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. .