Chapter 20

Forward Commitments

Section 2001	Generally

2001.01	Description

Requirements

You must 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 permanent 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 complies with the Forward Commitment Confirmation.

2001.02	Eligible Properties

Requirements

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). undergoing new construction or substantial rehabilitation is eligible for a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. . PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). substitutions are not permitted.

Section 2002	Funded Forward Commitments

Guidance

You may contact the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. for funded Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. information.

Section 2003	Unfunded Forward Commitments

2003.01	Terms and Interest Rate Determination

2003.01A	Terms

Requirements

Terms	Unfunded Forward Commitment Requirements
Forward Commitment Term	30-month maximum for construction and lease up, unless extended per Part III, Chapter 20: Forward Commitments, Section 2003.05C: Forward Commitment Extensions.
Borrower Commitment	Must: have the same terms as the Forward Commitment Confirmation; comply with this Chapter; and comply with all Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. documents.
Loan Type	Must be a fixed rate or variable rate: 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. ; or tax-exempt bond credit enhancement or associated Taxable TailTaxable TailTaxable debt secured by the Property securing the Credit Enhancement Mortgage Loan. .
Expiration or Termination	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 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 an immediate DeliveryDeliverySubmission 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. if the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expired, or terminated.

2003.01B	Interest Rate Determination and Rate Lock

Guidance

The interest rate for a permanent 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 determined:

with a Rate LockRate 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. as of the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. date; or
for a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. on a 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. , at 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. pricing per Part IV, Chapter 8: Bond Transactions and Credit Enhancement Mortgage Loans, Section 801.04: Rate Lock.

Operating Procedures

You must

set the Guaranty FeeGuaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. and Servicing FeeServicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. at Rate LockRate 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
ensure they are paid only on the permanent 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. .

No Guaranty FeeGuaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. or Servicing FeeServicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. will be charged during the construction period.

2003.02	Good Faith Deposit and Fees

2003.02A	Good Faith Deposit

Requirements

You must collect the Good Faith DepositGood Faith DepositAmount you collect from the Borrower when originating a Mortgage Loan per Part IV, Chapter 2: Rate Lock and Committing, Section 203: Good Faith Deposits. from the BorrowerBorrowerPerson who is the obligor per the Note. per

2003.02B	Fees

Requirements

The following fees apply to Forward CommitmentsForward CommitmentsCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .

Fees	Requirements
Standby Fee	For the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. term, the fee is: per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ; and due when the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. is confirmed.
Standby Extension Fee	For each extension contemplated in the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , the fee is: per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ; and due when Fannie Mae processes the extension. Any additional extension terms and fees are at Fannie Mae’s discretion.
Rate Lock Extension Fee	For a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. not involving a 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. , per Part IV, Chapter 2: Rate Lock and Committing, Section 204.03B: Rate Lock Extensions and the Pricing MemoPricing MemoApplicable DUS Pricing Memo or non-DUS Pricing Memo communicating pricing for various products and features. .
Non-Delivery Fee	If the conversion conditions are not met or the permanent 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 not DeliveredDeliveredSubmission 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. per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , the fee is: for: a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. involving a 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. , per the Credit Enhancement Commitment Letter; or all other Forward CommitmentsForward CommitmentsCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , per Form 4210; and drafted from your account on the earlier of the Forward Commitment’sForward Commitment’sCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration date, or termination by Fannie Mae.
Shortfall Fee	For a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. not involving a 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. , if the permanent 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. closes, but its original principal amount is less than 90% of the maximum 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, the fee is: per Form 4210; and drafted from your account by the permanent 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. closing.
Origination Fee; Construction Loan Administration Fee	You must: charge the BorrowerBorrowerPerson who is the obligor per the Note. : an Origination FeeOrigination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. per the Pricing MemoPricing MemoApplicable DUS Pricing Memo or non-DUS Pricing Memo communicating pricing for various products and features. ; and a Construction Loan Administration Fee covering the actual loan administration costs, but no less than $500 per month; and not pay these fees to Fannie Mae.

2003.03	Forward Commitment Underwriting

2003.03A	Generally

Requirements

You must:

Underwrite, originate, and service a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. 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 if it were an immediate funding 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. .
Agree to issue the Borrower CommitmentBorrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. .
Determine the construction lender has
- completed its underwriting, and
- agreed to issue a construction financing commitment.
Confirm the InvestorInvestorMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. will
- issue its commitment to purchase the MBSMBSMortgage-Backed Security , and
- meet the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. conditions, including timing.

2003.03B	Construction and Feasibility Review

Guidance

You should:

Assess the:
- construction lender’s capacity to fund and monitor the construction loan; and
- ability of the development team and general contractor to
  - complete the project, and
  - post an acceptable bond or letter of credit for the construction lender.
Review and approve the:
- project budget, including construction contingencies, and align any deferred development fee to market rates;
- LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity funding schedule;
- pro forma underwriting;
- feasibility of repaying the construction loan at conversion, including:
  - evaluating several stress-test scenarios such as a decline in rents, an increase in operating expenses, or other circumstances;
  - having the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or construction lender retain an appropriate portion of the development fee until specified construction and lease up milestones are met;
  - the sufficiency of the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor’s equity funding; and
  - the availability of other capital sources such as grants or subordinate debt;
- absorption schedule, including a capture band analysis of submarket income;
- BorrowerBorrowerPerson who is the obligor per the Note. organizational documents;
- Affordable Regulatory Agreements; and
- Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. documents.
Ensure the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. term is sufficient to allow for:
- 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). to be completed and leased;
- you to submit the conversion package;
- Fannie Mae to approve the conversion; and
- you to 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. the permanent 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. .

2003.03C	Third-Party Reports

Requirements

If you and the construction lender use a single set of third-party reports for underwriting, the reports

must be addressed to both lenders, but
can be contracted and paid for by either lender.

Operating Procedures

You must obtain the following reports.

Report	Timing	You must...
Property Condition Assessment	Before Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property.	Complete a PCAPCAAssessment of the Property's physical condition and historical operation. for all substantial rehabilitation properties.
Property Condition Assessment	Before conversion	Obtain a PCAPCAAssessment of the Property's physical condition and historical operation. and complete the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required… per Part II, Chapter 4: Inspections and Reserves.
Environmental Site Assessment	Before construction	Obtain a Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
Environmental Site Assessment	Before conversion	Obtain a new Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. . Obtain a Phase II ESAPhase II ESAEnvironmental Site Assessment conducted per the current ASTM E-1903 standard, or any other post-Phase I ESA, and the resulting report. if recommended by the new Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. . Ensure any required remediation is complete before you 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. the permanent 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. .
Architectural Review	Before Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property.	From an independent consulting architect, obtain an architectural review assessing 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). preliminary plans and specifications, compliance with local building codes, site characteristics, choice of building materials and finishes, asset quality, marketability, and overall design appropriateness for the intended use.
	During construction	Use a consulting architect for in-field inspections.
	Final inspection	Require the consulting architect to conduct a final inspection confirming 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). : was built according to the approved plans and specifications; and meets all applicable building codes and zoning requirements.
Appraisal	Before 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.	Obtain an AppraisalAppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. per Part II, Chapter 2: Valuation and Income.
Appraisal	Before conversion	Obtain a new or updated AppraisalAppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. if you request an increase in the permanent 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 above the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. terms, or Fannie Mae requires it.

Guidance

You may use the same consulting architect as the construction lender if the consulting architect:

is independent and not an employee of the construction lender;
is retained directly by you and engaged separately by the construction lender; and
acknowledges they may be required to make recommendations that do not align with those of the construction lender.

2003.04	Commitment

Requirements

All:

Forward CommitmentsForward CommitmentsCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. must comply with Part IV, Chapter 2: Rate Lock and Committing.
Borrower CommitmentsBorrower CommitmentsYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. must comply with Part IV, Chapter 2: Rate Lock and Committing, Section 201.01: Borrower Commitment.

Operating Procedures

You must

complete the steps in the following table, and
submit the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. per the Committing & Delivery of Unfunded Forwards Job Aid.

Step	You must...
For All Mortgage Loans
1	Obtain an executed Borrower CommitmentBorrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. including: BorrowerBorrowerPerson who is the obligor per the Note. covenants to close the permanent 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. per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. terms, and pay all required fees and deposits; and all required Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. and third-party documents in final form, including Affordable Regulatory Agreements (or other affordable housing restrictions), and Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. documents and subordination agreements.
2	Pay all fees or submit acceptable collateral to Fannie Mae.
3	Ensure the BorrowerBorrowerPerson who is the obligor per the Note. accepted the construction loan commitment, and complied with its conditions.
4	Obtain evidence that state and local authorities issued the BorrowerBorrowerPerson who is the obligor per the Note. all land disturbance, site, grading, foundation, and building permits, or their equivalents.
Additionally, for all non-Credit Enhancement Mortgage Loans
5	Obtain a Rate LockRate 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. .
6	Obtain the signed Delivery Assurance Agreement (Unfunded Forwards) (Form 6488).
7	Ensure any Delivery Assurance Security InstrumentDelivery Assurance Security InstrumentThe applicable Security Instrument (Form 6025 series). covers any permitted Borrower CommitmentBorrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. extension terms.
8	Record any Delivery Assurance Security InstrumentDelivery Assurance Security InstrumentThe applicable Security Instrument (Form 6025 series). 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). before the construction loan closing.
Additionally, for all Credit Enhancement Mortgage Loans
9	Ensure 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. pricing complies with Part IV, Chapter 8: Bond Transactions and Credit Enhancement Mortgage Loans, Section 801.04: Rate Lock.
10	Obtain the Credit Enhancement Commitment Letter.

After you complete these steps, Fannie Mae will confirm the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .

Within 30 days after the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. is confirmed, you must 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. the documents listed in:

steps 4, 6, 8, and 10; and
the Pre-Construction Monitoring Package (Form 4543).

2003.05	Construction Period

2003.05A	Monitoring

Requirements

You must monitor the construction process to ensure that when the permanent 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 converted it will comply with the

Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , and
permanent 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. 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. .

Guidance

During the construction or substantial rehabilitation period:

Responsible Party	Activities
You	Evaluate inspections and change orders. Reject any change orders that would: change 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). main design or asset quality features; make material changes; or result in combined hard and contingency costs greater than the construction loan budget (i.e., the construction loan must remain in balance). Review the consulting architect’s progress reports and provide them to Fannie Mae upon request. Monitor the construction loan and lease-up status.
Consulting Architect	Regularly perform on-site construction progress inspections. Ensure the time between inspections is not more than 2 months. Issue a progress report after each inspection, and whenever the construction lender approves a disbursement.

Responsible Party

Activities

You

Evaluate inspections and change orders.
Reject any change orders that would:
- change 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). main design or asset quality features;
- make material changes; or
- result in combined hard and contingency costs greater than the construction loan budget (i.e., the construction loan must remain in balance).
Review the consulting architect’s progress reports and provide them to Fannie Mae upon request.
Monitor the construction loan and lease-up status.

Consulting Architect

Regularly perform on-site construction progress inspections.
Ensure the time between inspections is not more than 2 months.
Issue a progress report after each
- inspection, and
- whenever the construction lender approves a disbursement.

You and the construction lender may both use the same consulting architect for the

preliminary and final plans,
specification reviews, and
construction period inspections.

2003.05B	Reporting

Requirements

You must provide quarterly reports to Fannie Mae 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. using Construction Period Monitoring (Form 4211).

2003.05C	Forward Commitment Extensions

Requirements

You must inform the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and the Forwards TeamForwards TeamTeam that can be contacted at [email protected]. if conversion may be delayed.

Guidance

If the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. permits, you may approve a maximum delegated Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. extension up to:

for MBS for BondsMBS for BondsFannie Mae MBS: issued to credit enhance tax-exempt Bonds; or exchanged for Bonds redeemed at MBS issuance. , two 6-month periods; or
for any other 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. , one 6-month period.

Operating Procedures

The delegated Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. extension will become effective when all of the following occur:

you submit the following extension documentation to Fannie Mae at least 30 days before the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration:
- the Borrower'sBorrower'sPerson who is the obligor per the Note. extension request;
- a project status report, including reasons for the delay;
- verification the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. is likely to convert to a permanent 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. within the extension period;
- anticipated shortfall analysis 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. amount at conversion and the source of funds for filling the shortfall;
- confirmation there has been no material adverse change in the BorrowerBorrowerPerson who is the obligor per the Note. or PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and
- confirmation the Borrower'sBorrower'sPerson who is the obligor per the Note. construction loan will be extended by the same extension period as the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. term.
Fannie Mae processes the extension request; and
at least 1 business day before the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration:
- you enter all fees into C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. ;
- Fannie Mae receives the fees;
- you submit a C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. request to adjust the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration date; and
- you are notified the adjustment has been completed.

Requirements

Fannie Mae must approve all Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. extensions beyond the maximum delegated term. To request Fannie Mae approval:

you must submit
- all extension documentation required for a delegated extension, and
- any requested revised stabilization analysis; and
the BorrowerBorrowerPerson who is the obligor per the Note. must pay any required fees.

2003.06	Construction Completion

Reqiurements

You must ensure that all ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). 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). are completed, including

amenities,
landscaping,
signage,
parking, etc.

If sufficient funds will be reserved in a Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. , minor punch list and weather-sensitive items may be incomplete.

Guidance

Use the following table for confirming construction completion and occupancy.

Responsible Party	Activities
Consulting Architect	Conduct a final PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection. Certify 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). was completed per this Section.
You	Ensure all ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). : were completed in a good and workmanlike manner per the approved plans and specifications; are LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. -free; and for all governmental authorities with jurisdiction over 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). , comply with all applicable laws, building codes, zoning requirements, subdivision requirements, fire and safety laws, ADA requirements, and design and construction requirements per the Fair Housing Act. Obtain: certificates and reports showing the BorrowerBorrowerPerson who is the obligor per the Note. completed all ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). per the GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. from the architect, consulting architect, and other project consultants; evidence of all public utilities for 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). ; copies of: all PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operating permits and licenses; and either: each unconditional certificate of occupancy (or the local equivalent) for all required portions of 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 evidence 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). passed all inspections and received all approvals before occupancy, if local law does not require certificates of occupancy; and a Certification of Substantial Completion (AIA Document G704) stating the ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). were completed per the final plans and specifications, and executed by the appropriate parties, including the architect, general contractor, and BorrowerBorrowerPerson who is the obligor per the Note. .

Responsible Party

Activities

Consulting Architect

Conduct a final PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection.
Certify 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). was completed per this Section.

You

Ensure all ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). :

were completed in a good and workmanlike manner per the approved plans and specifications;
are LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. -free; and
for all governmental authorities with jurisdiction over 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). , comply with all
- applicable laws,
- building codes,
- zoning requirements,
- subdivision requirements,
- fire and safety laws,
- ADA requirements, and
- design and construction requirements per the Fair Housing Act.

Obtain:

certificates and reports showing the BorrowerBorrowerPerson who is the obligor per the Note. completed all ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). per the GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. from the
- architect,
- consulting architect, and
- other project consultants;
evidence of all public utilities for 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). ;
copies of:
- all PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operating permits and licenses; and
- either:
  - each unconditional certificate of occupancy (or the local equivalent) for all required portions of 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
  - evidence 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). passed all inspections and received all approvals before occupancy, if local law does not require certificates of occupancy; and
a Certification of Substantial Completion (AIA Document G704) stating the ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). were completed per the final plans and specifications, and executed by the appropriate parties, including the
- architect,
- general contractor, and
- BorrowerBorrowerPerson who is the obligor per the Note. .

2003.07	Permanent Loan Final Underwriting

2003.07A	Generally

Requirements

Before converting, you must complete the permanent 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. final underwriting.

Topic	You must...
DSCR and LTV	Ensure 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). complies with the committed DSCRDSCROn 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 Preferred Equity payments. and LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage. .
Eligibility	Ensure: The BorrowerBorrowerPerson who is the obligor per the Note. : does not change; remains eligible; and still owns 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 Key PrincipalsKey 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. : do not change; and have not reduced their direct or indirect ownership interest and control over the BorrowerBorrowerPerson who is the obligor per the Note. or 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). . There is no material adverse change in the condition, financial or otherwise, of the BorrowerBorrowerPerson who is the obligor per the Note. , any GuarantorGuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , any 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 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). .
Construction Loan Status	Ensure the BorrowerBorrowerPerson who is the obligor per the Note. is current on the construction loan payments and not in default, and has not been delinquent during the previous 12 months.
Certification of Rent Roll	On the permanent Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , certify with the BorrowerBorrowerPerson who is the obligor per the Note. there has been no material adverse change in the Certification of ProjectProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership. Rent Roll.
Equity Contributions	As of the permanent 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. DeliveryDeliverySubmission 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. , obtain a BorrowerBorrowerPerson who is the obligor per the Note. certificate, or other Fannie Mae-accepted evidence, that all funds reflected on the Borrower'sBorrower'sPerson who is the obligor per the Note. sources and uses of funds statement were: received, including all equity contributions; and properly invested in 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). .
LIHTC Reservation or Allocation	If 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). is eligible for LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , verify the Borrower'sBorrower'sPerson who is the obligor per the Note. IRS Form 8609 issued by the state housing finance agency reflects the required LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. amount.

Guidance

Fannie Mae may defer the requirement to obtain IRS Form 8609 before conversion based on factors such as whether:

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). financials exceed the pro-forma underwriting per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ;
all other conversion criteria were met;
the BorrowerBorrowerPerson who is the obligor per the Note. certified 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). complies with the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. requirements;
you and the tax accountant approved the cost certification;
the BorrowerBorrowerPerson who is the obligor per the Note. submitted the cost certification to the state, with no anticipated significant adjustments;
the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor contributed at least 90% of their equity, with the remaining 10% withheld for any minor adjustments to 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). tax depreciable basis,
- adjusters, or
- developer fee;
the sources and uses of funds are in balance, and all required funds were received to complete and lease-up 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). ;
you have documentation confirming the IRS Form 8609 application and the state’s acknowledgement of receipt;
you expect to receive the IRS Form 8609 timely post-conversion;
you will monitor receipt of IRS Form 8609 as a post-closing matter and deliver a copy to Fannie Mae; and
the BorrowerBorrowerPerson who is the obligor per the Note. has experience complying with IRS Form 8609 in the specific state.

2003.07B	Stabilized NCF

Requirements

You must:

Confirm 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). will qualify for the full 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. by
- evaluating its performance, and
- assessing whether it meets the projected
  - income,
  - expenses, and
  - 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….
Use the Forward Loan Conversion Analysis (Form 4212) to
- annualize the certified project rent rolls,
- compare pro forma and actual operating expenses, and
- calculate 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). stabilized 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… per
  - this Chapter, and
  - Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis or the applicable Part III chapter based on the specific product.
Submit the Forward Conversion Analysis Summary (Form 4618) that verifies your Chief Underwriter’s involvement and agreement with the analysis.

The permanent Mortgage Loan Delivery PackageMortgage Loan Delivery PackageLoan Documents and underwriting material required in connection with the Delivery of a Mortgage Loan. documentation must include:

the percentage of 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). occupied units categorized by
- bedroom configuration,
- square footage, and
- rent type (low income or market rate) delineating any Section 8 or other subsidized rental program tenants;
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). actual Effective Gross IncomeEffective Gross IncomeOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. for each of the previous 3 months, including only rental income and permitted other income from the units less any
- rent concessions,
- reductions,
- inducements, or
- forbearance; and
rental income by rent type (low income or market rate).

You must use the following table to calculate stabilized 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….

STABILIZED NCF
Item	Function	Description
1		For each of the most recent trailing 3 months before conversion: determine the Gross Potential RentGross Potential RentOn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. from an executed Certification of ProjectProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership. Rent Roll; and confirm that at least 90% of the units were physically occupied by a Qualified TenantQualified TenantParty occupying a dwelling unit in a Property in full compliance with a lease. with an acceptable LeaseLeaseWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent. .
	EQUALS	GROSS POTENTIAL RENT
2	MINUS	Economic vacancy using the higher of original Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting, or actual annualized trailing 3-month operating statements.¹ Include: concessions if they are prevalent in the market, or were used to achieve initial stabilization and will remain; and a re-leasing cost allowance if 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). has short term leases.
3	PLUS	For an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. , include annualized other income per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.01: Underwritten NCF.
4	PLUS	Commercial income per Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF).
	EQUALS	EFFECTIVE GROSS INCOME
5	MINUS	Line-by-line operating expenses using the higher of: actual annualized trailing 3-month operating statements; or original Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting, adjusted by substituting the following actual expenses, if known: real estate taxes; property liability and other insurance; and management fees.
6	MINUS	Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense per Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF).
	EQUALS	STABILIZED NCF
1 Assess if there was any decline in NRI per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis.

2003.07C	Final Permanent Mortgage Loan Amount

Requirements

You must ensure the permanent 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 is less than or equal to the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .

Operating Procedures

Steps	Actions
1	You must determine the permanent 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 using the Forward Loan Conversion Analysis (Form 4212).
2	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). actual stabilized 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… before permanent 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. DeliveryDeliverySubmission 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. is less than the original Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting, reduce the permanent 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 to comply with the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. DSCRDSCROn 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 Preferred Equity payments. and LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage. .
3	If the permanent 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 in Step 2 is less than the Forward Commitment Confirmation Mortgage Loan amount, verify the BorrowerBorrowerPerson who is the obligor per the Note. has secured a source of funds, whether debt or equity, to cover the difference.
4	Ensure any additional debt the BorrowerBorrowerPerson who is the obligor per the Note. incurs to cover the difference in Step 3, is only secured by a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. 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). if it is an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. , and the subordinate debt complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704: Subordinate Financing.
5	If the permanent 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 in Step 2 results in a loan curtailment, the BorrowerBorrowerPerson who is the obligor per the Note. must close the permanent 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. at the reduced amount, and you must 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. the permanent 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. at the reduced amount.
6	If 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). qualifies for additional financing beyond the Forward Commitment Confirmation Mortgage Loan amount, submit 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. : a request for additional financing; your conversion documentation; and a comparative analysis showing the stabilized 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… is greater than the original Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting. A new pre-conversion AppraisalAppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. is not required if the pre-construction Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. and permanent 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 comply with the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. maximum LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage. .
7	Any increase in the permanent 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 approved by Fannie Mae will: be limited to the Maximum Loan Amount Increase percentage per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ; be made on the currently available terms and conditions; and not be approved simply because construction costs, cost overruns, or change orders were higher than expected.

2003.07D	Third-Party Reports

Requirements

You must obtain third-party reports per Part III, Chapter 20: Forward Commitments, Section 2003.03C: Third-Party Reports.

2003.08	Conversion

2003.08A	Eligibility

Requirements

To convert to the permanent 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 confirm:

construction is complete;
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). achieved the
- minimum occupancy,
- income, and
- debt service coverage;
the eligibility criteria in Part III, Chapter 20: Forward Commitments, Section 2003.07A: Generally have been met; and
the permanent 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 DeliveredDeliveredSubmission 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. on Fannie Mae Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .

2003.08B	Timeline

Operating Procedures

Timing	You must...
30 days before the Borrower's closing	Contact the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and Forwards TeamForwards TeamTeam that can be contacted at [email protected]. , to provide the project development status, and anticipated conversion and DeliveryDeliverySubmission 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. date. Submit 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. : Preliminary Notice of Conversion: for Credit Enhancement Mortgage LoansCredit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , using the form attached in the Credit Enhancement Commitment Letter; and for all other Mortgage LoansMortgage 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. , using Form 4616; Forward Loan Conversion Analysis (Form 4212); Forward Conversion Analysis Summary (Form 4618); and compliance evidence required by Fannie Mae conditions. Receive a conversion approval letter from the Forwards TeamForwards TeamTeam that can be contacted at [email protected]. after all Fannie Mae imposed conditions are met.
At Conversion	Submit the permanent 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. 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. in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. per the Committing & Delivery of Unfunded Forwards Job Aid. Document the permanent 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. using Fannie Mae Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. attached to the Borrower CommitmentBorrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. . For Credit Enhancement Mortgage LoansCredit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , submit 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. the final conversion notice using the form attached in the Credit Enhancement Commitment Letter.
By the Delivery Deadline	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. the permanent Mortgage Loan Delivery PackageMortgage Loan Delivery PackageLoan Documents and underwriting material required in connection with the Delivery of a Mortgage Loan. and submit the permanent 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. data per Part IV, Chapter 4: Delivery, Section 401: Delivery Deadline, and Part IV, Chapter 4: Delivery, Section 402: Submission. For a 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. , also submit applicable data on the Bond, Loan, Borrower, and Property pages in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. within 3 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. after 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. closing.

2003.09	MBS Issuance

Operating Procedures

The MBSMBSMortgage-Backed Security will be issued per your delivery instructions after you 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. the permanent 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. .

2003.10	Forward Commitment Termination

Guidance

Fannie Mae may terminate the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. if:

You fail to 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 permanent 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. per the Forward Commitment Confirmation terms and conditions.
The BorrowerBorrowerPerson who is the obligor per the Note. does not begin PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). construction or substantial rehabilitation within 180 days after you accept the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .
A construction loan default occurs and is not cured within 90 days.
A substantial construction defect occurs that may threaten tenant life and safety unless:
- the BorrowerBorrowerPerson who is the obligor per the Note. repairs the defect within 90 days;
- the repairs satisfy both you and your consulting architect; and
- after paying all repair costs, the available remaining funds are sufficient to pay for all
  - work performed,
  - materials used or ordered, and
  - other required unpaid project costs per the contract.

Requirements

If Fannie Mae terminates the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , all applicable fees must be paid per the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. terms.

If the BorrowerBorrowerPerson who is the obligor per the Note. terminates the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , you must:

submit a request to collapse the transaction to the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and the Forwards TeamForwards TeamTeam that can be contacted at [email protected]. at least 30 days before the Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration;
for 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. transactions, coordinate with Fannie Mae’s counsel; and
contact Multifamily AcquisitionsMultifamily AcquisitionsTeam that can be contacted at [email protected]. to withdraw the transaction in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .