Section 206

Borrower Business Plan

Requirements

For Acquisitions AcquisitionsAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. or refinances where the Property PropertyMultifamily 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’s Sponsor’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 Sponsor SponsorPrincipal 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 Property PropertyMultifamily 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 Loan Mortgage 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 Property PropertyMultifamily 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 AcquisitionAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. at the Underwriting Value Underwriting 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’s Mortgage 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 Date Maturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. ;
  • Mortgage Loan’s Mortgage 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 Rate Underwritten Capitalization RateRatio, expressed as a percentage, of the Underwritten Net Cash Flow, divided by Underwriting Value. ; and
  • motivation in the Property’s Property’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’s Borrower’sPerson who is the obligor per the Note. other investment alternatives.