Chapter 19

Bond Transactions and Credit Enhancement Mortgage Loans

Section 1901

Description

Guidance

A 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. credit enhancement may involve

  • a StandbyStandbyCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) if the Borrower fails to make required mortgage note payments or if a bankruptcy event has occurred. 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. ,
  • a Direct PayDirect PayCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) regardless of whether the Borrower has reimbursed Fannie Mae for such payments. 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. , 
  • a secondary market 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. , or
  • an MBSMBSMortgage-Backed Security .

In addition to credit enhancing the BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , both the StandbyStandbyCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) if the Borrower fails to make required mortgage note payments or if a bankruptcy event has occurred. 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. and the Direct PayDirect PayCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) regardless of whether the Borrower has reimbursed Fannie Mae for such payments. 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. may provide

  • liquidity support, and
  • if the BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. are issued under an Open IndentureOpen IndentureIndenture for a Bond transaction where a portion of the Bond proceeds finance projects in addition to the Property securing the Mortgage Loan. , credit enhancement 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. .

Requirements

You must coordinate all aspects of 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. transaction with your counsel and Fannie Mae’s counsel.

For BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. that are privately placed or purchased directly, you must consult with the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and Fannie Mae’s counsel for pricing and disclosure requirements.

For a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. 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. , you must also comply with Part III, Chapter 20: Forward Commitments.

Terms Credit Enhancement Instrument MBS for Bonds
Fannie Mae Guarantees
  • 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. P&IP&IPrincipal and interest for Closed IndentureClosed IndentureIndenture for a Bond transaction where all of the Bond proceeds finance only the Property securing the Mortgage Loan. BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. .
  • 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. P&IP&IPrincipal and interest for Open IndentureOpen IndentureIndenture for a Bond transaction where a portion of the Bond proceeds finance projects in addition to the Property securing the Mortgage Loan. BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. .
  • Up to 25 basis points of BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. fees.
 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. P&IP&IPrincipal and interest .
Basis

Either

 

  • StandbyStandbyCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) if the Borrower fails to make required mortgage note payments or if a bankruptcy event has occurred. , or
  • Direct PayDirect PayCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) regardless of whether the Borrower has reimbursed Fannie Mae for such payments. .
 Direct PayDirect PayCredit enhancement under which Fannie Mae makes principal and interest payments directly to the Bond Trustee (for payment to bondholders) regardless of whether the Borrower has reimbursed Fannie Mae for such payments. .
Interest Rate Type

Either

 

  • fixed rate, or
  • variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. .

Either

 

  • fixed rate, or
  • variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. with a SARM Loan.
Documents
  • Any new 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. issued must be documented on Fannie Mae 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. and Loan DocumentLoan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. forms.
  • For substitute credit enhancements where the existing BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. remain outstanding, the existing 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. and Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. must be:
    • amended and restated on Fannie Mae form documents; or
    • amended only as necessary per Fannie Mae.
Credit Enhancement Timing

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. is delivered

 

  • on the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. issuance date for a new 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. , or 
  • when Fannie Mae provides new or substitute credit enhancement.
 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 originated with 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. issuance and the MBSMBSMortgage-Backed Security , when issued, is deposited with the Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. .
Section 1902

Outside Counsel
1902.01

Engagement

Requirements

You must request Fannie Mae’s outside counsel assignment before any transaction structuring discussions begin.

Operating Procedures

To request Fannie Mae’s outside counsel assignment, submit a Counsel Designation Request (Form 4625.B) to [email protected].

Fannie Mae selects its own outside counsel but may consider your request for a specific counsel.

1902.02

Fees

Requirements

You must pay Fannie Mae's outside counsel fees and costs regardless of whether the transaction closes.

Guidance

You may charge the BorrowerBorrowerPerson who is the obligor per the Note. for Fannie Mae’s outside counsel fees and costs.

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. , you may choose to have Fannie Mae’s outside counsel

  • prepare the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , and
  • review title insurance and survey matters.

If Fannie Mae’s outside counsel performs these services:

  • the counsel will only represent Fannie Mae, not you; and
  • you will be responsible for the additional fees.
Section 1903

Third Parties
1903.01

Generally

Requirements

You must coordinate with all third parties and their counsels to ensure the transaction complies with their requirements.

Fannie Mae reserves the right, in its sole discretion, to reject any third party’s involvement, including:

  • BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. ;
  • Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. ;
  • 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. underwriter;
  • any Remarketing AgentRemarketing AgentPerson selected by the Issuer to reset the interest rate on the Bonds in order to resell any Bonds tendered by investors on the interest rate reset date. ;
  • any 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. liquidity provider; and
  • any Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. provider.
1903.02

Remarketing Agent

Requirements

You must ensure any Remarketing AgentRemarketing AgentPerson selected by the Issuer to reset the interest rate on the Bonds in order to resell any Bonds tendered by investors on the interest rate reset date. :

  • currently remarkets at least $250 million of weekly variable rate demand BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. ;
  • has continuously remarketed weekly variable rate demand BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. for the past 3 years;
  • has a minimum net worth of $5 million; and
  • has a minimum broker line of credit sufficient for warehousing $100 million of rated BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. at any time.

Operating Procedures

Fannie Mae’s counsel must confirm that the Remarketing Agreement terms comply with Fannie Mae requirements.

Section 1904

Legal Documents
1904.01

Generally

Operating Procedures

Fannie Mae’s counsel will advise your counsel regarding the appropriate Fannie Mae Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. for the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. structure.

Immediately after 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. closing, you must:

  • obtain a final 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. transcript from 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. counsel; 
  • submit it via CD to Multifamily Certification and CustodyMultifamily Certification and CustodyTeam responsible for taking custody of and certifying Mortgage Loans that can be contacted at  [email protected], (800) 940-4646, or for submissions:  Fannie Mae (Multifamily) Certification and Custody 21240 Ridgetop Circle Suite 125-130 Sterling, VA  20166. ; and
  • maintain a copy in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. . 
1904.02

Credit Enhancement Instrument

Guidance

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

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

Requirements

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

Operating Procedures

Fannie Mae and its counsel will:

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

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

1904.03

MBS for Bonds

Operating Procedures

The MBSMBSMortgage-Backed Security For BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. loan structure is identical to a standard 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. .

Your counsel must:

  • Prepare the standard 6000 series Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
  • Consult with Fannie Mae’s counsel to 
    • integrate the standard Loan DocumentLoan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. provisions into the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. transaction structure, and 
    • incorporate any 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. related modifications into the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
1904.04

Affordable Regulatory Agreements

Operating Procedures

  1. If an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… must be recorded before the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. to ensure the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. ’s tax-exempt status, Fannie Mae’s counsel will provide an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… rider subordinating it to the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. .  
  2. You must ensure the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. attaches the rider to the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower….
Section 1905

Fannie Mae LIHTC Investment in Credit-Enhanced Bonds

Guidance

Per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 710.02: Fannie Mae Credit-Enhanced Tax-Exempt Bond Issuance, Fannie Mae may be a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor in the BorrowerBorrowerPerson who is the obligor per the Note. for a project financed by tax-exempt BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. that Fannie Mae will also be credit enhancing.  To avoid potential adverse tax consequences, if Fannie Mae is a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor 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. , Fannie Mae’s counsel will prepare the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. agreement among the

  • BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. , 
  • BorrowerBorrowerPerson who is the obligor per the Note. , and 
  • Fannie Mae. 

Requirements

You must determine if Fannie Mae will be a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor 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. .  If so, you must confirm:

  • Fannie Mae does not hold a direct equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. ;
  • Fannie Mae’s indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. is less than 50%;
  • the IRS documentation filed for the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. issuance shows that none of the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. proceeds were applied to pay any portion of Fannie Mae’s Credit Enhancement FeeCredit Enhancement FeeFee due to Fannie Mae for a Credit Enhancement Instrument. ;
  • the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. , BorrowerBorrowerPerson who is the obligor per the Note. , and Fannie Mae enter into a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. agreement acknowledging Fannie Mae’s equity interest; and
  • any LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. agreement required notices to the BorrowerBorrowerPerson who is the obligor per the Note. and BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. were provided.
Section 1906

Credit Enhancing Fixed Rate Bonds
1906.01

Terms

Requirements

Terms Credit Enhancement Instrument MBS for Bonds
Interest Rate Reset
  • Used if the BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties.
    • have a fixed rate for a specified period before maturity, and
    • require remarketing on scheduled mandatory tender dates.
  • Occurs after the fixed rate period per the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. and Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
 Not available.
Loan Term

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. must:

 

  • for 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). with new 4% LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , have a term of at least 10 years, with a maximum of 30 years; or
  • for 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). without new 4% LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , have a term less than or equal to the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. term, with a maximum of 30 years.
Fannie Mae Fees Credit Enhancement FeeCredit Enhancement FeeFee due to Fannie Mae for a Credit Enhancement Instrument. 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.
Trustee Fee and Bond Issuer Fee

Underwritten as

 

  • an operating expense, or
  • part of the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. .
 Underwritten as an operating expense.
Gross Note Rate

Sum of the

 

  • BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. interest rate, 
  • Facility Fee (calculated per Part III, Chapter 19: Bond Transactions and Credit Enhancement Mortgage Loans, Section 1908: Facility Fee) divided by the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. UPBUPBUnpaid Principal Balance , and 
  • trustee fee and BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. fee, if they are not underwritten as an operating expense.

Sum of the

 

  • BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. interest rate,
  • 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. .
1906.02

Multiple Fixed Rate Bonds

Operating Procedures

If the fixed rate 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. issue has multiple BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. with different maturity dates and interest rates, the fixed rate for the entire 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. issue will be the weighted average of the individual 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. rates, and considering the different maturities.

Section 1907

Credit Enhancing Variable Rate Bonds
1907.01

Terms

Guidance

Fannie Mae does not provide liquidity support for variable rate demand BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. .

Requirements

Terms Credit Enhancement Instrument MBS for Bonds
Variable Interest Rate

A 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. and 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. must have an interest rate linked to

 

  • the SIFMA Municipal Swap Index,
  • an IndexIndexBasis for determining the Gross Note Rate of an ARM Loan, including any required alternative index that may be determined necessary by Fannie Mae because the Index is no longer widely accepted or has been replaced as the index for similar financial instruments. that adjusts weekly, or
  • a SOFRSOFRFor any Business Day, the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York, or any successor administrator, on the Federal Reserve Website. -based index. 
  • 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. must comply with Part III, Chapter 12: Structured Adjustable Rate Mortgage (SARM) Loans.
  • BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. must have an interest rate linked to a SOFRSOFRFor any Business Day, the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York, or any successor administrator, on the Federal Reserve Website. -based index.
Bond Liquidity You must obtain Fannie Mae’s approval for any third party providing 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. liquidity support.
No New 4% LIHTCs 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. must have a term of at least 5 years, with a maximum of 30 years.

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. must have a:

 

  • term of at least 5 years, with a maximum of 30 years; and
  • Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. coinciding with the
    • final 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. maturity date, adjusted for applicable payment timing differences, or
    • initial 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. tender and remarketing, if the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. has a scheduled mandatory tender date for remarketing.
New 4% LIHTCs 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. must have a term of at least 10 years, with a maximum of 30 years.

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. must have a:

 

  • term of at least 10 years, with a maximum of 30 years; and
  • Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. coinciding with the
    • final 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. maturity date, adjusted for applicable payment timing differences, or
    • initial 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. tender and remarketing, if the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. has a scheduled mandatory tender date for remarketing.
Maximum Note Rate Determined by Fannie Mae. Per Part III, Chapter 12: Structured Adjustable Rate Mortgage (SARM) Loans.
Amortization

For a variable rate 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. using an Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. , use the greater of the

 

  • Maximum Note RateMaximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   , or
  • actual Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. .
 Per Part III, Chapter 12: Structured Adjustable Rate Mortgage (SARM) Loans.
Maximum SARM Loan Per Part III, Chapter 12: Structured Adjustable Rate Mortgage (SARM) Loans.
PRF You must establish a PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. . Not applicable.
Fannie Mae Fees Credit Enhancement FeeCredit Enhancement FeeFee due to Fannie Mae for a Credit Enhancement Instrument. . 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. .
Trustee Fee and Bond Issuer Fee

Underwritten as

 

  • an operating expense, or
  • part of the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. .
 Underwritten as an operating expense.
Gross Note Rate

Sum of the

 

  • BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. interest rate, 
  • Facility Fee (calculated perPart III, Chapter 19: Bond Transactions and Credit Enhancement Mortgage Loans, Section 1908: Facility Fee) divided by the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. UPBUPBUnpaid Principal Balance , 
  • trustee fee and BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. fee, if they are not underwritten as an operating expense, and
  • cap cost factor.

Sum of the

 

  • BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. interest rate,
  • 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. .
1907.02

Principal Reserve Fund

Operating Procedures

Topics Principal Reserve Fund Process
Borrower Election

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. , the BorrowerBorrowerPerson who is the obligor per the Note. must select 1 of the following options to redeem BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. :

 

  • Minimum Dollar Balance:  
    • Required option for a non-single-asset entity BorrowerBorrowerPerson who is the obligor per the Note. .
    • PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. deposits accumulate until the balance is at least $100,000. 
    • BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. eligible for redemption are redeemed in $100,000 increments.
  • Minimum Percentage Balance: 
    • PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. deposits accumulate until the balance is at least $100,000 greater than 20% of the original 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. principal amount. 
    • BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. eligible for redemption are redeemed in $100,000 increments, but the redemption payments may not reduce the PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. balance below 20% of the original 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. principal amount.
PRF Deposit Amount

PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. deposits represent the principal amortization amount of the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. based on

 
PRF Deposit Schedule On the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must calculate and attach the Schedule of Deposits to the Principal Reserve FundPrincipal Reserve FundAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. to the Reimbursement Agreement.

 

1907.03

Interest Rate Cap

Requirements

Terms You must ensure the third-party Interest Rate Cap...
Interest Rate Cap For a variable rate 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. with variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , is purchased and maintained for the entire time the variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. are credit enhanced. 
Index Has the same IndexIndexBasis for determining the Gross Note Rate of an ARM Loan, including any required alternative index that may be determined necessary by Fannie Mae because the Index is no longer widely accepted or has been replaced as the index for similar financial instruments. as the variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. .
Interest Rate Cap Provider Is obtained from an approved provider listed on https://multifamily.fanniemae.com.
Initial Interest Rate Cap Notional Amount equals the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. UPBUPBUnpaid Principal Balance when the Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. is purchased.
Minimum Interest Rate Cap Term

Agreement remains continually in place until the earlier of

 

  • 5 years, or
  • the remaining 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. term.
Replacement Interest Rate Cap ReplacementReplacementCapital item replacements and major maintenance needs identified by the Property Condition Assessment or otherwise required. is purchased if the existing Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. expires before the variable rate 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. conversion or Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
Cap Strike Rate for Replacement Interest Rate Cap Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. for the ReplacementReplacementCapital item replacements and major maintenance needs identified by the Property Condition Assessment or otherwise required. Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments.  is the same or lower than that of the initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .
Cap cost factor Cost factor is included in the Maximum Note RateMaximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   per Part III, Chapter 19: Bond Transactions and Credit Enhancement Mortgage Loans, Section 1907.05: Cap Cost Factor Included in Maximum Note Rate.
Interest Rate Cap Reserve Adjustment

Cash reserve:

 

  • is evaluated at the end of each 6-month period to determine if the cost of the replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. has increased, based on market conditions; and
  • future deposits are not decreased even if the future Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. cost has decreased.
Documents

Documents are:

 

  • on acceptable forms; and
  • delivered to Fannie Mae, including the
    • Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. , and
    • applicable Interest Rate Cap Reserve and Security Agreement (Form 6442 series).

Operating Procedures

Fannie Mae will engage outside counsel at your expense to review all Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. -related documents.

1907.04

Cap Strike Rate

Operating Procedures

The BorrowerBorrowerPerson who is the obligor per the Note. must purchase an Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. with a Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. that is determined

1907.05

Cap Cost Factor Included in Maximum Note Rate

Requirements

When determining the Maximum Note RateMaximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   used to calculate the minimum required Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and…, you must include a cap cost factor based on the term of the

  • Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , and
  • initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .

You do not need to include a cap cost factor if the initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. term equals the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. term.

You must ensure the cap cost factor equals the

  • estimated cost of the replacement cap (when the term of the initial cap expires), divided by
  • term of the initial cap.

Operating Procedures

For example, to calculate the cap cost factor assuming a 5-year Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. and 10-year 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. term:

  • You must include an annual cap cost factor in the Maximum Note RateMaximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   .
  • If the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. term is 10 years and an initial cap is purchased for a 5-year term, the cap cost factor equals the estimated cost of a replacement cap divided by 5 (the number of years of the initial interest rate term).
  • The replacement cap has a 5-year term and a Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. equal to that of the initial cap.
  • If a 5-year Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. at the initial Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. costs 20 basis points, you must divide 20 by 5, then add the result (4 basis points) to the Maximum Note RateMaximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   .
1907.06

Interest Rate Cap Reserve

Requirements

You must ensure the BorrowerBorrowerPerson who is the obligor per the Note. fully funds a cash reserve to purchase replacement Interest Rate CapsInterest Rate CapsInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .

Operating Procedures

  • If the initial Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. term is 5 years, you must ensure the BorrowerBorrowerPerson who is the obligor per the Note. funds the cash reserve with each monthly 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. payment during the term.
  • Calculate the monthly reserve payments for the first 6 months using the estimated cost of a replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. with a 5-year term and the initial Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. .
  • If the initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. term is more than 5 years, you must ensure the Borrower'sBorrower'sPerson who is the obligor per the Note. monthly reserve payments for the replacement cap begin no later than 5 years before the existing Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. expires.

Guidance

For example, if 

  • a 5-year initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. is purchased with a 10-year term and a 6.00% Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. , and 
  • the cost of a replacement 5-year cap with a 6.00% Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. is $140,000, then
  • the monthly reserve for the first 6 months would be $2,333.33 ($140,000 cost ÷ 60 months).
1907.07

Interest Rate Cap Reserve Adjustments

Requirements

You must evaluate the Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. reserve every 6 months.  If the replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. cost:

  • increased, you must raise the monthly reserve payment to purchase the replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. before the existing Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. expires; or
  • decreased, do not adjust the reserve.

When a replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. is purchased, the reserve cycle resets to match the term of the new Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .  Any amount remaining in the reserve after purchasing the replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. must be used to fund the subsequent reserve.

1907.08

Interest Rate Cap Contract Documentation and Delivery

Requirements

For credit enhancements using:

Operating Procedures

Topic Process
Cap Provider Payment

You must ensure the Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. provider pays you or the Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. directly

 

  • on the 1st or 15th day of the month corresponding with the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. payment dates, and
  • when the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. interest rate index is greater than the average Cap Strike RateCap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. for a month.

 

Only disburse a provider payment to the BorrowerBorrowerPerson who is the obligor per the Note. if

 

  • there is no 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. default, and
  • you received all payments due under the IndentureIndentureBond issuer trust indenture or resolution listing Bond terms. and BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. for that month.

 

If the BorrowerBorrowerPerson who is the obligor per the Note. defaults under 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. or Reimbursement Agreement, you must

 

  • promptly notify Fannie Mae and any applicable Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. , and
  • direct the Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. to suspend its payment to the BorrowerBorrowerPerson who is the obligor per the Note. .
Timing The BorrowerBorrowerPerson who is the obligor per the Note. must accept a bid for the initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. in writing from a Fannie Mae approved provider before you request a 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. .
Purchase Price The BorrowerBorrowerPerson who is the obligor per the Note. must pay the entire purchase price for an Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. to the provider when the Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. is issued.
Pledge to Fannie Mae The BorrowerBorrowerPerson who is the obligor per the Note. must pledge its interest in the Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. and any reserve to Fannie Mae using the documentation provided by Fannie Mae’s counsel.
Section 1908

Facility Fee

Operating Procedures

For Credit Enhancement InstrumentsCredit Enhancement InstrumentsAgreement 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. , you must calculate the Facility Fee as follows:

FACILITY FEE CALCULATION
Item Function Description
CREDIT ENHANCEMENT FEE / GUARANTY FEE CALCULATION
1  
  • Applicable Credit Enhancement FeeCredit Enhancement FeeFee due to Fannie Mae for a Credit Enhancement Instrument. , or 
  • 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.

MULTIPLIED BY

 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. UPBUPBUnpaid Principal Balance
MINUS PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. balance, excluding interest
EQUALS Credit Enhancement FeeCredit Enhancement FeeFee due to Fannie Mae for a Credit Enhancement Instrument. / 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.
SERVICING FEE CALCULATION
2   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.
MULTIPLED BY 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. UPBUPBUnpaid Principal Balance
MINUS PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. balance, excluding interest
EQUALS 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.
PRF FEE CALCULATION
3   For variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , PRF Fee Rate
MULTIPLIED BY PRFPRFAccount you hold accumulating principal amortization payments for variable rate Bond credit enhancements. balance, excluding interest
EQUALS PRF Fee
BOND LIQUIDITY FEE CALCULATION
4   For variable rate BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , Bond Liquidity Fee RateBond Liquidity Fee RateFee charged by the provider of a letter of credit, standby bond purchase agreement, or other arrangement providing liquidity to purchase securities (typically variable rate demand obligations), that were tendered to the Issuer but cannot be immediately remarketed to new investors, expressed as an…
MULTIPLIED BY 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. UPBUPBUnpaid Principal Balance
EQUALS Bond Liquidity Fee
FACILITY FEE CALCULATION
5   Credit Enhancement FeeCredit Enhancement FeeFee due to Fannie Mae for a Credit Enhancement Instrument. / 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.
PLUS 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.
PLUS any PRF Fee
PLUS any Bond Liquidity Fee
EQUALS Facility Fee
Section 1909

Taxable Tails and Supplemental Mortgage Loans
1909.01

Taxable Tails

Requirements

Terms A Taxable Tail must...
Structure

Be fixed or variable rate debt structured as

 

  • BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. ,
  • a Cash Mortgage LoanCash Mortgage LoanMortgage Loan purchased by Fannie Mae in exchange for cash. , or
  • an MBS Mortgage LoanMBS Mortgage LoanMortgage Loan purchased by Fannie Mae in exchange for an issued MBS backed by the Mortgage Loan. .
Underwriting and Loss Sharing

Be treated with the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds.

 

  • as a single combined 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. , and
  • with a blended weighted average Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products 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.  , interest rate, etc., based on the combined UPBUPBUnpaid Principal Balance of the tax-exempt and taxable debt.
Cross Provisions Be cross-collateralized and cross-defaulted with the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. .
MBS Mortgage Loan Have Additional DisclosureAdditional DisclosureInformation you provide that is published as an addendum to the disclosure documents when an MBS is issued and describes special Security, Mortgage Loan, or Property characteristics or terms that differ from those described in the standard Multifamily MBS Prospectus. .
Maturity and Prepayment
  • Mature no earlier than the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. .
  • Be fully repaid before the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. is prepaid.

Operating Procedures

A Taxable TailTaxable TailTaxable debt secured by the Property securing the Credit Enhancement Mortgage Loan. usually fully amortizes over its loan term.  This may require “hyper-amortization” where all principal payments are applied

  • first to the Taxable TailTaxable TailTaxable debt secured by the Property securing the Credit Enhancement Mortgage Loan. until it fully amortizes, and
  • then to the tax-exempt debt.
1909.02

Supplemental Mortgage Loans

Requirements

You must ensure any Supplemental Mortgage LoanSupplemental Mortgage LoanMortgage Loan purchased by Fannie Mae that is subordinated to, and has a Mortgage Loan Origination Date after, the Senior Mortgage Loan that is also owned by Fannie Mae. :

  • is taxable debt that is cross-collateralized and cross-defaulted with the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. 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 originated after the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. ;
  • complies with the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. documents; and
  • is properly disclosed to InvestorsInvestorsMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. .
Section 1910

Third-Party Subordinate Financing

Requirements

For third-party subordinate financing, you must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704: Subordinate Financing.

Section 1911

Moderate Rehabilitation Mortgage Loan with Side-by-Side Bond Financing

Guidance

Fannie Mae may purchase a Moderate RehabilitationModerate RehabilitationProperty that will undergo at least $8,000 per unit of Rehabilitation Work. 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. 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. when the BorrowerBorrowerPerson who is the obligor per the Note. separately obtains side-by-side 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. financing.  Since Fannie Mae does not credit enhance the BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , you may use your own outside counsel.

Requirements

For a Moderate RehabilitationModerate RehabilitationProperty that will undergo at least $8,000 per unit of Rehabilitation Work. 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. with side-by-side 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. financing, you must ensure the BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties.

  • have a shorter term than 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. , 
  • are fixed rate, 
  • are tax-exempt,
  • are 100% secured by cash collateral, and
  • are not secured by the 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. .