Section 301

Zoning and Legally Non-Conforming Status

301.01

Zoning

Requirements

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). , you must:

  • identify the current zoning or land use designation;
  • determine if the existing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). use (e.g., multifamily, single-family, mixed use, Manufactured Housing CommunityManufactured Housing CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. , etc.) is expressly permitted per current zoning and land use laws and regulations; and
  • confirm 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). characteristics (e.g., building height, density, set-back lines, etc.):
    • conform to current zoning requirements and land use designations; or
    • are legally non-conforming per applicable zoning or land use laws and regulations.

If you order a Zoning Report from a zoning consultant, you must:

  • upload the zoning report to DUS Docway in Folder II; and
  • deliver structured data per the Zoning Report Data Supplement (Form 4089). 
301.02

Legal Non-Conforming Use

Requirements

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 a legal non-conforming use, you must:

  • ensure the BorrowerBorrowerPerson who is the obligor per the Note. executes Modifications to Multifamily Loan and Security Agreement (Legal Non-Conforming Status) (Form 6275);
  • confirm, following a casualty, the percentage of damage to 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). ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). (i.e., the destruction threshold) at which 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). jurisdiction would prohibit the rebuilding of all impacted ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). to the pre-casualty use and condition under current
    • laws,
    • zoning requirements, and
    • building codes; and
  • if the destruction threshold is less than 50%, not DeliverDeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. the 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. .
301.03

Legal Non-Conforming Characteristics

Requirements

If 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). characteristics are legally non-conforming, you must:

  • ensure the BorrowerBorrowerPerson who is the obligor per the Note. executes the Modifications to Multifamily Loan and Security Agreement (Legal Non-Conforming Status) (Form 6275);
  • confirm whether, if fully or partially destroyed, 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). ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). can be fully rebuilt to the pre-casualty condition per current
    • laws,
    • zoning requirements, and
    • building codes; and 
  •  if 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). ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). cannot be fully rebuilt to the pre-casualty condition,
    • evaluate if the as-rebuilt PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). will support 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. at the current TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). , and
    • document your analysis in the Transaction Approval Memo.

Guidance

To assess the Borrower'sBorrower'sPerson who is the obligor per the Note. ability to rebuild ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). on a non-conforming PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). to a level that will support 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. at the current TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). , you should consider:

  • conducting a threshold analysis to determine the resulting actual amortizing DSCRDSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of:  principal, interest, and required Mezzanine Financing or Hard Preferred Equity payments. if the reconstructed ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). cannot be rebuilt as-is per current law;
  • the likelihood of a casualty event (e.g., wind, earthquake, fire, flood, mine subsidence, etc.);
  • the percentage of damage to the ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). at which 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). jurisdiction will require 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). be rebuilt to current zoning and land use requirements (i.e., the destruction threshold);
  • which PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). characteristics the destruction threshold percentage applies to, such as
    • market value,
    • assessed value,
    • replacement cost, or
    • unit count;
  • for PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with multiple buildings, if the destruction threshold percentage applies to
    • each building, or
    • all buildings as a whole;
  • the replacement cost to rebuild per current requirements for
    • zoning, and
    • land use;
  • 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). continued
    • marketability, and
    • economic viability;
  • the amount and type of BorrowerBorrowerPerson who is the obligor per the Note. -maintained insurance coverage required per Part II, Chapter 5: Property and Liability Insurance, Section 501.02C: Ordinance or Law Insurance;
  • insurance loss proceeds payout, compared to increased rebuilding costs, including from
    • building code changes,
    • Americans with Disabilities Act compliance, and
    • the municipality's local zoning requirements (e.g., green compliance for new buildings, etc.); 
  • the sufficiency of estimated insurance proceeds from ordinance or law insurance and other coverages to repay 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. in the event of partial or full
    • casualty, or
    • condemnation; and
  • for a TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 or TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 4 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. , if requiring execution of the Limited Payment Guaranty (Form 6020.LPG) would mitigate the risk of the as-rebuilt PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). not supporting a TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 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. .