Section 503

Financial Analysis of Operations

503.01

Reporting

Requirements

You must submit quarterly and annual Financial Analysis of Operations reports (Form 4254 or Form 4254.Seniors) for each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .

Operating Procedures

You must submit all Financial Analysis of Operations reports via the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .  To ensure the operating statements are complete:

Item Activity  You must...
1 Verify Verify the operating statements reflect 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 physical occupancy based on the most recent quarter-end rent roll.
2 Provide

Provide actual expenses, normalizing

 

  • for seasonal variations, and
  • certain expenses including, but not limited to,
    • real estate taxes,
    • property casualty insurance,
    • Replacement ReservesReplacement ReservesCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. , and
    • property management fees.
3 Comment 

Comment if:

 

  • 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. is on Fannie Mae’s WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. ; or
  • per Form 4254.DEF there is a 20% or greater variance, either higher or lower, from the same reporting period in the prior year for 
    • 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. ,
    • Total Operating Expenses,
    • Capital Expenditures, or
    • Debt Service Coverage.

Comments should:

 

  • describe: 
    • the situation and the variance’s root cause;
    • risk changes or trends;
    • any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management changes;
    • the BorrowerBorrowerPerson who is the obligor per the Note. /PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager’s plan to improve cash flow 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 
      • on the WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. , or 
      • not performing as expected per original underwriting; and 
    • the overall 
      • payment history, 
      • debt service adjustments, 
      • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). performance, or 
      • significant financial changes; and
  • include:
    • available market data, noting 
      • concerns or improvements, and 
      • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). performance relative to competition;
    • normalization/annualization adjustments; and
    • applicable hedge data for rate cap income and/or escrow payments.
4 Resolve Timely resolve any quality control issues.
503.02

Quarterly Financial Analysis of Operations

Requirements

Fannie Mae Watchlist Status or Product Reporting
Fannie Mae Watchlist Property (All Products)

You must submit detailed quarterly operating statements

 

  • 90 days after the end of the first quarter, and
  • 75 days after the end of the second and third quarters.
Cooperative Property No quarterly financial reporting or waiver required.
Small Mortgage Loan

If the original Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. amount is:

 

  • equal to $6 million or less, no quarterly financial reporting or waiver required; or
  • greater than $6 million, you must submit detailed quarterly operating statements 75 days after the end of the second and third quarters.
Seniors Housing Property You must submit detailed quarterly operating statements 75 days after the end of every quarter.
Credit Facility or Bulk Delivery Property

You must submit the Deal Level Structured Transaction (BD/CF) Quarterly report 75 days after the end of every quarter, including the

 

  • detailed quarterly operating statements, 
  • Structured Facilities Monitoring Narrative (Form 4801), and
  • Spreadsheet (Form 4802).
All Others You must submit detailed quarterly operating statements 75 days after the end of the second and third quarters.

Operating Procedures

You must adhere to the following due dates:

Fannie Mae Watchlist Property
Reporting Quarter Period Covered Reporting Due Date for Property with 12/31 Fiscal Year End Reporting Due Date for Property with non-12/31 Fiscal Year End
First 1st quarter June 30 90 days after 1st quarter end
Second 2nd quarter year-to-date September 15 75 days after 2nd quarter end
Third 3rd quarter year-to-date December 15 75 days after 3rd quarter end

 

Seniors Housing Property
Reporting Quarter Period Covered Reporting Due Date for Property with 12/31 Fiscal Year End Reporting Due Date for Property with non-12/31 Fiscal Year End
First Trailing 3 months operating data covering the 1st quarter June 15 75 days after 1st quarter end
Second Trailing 3 months operating data covering the 2nd quarter  September 15 75 days after 2nd quarter end
Third Trailing 3 months operating data covering the 3rd quarter  December 15 75 days after 3rd quarter end 
Fourth Trailing 3 months operating data covering the 4th quarter  March 15 75 days after 4th quarter end 

 

Credit Facility or Bulk Delivery Property
Reporting Quarter Reporting Period Reporting Due Date for Property with 12/31 Fiscal Year End Reporting Due Date for Property with non-12/31 Fiscal Year End
First

Trailing 3 months operating data:

 

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). level statements covering the 1st quarter; and
  • Deal level Structured Facilities Monitoring Narrative and Spreadsheet (Form 4801 and Form 4802).
 June 15 75 days after 1st quarter end
Second

Trailing 3 months operating data:

 

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). level statements covering the 2nd quarter; and
  • Deal level Structured Facilities Monitoring Narrative and Spreadsheet (Form 4801 and Form 4802).
 September 15 75 days after 2nd quarter end
Third

Trailing 3 months operating data:

 

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). level statements covering the 3rd quarter; and
  • Deal level Structured Facilities Monitoring Narrative and Spreadsheet (Form 4801 and Form 4802).
 December 15 75 days after 3rd quarter end
Fourth

Trailing 3 months operating data:

 

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). level statements covering the 4th quarter; and
  • Deal level Structured Facilities Monitoring Narrative and Spreadsheet (Form 4801 and Form 4802).
 March 15 75 days after 4th quarter end

 

All Others
Reporting Quarter Period Covered Reporting Due Date for Property with 12/31 Fiscal Year End Reporting Due Date for Property with non-12/31 Fiscal Year End
Second 2nd quarter year-to-date September 15 75 days after 2nd quarter end
Third 3rd quarter year-to-date December 15 75 days after 3rd quarter end

Guidance

If any due date is not a Business DayBusiness DayAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. , you may submit the quarterly Financial Analysis of Operations on the next Business DayBusiness DayAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. .

503.03

Annual Financial Analysis of Operations
503.03A

Reporting Period

Requirements

The annual Financial Analysis of Operations (Form 4254 or Form 4254.Seniors) for each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). must cover the

  • previous calendar year 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 a 12/31 fiscal year end, or
  • fiscal year ending in the previous calendar year 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 a non-12/31 fiscal year end.
503.03B

Submission

Operating Procedures

  1. Comply with the Annual Reporting Protocol table.
  2. Analyze the Borrower'sBorrower'sPerson who is the obligor per the Note.  operating statements per Form 4254.DEF.
  3. Indicate on each statement line which of the Borrower'sBorrower'sPerson who is the obligor per the Note. income and expense items are included.
  4. Provide the pertinent income, expense, and other required data for the current reporting period in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .
Annual Reporting Protocol
For... Due Date You must...
First Year
A Mortgage Loan Fannie Mae purchases on or before June 30  June 1 of the following year. Annualize the operating data to represent 12 months of operations.
A Mortgage Loan Fannie Mae purchases on or after July 1 June 1 of the second year after purchase. Submit 12 months of actual operating data.
Subsequent Years
Every Property
  • June 1 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 a 12/31 fiscal year end, 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). with a non-12/31 fiscal year end:
    • within 150 days after the fiscal year-end; and
    • submit a data change request via the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. to change the Borrower'sBorrower'sPerson who is the obligor per the Note.  fiscal year end.
 Submit 12 months of actual operating data.
503.03C

Annual Review

Operating Procedures

Within 15 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. after Fannie Mae notifies you of a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. review, you must submit: 

  • the Borrower'sBorrower'sPerson who is the obligor per the Note.  operating statements, with each income and expense line item indicated per Form 4254.DEF; 
  • the Borrower'sBorrower'sPerson who is the obligor per the Note.  escrow activity reconciliation; and
  • any other requested documentation.
503.04

Waiver Request

Operating Procedures

Waiver Reason Action
Unresponsive Borrower
  • Request the BorrowerBorrowerPerson who is the obligor per the Note. provide the missing statements.
  • If the BorrowerBorrowerPerson who is the obligor per the Note. does not respond after 3 written requests, wait to submit a waiver request via the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. until:
    • for an annual report, 6 months after the due date; or
    • for a quarterly report, the next due date.
  • Include “Unresponsive Borrower” as the waiver condition in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .
  • Provide copies of all relevant BorrowerBorrowerPerson who is the obligor per the Note. correspondence.
  • Provide any additional requested information.
All Others

Submit a waiver request via the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. if:

 

  • Your Lender ContractLender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. does not require collecting PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operating statements.
  • The Mortgage Loan DocumentsMortgage Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. do not permit you to collect, nor require the BorrowerBorrowerPerson who is the obligor per the Note. to submit, financial reports.
  • 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. :
    • liquidated in the current quarter (for quarterly reporting waivers), or year (for annual reporting waivers), before the Financial Analysis of Operations submission due date;
    • was delivered per a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. and has not yet converted to a permanent loan;
    • was defeased;
    • has FHAFHAFederal Housing Administration or HUDHUDU.S. Department of Housing and Urban Development risk sharing;
    • is managed by Fannie Mae’s Special Asset ManagementSpecial Asset ManagementTeam performing Fannie Mae’s Special Servicing that can be contacted at [email protected]. ; or
    • was acquired by Fannie Mae in the current reporting year, and less than 6 months of PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operating data is available.

If you receive operating statements after a waiver was granted, you must promptly submit the Financial Analysis of Operations report (Form 4254 or Form 4254.Seniors).