who is the obligor per the Note. , or
    • exercises rights under DLA Mezzanine FinancingDLA 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 ExecutivesLender 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 any direct or indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. .

You must not

  • 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. a Prohibited Conflict Mortgage Loan, or
  • cause any Portfolio Mortgage LoanPortfolio 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.
310.02

Restrictions
310.02A

Underwriting

Requirements

You must ensure that no LenderLenderPerson 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 BorrowerBorrowerPerson 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 BorrowerBorrowerPerson who is the obligor per the Note. owned by any Lender Senior ExecutiveLender 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 LenderLenderPerson 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 ExecutiveLender 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 LenderLenderPerson 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 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. , own any direct or indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. ?
    • Can any Lender Senior ExecutiveLender 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 LenderLenderPerson 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 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. , require changes to the management, operations, or decision-making of the BorrowerBorrowerPerson who is the obligor per the Note. ?

In addition, your underwriting submission must include:

  • copies of the Borrower'sBorrower'sPerson who is the obligor per the Note. organizational documents and financial statements;
  • copies of all organizational documents and financial statements for any Lender AffiliateLender 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 BorrowerBorrowerPerson who is the obligor per the Note. ; and
  • an organizational chart or diagram showing
    • the complete ownership structure of the BorrowerBorrowerPerson who is the obligor per the Note. ,
    • the relationship among the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. , BorrowerBorrowerPerson who is the obligor per the Note. , and applicable Lender AffiliateLender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. , and
    • the percentage ownership of each entity.

Operating Procedures

You must designate 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. as a Conflict Mortgage Loan in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .

310.02B

Servicing

Requirements

As ServicerServicerPrimary 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 LoanNon-Performing Mortgage LoanMortgage Loan with an uncured default. , or
  • be notified of, or participate in, any negotiations or communications between Fannie Mae and the BorrowerBorrowerPerson who is the obligor per the Note. , Key PrincipalKey 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 PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. (or any 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 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 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. 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 PropertyPropertyMultifamily 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 BorrowerBorrowerPerson who is the obligor per the Note. or GuarantorGuarantorKey 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 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. .
  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.
310.02C

No First Right of Refusal

Requirements

You will not have any First Right of Refusal to purchase a PropertyPropertyMultifamily 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 MSSAMSSAProgram Documents per the Multifamily Selling and Servicing Agreement. grants you this right.

310.02D

Additional Disclosure

Operating Procedures

For an MBSMBSMortgage-Backed Security backed by a Conflict Mortgage Loan, you must indicate in C&DC&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 LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. , a Lender AffiliateLender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. , a Lender Senior ExecutiveLender 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 LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. employee, or group of employees who has a Controlling InterestControlling 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 InterestControlling 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. .
310.02E

Notifications

Requirements

If, after delivering 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. , it becomes a Conflict Mortgage Loan, you must deliver all materials described in this Section to Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected]. within 30 days after acquiring each equity interest.