202.02

Valuation

202.02A

Appraised Value

Requirements

You must ensure:

  • the Appraiser'sAppraiser'sPerson engaged to estimate a Property’s market value per USPAP. engagement letter requires compliance with Instructions for Appraisers (Form 4827);
  • the AppraiserAppraiserPerson engaged to estimate a Property’s market value per USPAP. provides an opinion of the market value on an "as is" basis;
  • the Appraiser'sAppraiser'sPerson engaged to estimate a Property’s market value per USPAP. opinion of the market value covers:
    • each separate ProjectProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership.  per Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership; and
    • the aggregate market value of all ProjectsProjectsMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership.  ; and
  • regardless of any allocation in the purchase/sales agreement, the Appraiser’sAppraiser’sPerson engaged to estimate a Property’s market value per USPAP. opinion of the market value excludes any value from
    • goodwill,
    • business value (permitted for Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ),
    • intangibles,
    • furniture,
    • fixtures (unless customary in the market), or
    • equipment.

You may also request the AppraiserAppraiserPerson engaged to estimate a Property’s market value per USPAP. provide an opinion of the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). market value on an "as completed" basis, but you must only use an "as completed" value if all of the following apply:

  • less than 12 months have passed between the
    • Borrower'sBorrower'sPerson who is the obligor per the Note. acquisition of 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). , and
    • Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. ;
  • for any capital improvements completed after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. to be considered in an "as completed" value, they must be:
    • Immediate Repairs listed in the PCAPCAAssessment of the Property's physical condition and historical operation. ; or
    • improvements identified by the BorrowerBorrowerPerson who is the obligor per the Note. , if you agree the improvements will add PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value;
  • all capital improvements are included in either the
    • Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement, or other Fannie Mae-approved agreement, evidencing: the Borrower’s agreement to fund the Completion/Repair Escrow, and perform Completion…, or
    • Rehabilitation Reserve AgreementRehabilitation Reserve AgreementBorrower’s agreement to undertake identified Rehabilitation Work, the terms for funding the Rehabilitation Work, and the disbursement of funds from the Rehabilitation Reserve Account (e.g., Form 6222 or Form 4523). ;
  • sufficient funds to complete all capital improvements are deposited into either the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. or the Rehabilitation Reserve AccountRehabilitation Reserve AccountCustodial Account established by the Lender and funded by deposits from the Borrower per the Rehabilitation Reserve Agreement to fund the Rehabilitation Work. :
    • for capital improvements identified as Immediate Repairs, the funds must cover any higher funding percentage you require; and
    • for capital improvements identified by the BorrowerBorrowerPerson who is the obligor per the Note. , the funds must cover the estimated cost (including a cost overrun allowance); and
  • all capital improvements must be completed within:
202.02B

Property's Sale History

Requirements

You must:

  • analyze 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). sale history for the last 3 years, including any transfer of a Controlling InterestControlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the owner;
  • address the following in your Transaction Approval Memo:
    • if a sale occurred within the last 24 months, document the
      • circumstances of the sale, and
      • support for any increased Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. by analyzing any
        • Net Cash FlowNet Cash FlowOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and… increases,
        • capitalization rate compression, and
        • value-add market drivers; and
    • if any stated sales price per the purchase/sales agreement differs from the transfer price per the public records or third-party reports, investigate and document the discrepancy;
  • for any acquisition, confirm the seller was 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). owner in the real estate records when the purchase/sales agreement was signed;
  • evaluate the purchase/sale contracts to
    • clearly identify the
      • seller, and
      • purchaser, and
    • confirm the sale was an arm's length transaction;
  • review the final settlement statement before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. to confirm accuracy of the
    • purchase price,
    • closing costs, and
    • any cash in/out to the seller and purchaser; and
  • submit a copy of:
    • the final settlement statement at DeliveryDeliverySubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. ; and
    • all purchase/sales contracts and amendments to
      • the AppraiserAppraiserPerson engaged to estimate a Property’s market value per USPAP. , and
      • Fannie Mae.
202.02C

Underwriting Value

Requirements

Your Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation. must not exceed the Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. , as reduced by any adjustments you deem necessary, accounting for:

  • your analysis of the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). sales history; and/or
  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). deficiencies that cannot be cured within 6 months after the Appraisal DateAppraisal DateEffective date of value in the Appraisal. .

If less than 12 months have passed between the Borrower'sBorrower'sPerson who is the obligor per the Note. acquisition of 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). and the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. , your Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation. must not exceed the lower of the

  • Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. , or
  • sum of the:
    • Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). acquisition price per the title company settlement statement, with no allocations to:
      • goodwill,
      • business value (permitted for Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ),
      • intangibles,
      • furniture,
      • fixtures (unless customary in the market), or
      • equipment;
    • cost of capital improvements or repairs that increase 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). value, if
      • completed and fully paid, or
      • sufficient funds for completion are deposited in the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. or reserve account; and
    • actual acquisition costs, not exceeding 3% of the acquisition price, including:
      • Origination FeeOrigination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. ;
      • arm's length acquisition fee (generally 1% - 2%) paid to an unrelated PersonPersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). if documented in the Settlement Statement;
      • third-party report fees;
      • BorrowerBorrowerPerson who is the obligor per the Note. -paid legal fees incurred on your behalf;
      • title search and title insurance fees;
      • survey fees;
      • real estate and stamp taxes;
      • deed-recording fees; and
      • credit report charges.

Guidance

Actual acquisition costs should exclude any prepaid operating expenses or deposits applied toward future operating expenses or PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). improvements, including:

  • prepaid or escrowed
    • real estate taxes, or
    • insurance premiums;
  • prepaid
    • utilities,
    • 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. interest, including any interest rate buydown expense,
    • rents, or
    • security deposits;
  • funded
    • Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. (including any initial deposit),
    • 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,
    • operating or Restabilization Reserve, or
    • BorrowerBorrowerPerson who is the obligor per the Note. -controlled 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 or capital accounts;
  • fees included in the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. , including any
    • Origination FeeOrigination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. , or
    • broker fee;
  • acquisition fees paid to a BorrowerBorrowerPerson who is the obligor per the Note. -AffiliateAffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key…; and
  • 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. , pre-paid 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 and compliance monitoring fees.