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 
  • 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.