1904.02

Credit Enhancement Instrument

Guidance

Fannie Mae’s Credit Enhancement InstrumentCredit Enhancement InstrumentAgreement between Fannie Mae and a Bond Trustee where Fannie Mae provides credit enhancement of a Credit Enhancement Mortgage Loan, Bonds issued to finance a Credit Enhancement Mortgage Loan, or an Interest Rate Hedge Agreement; and if applicable, a Bond liquidity facility. Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. presume the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. 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. will:

  • be the initial lender and secured party under the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. ; and
  • immediately assign the Multifamily Bond Note and Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. to Fannie Mae and the Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. , as co-assignees.

Requirements

You must ensure that Fannie Mae (not you or the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. 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. ) is named as the counterparty or beneficiary in the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. agreements and collateral assignments.

Operating Procedures

Fannie Mae and its counsel will:

  • prepare the
    • Credit Enhancement Commitment Letter,
    • credit enhancement documents,
    • multifamily NoteNoteInstrument evidencing a Mortgage Loan obligation, including  Form 6010 series,  any other Fannie Mae-approved note, and  all applicable addenda, schedules, and exhibits.  ; and
  • review and approve all BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. documents.

You may ask Fannie Mae’s counsel to also prepare other Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , or your counsel may prepare these documents.