Section 206

Borrower Business Plan

Requirements

For acquisitions or refinances where 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 being repositioned through a substantial capital improvement plan, you must analyze (and document in your Transaction Approval Memo) the:

  • Sponsor’sSponsor’sPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). :
    • business plan (either through a written plan or by a conversation with the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). ), including
      • market rent growth expectations,
      • any planned capital improvements,
      • any expected rent premiums after renovations,
      • operating expense management, and
      • value appreciation through capitalization rate compression;
    • expected ownership period for 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). relative to 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. term; and
    • expected investment returns from owning/operating 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). , assuming
      • acquisition at the 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. , and
      • a hypothetical disposition at the Mortgage Loan’sMortgage Loan’sMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. ;
  • Mortgage Loan’sMortgage Loan’sMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. Underwritten Capitalization RateUnderwritten Capitalization RateRatio, expressed as a percentage, of the Underwritten Net Cash Flow, divided by Underwriting Value. ; and
  • motivation in 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). investment compared to the Borrower’sBorrower’sPerson who is the obligor per the Note. other investment alternatives.