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.