Section 101 | |
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101.01 | |
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Requirements
- A Student Housing PropertyStudent Housing PropertyA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. is a multifamily rental property in which 40% or more, but less than 80%, of the units are leased to undergraduate or graduate students.
- A student with sufficient income to pay rent does not count toward the student unit concentration required for a Student Housing PropertyStudent Housing PropertyA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. .
Requirements
A Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. is a multifamily rental property in which 80% or more of the units are leased to undergraduate or graduate students.
Guidance
A Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. typically:
- caters to a student population due to its location;
- was specifically constructed as a student property or, although built as conventional multifamily housing, is now leased primarily to students; or
- is not readily rentable as conventional multifamily housing.
Section 102 | |
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Guidance
When underwriting a Student Housing PropertyStudent Housing PropertyA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. or Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. , you should consider the following questions:
- What percentage of units are leased to graduate students versus undergraduate students?
- Has the ratio of student to non-student tenants changed over the past several years?
- Is 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). marketable to non-student tenants, given the size, mix, and quality of the units?
- What is the rent structure? For example, are rents charged on a by unit basis or by bed basis?
- Who are the parties to the lease agreements? For example, are they typically signed by 1 tenant or all tenants, and/or co-signed by parents?
- What is the typical lease term?
- What is the enrollment outlook at the college/university?
- What is the student composition (i.e., full-time versus part-time) at the college/university?
- What are the current and forecasted supply and demand for student housing at the college/university? Will there be any college/university-sponsored construction?
- What is the Key Principal’sKey Principal’sPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. experience with operating Student HousingStudent HousingA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and Dedicated Student HousingDedicated Student HousingMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?
- What is 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). proximity to campus? Can students walk to class and other campus locations?
- Is 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). conveniently located to a college/university-sponsored transportation line?
- Is 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). subject to a Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. ? If so, what are the structure and terms of the Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. ?
Requirements
If a Student Housing PropertyStudent Housing PropertyA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. or Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. is subject to a master lease, you must complete the Master Lease Review Checklist (Form 6480).
Section 103 | |
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Requirements
You must ensure that a Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. :
- caters to a campus with at least 10,000 students, the majority of whom are full-time students;
- is
- located within 2 miles of a campus boundary line, as determined by the local municipality, or
- near a college/university-sponsored transportation line; and
- has operated for at least 1 full school year (i.e., August/September through April/May).
Guidance
The Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. should have stabilized occupancy no later than the month preceding the start of the first semester/quarter of the second full school year.
Requirements
Fannie Mae will not purchase any 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. secured by a Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. that offers food service.
103.03 | |
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Requirements
You must ensure that at least 80% of the units in a Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. are leased for a minimum term of 12 months.
Guidance
Each student lease agreement should have
- a parental guarantee of the rent, or
- student tenants with sufficient income or other documented financial means to pay the rent.
Requirements
You must ensure that a Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. located on college/university land meets the following:
- the BorrowerBorrowerPerson who is the obligor per the Note. has control over all economic decisions affecting 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). (such as financing, leasing, and management);
- the Key PrincipalKey PrincipalPerson who
controls and/or manages the Borrower or the Property,
is critical to the successful operation and management of the Borrower and the Property, and/or
may be required to provide a Guaranty.
- has at least 5 years of operating experience with Dedicated Student HousingDedicated Student HousingMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. , and
- operates at least 1 other Dedicated Student Housing PropertyDedicated Student Housing PropertyMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. located on college/university land; and
- any Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. complies with Part II, Chapter 1: Attributes and Characteristics, Section 104: Ground Leased Properties.
Requirements
Your underwriting must include the following:
- name of the college/university and its current total enrollment;
- current enrollment percentages of full-time graduate and undergraduate students;
- location 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). relative to the campus;
- whether 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 part of the college/university’s housing referral program;
- details 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). amenity package;
- whether 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 convenient to a college/university-sponsored transportation line;
- detailed description of the related rental housing market, including
- the amount of on-campus rental housing space occupied or available, and
- any future on- or off-campus rental housing planned or under construction;
- percentage 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). units pre-leased for the semester/quarter;
- percentage 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). tenants who are students;
- percentage 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). leases that have a term of less than 12-months;
- whether 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 subject to a Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. or master lease and, if so, the structure and terms of the lease; and
- whether parental guaranties are required for leases at 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). .
Section 104 | |
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Requirements
You must use the following table to calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. for Student HousingStudent HousingA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and Dedicated Student HousingDedicated Student HousingMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
For Dedicated Student HousingDedicated Student HousingMultifamily rental Property in which 80% or more of the units are leased to undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , Fannie Mae will permit “by-the-bed” income and valuation for units occupied by students 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). has at least 2 years of operating statements using that method, and
- rental rates are comparable to similar Student HousingStudent HousingA multifamily residential rental property in which 40% or more, but less than 80%, of the units are leased to either undergraduate or graduate students. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
REQUIRED UNDERWRITTEN NCF |
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Item |
Function |
Description |
CALCULATION OF NET RENTAL INCOME | ||
1 |
GROSS RENTAL INCOME (GRI) – market rents for vacant units based on a current rent roll (multiplied by 12), plus:
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2 |
PLUS |
To the extent deducted as an operating expense, rents for other non-revenue units (e.g., model units deducted in the “model apartment” operating expense in the “general and administrative” category, or actual rent from employee units deducted in the “employee” operating expense in the “payroll and benefits” category). |
EQUALS |
GROSS POTENTIAL RENT (GPR) |
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3 |
MINUS |
Premiums (e.g., identifiable additional income from furnished units or short term leases) and/or corporate premiums (e.g., identifiable additional income from corporate units, housekeeping services, etc.). |
4 |
MINUS |
Physical vacancy – market rents for vacant units based on a current rent roll (multiplied by 12).1 |
5 |
MINUS |
Concessions - the aggregate amount of forgone residential rental income from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.1 |
6 |
MINUS |
Bad debt - the aggregate amount of unpaid rental income determined to be uncollectable, including any adjustments to other income for bad debt.1 |
EQUALS |
NET RENTAL INCOME (NRI) |
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1 The total of Items 4, 5, and 6 must equal or exceed the greater of
If trailing 12-month NRI is not available, use a minimum 10% of GPR. |
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CALCULATION OF OTHER INCOME |
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7 |
PLUS |
Actual other income (except premiums and corporate premiums) generated through ongoing operations. The income must:
You must assess the individual month's other income within the prior full year operating statement or, at a minimum, an operating statement covering at least the trailing 6 months (annualized).
If there are fluctuations, you may use other income that exceeds the trailing 3-month other income (annualized), provided it does not exceed the highest 1-month other income used in the trailing 3-month other income calculation. |
CALCULATION OF COMMERCIAL INCOME |
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8 |
PLUS |
Actual income from leased and occupied commercial space per Part II, Chapter 1: Attributes and Characteristics, Section 109: Commercial Leases. |
9 |
MINUS |
10% of the actual commercial space income.2 |
10 |
PLUS |
Commercial parking income (e.g., public parking) that does not exceed actual trailing 12-month collections.2 |
2 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI. |
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11 |
PLUS |
Premiums3, provided that the income must:
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12 |
PLUS |
Corporate premiums3, provided that this income must:
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13 |
PLUS |
Laundry and vending, parking, and all other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
EQUALS |
EFFECTIVE GROSS INCOME (EGI) |
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3 Premium or corporate premium income cannot exceed 3% of GRI. |
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CALCULATION OF OPERATING EXPENSES |
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14 |
MINUS |
Line-by-line stabilized operating expenses.
Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operations, not affected by a
Non-recurring, extraordinary expenses must not be included.
You must assess:
You must:
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15 |
MINUS |
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 fee equal to the greatest of:
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16 |
MINUS |
Real estate taxes per Item 17(b) in Part II, Chapter 2: Valuation and Income, Section 202.01: Underwritten Net Cash Flow (Underwritten NCF). |
17 |
MINUS |
Insurance equal to:
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18 |
MINUS |
Utilities, water and sewer, repairs and maintenance, payroll and benefits, advertising and marketing, professional fees, general and administrative, ground rent, and all other expenses per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
EQUALS |
UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI) |
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19 |
MINUS |
Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense per Part III, Chapter 1: Student Housing Properties, Section 105: Replacement Reserve. |
EQUALS |
UNDERWRITTEN NCF |
Section 105 | |
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Requirements
The minimum Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. amount must equal the greater of
- the amount calculated per Part II, Chapter 4: Inspections and Reserves, Section 405: Replacement Reserve, or
- $250 per unit per year.
105.02 | |
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Requirements
You must ensure full funding of the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. .