Chapter 1

Attributes and Characteristics

Section 101

Eligible Properties
101.01

Generally

Requirements

For a 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. to be eligible for purchase, it must be secured by a multifamily residential property that meets all of the following:

  • contains at least 5 dwelling units;
  • does not include a stand-alone building containing less than 5 dwelling units (e.g., a single-family structure), unless it:
    • was originally constructed as part of a single multifamily development; or
    • is situated on the same tax parcel, or shares a tax parcel boundary, with a
      • multifamily property, or
      • MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. ;
  • has suitable bathroom and cooking facilities within each unit;
  • is located in 1 of the 50 states of the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, or Guam;
  • is located on a publicly dedicated, all-weather road, or is accessible by a satisfactory easement from this type of road;
  • consists of either a single parcel or multiple parcels per Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership;
  • any commercial space is:
    • physically part of, and connected to, the multifamily space; or
    • a stand-alone building that is on the same tax parcel;
  • has adequate water and sewer service, which may be delivered by a public utility or, where commercially acceptable for the market area, by a private system or utility;
  • offers a suitable level of utility service (e.g., electrical, natural gas, refuse removal, etc.) for the market area;
  • either complies with all applicable statutes, rules, regulations, and housing and building codes, or is being appropriately remediated;
  • does not contain any Modular HousingModular HousingProperty on which the multifamily Improvements are constructed of sections built off-site, such as modular, prefabricated, panelized, or sectional housing, and then assembled and installed on-site on a permanent foundation (and not a chassis). ; and
  • has access to police and emergency services.

Guidance

To determine if a single-family structure was originally constructed as part of a single multifamily development, you should consider if all buildings:

  • were originally constructed at the same time;
  • were historically bought, operated, and sold as 1 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.  since originally constructed;
  • are generally consistent in physical appearance, with distinct boundaries such as
    • signage,
    • gates/fencing,
    • shared parking, or
    • dedicated streets;
  • are located on a single tax parcel or adjacent tax parcels;
  • are configured without any non-BorrowerBorrowerPerson who is the obligor per the Note. owned parcels or buildings separating/splitting or within the multifamily development; and
  • are not part of a predominately homeowner development.
101.02

Expanded Housing Choice

Guidance

A 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. is eligible for a pricing incentive if the BorrowerBorrowerPerson who is the obligor per the Note. and PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). comply with this Section.

Requirements

For Expanded Housing Choice pricing incentive eligibility, all of the following must be met:

  • The BorrowerBorrowerPerson who is the obligor per the Note. agrees to:
    • accept Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. throughout 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;
    • not discriminate against applicants, tenants, their family members, and occupants for using Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. to pay rent and other lawful fees, including
      • applying stricter screening standards,
      • charging larger security deposits, rent, or fees, or
      • subjecting them to additional community rules;
    • advertise 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/or available units 
      • with participating Public Housing Agencies, and 
      • on https://www.affordablehousing.com (or successor site); and
    • execute a 
      • Modification to Multifamily Loan and Security Agreement (Expanded Housing Choice) (Form 6273), and 
      • Payment Guaranty (Pricing Incentive Recapture) (Form 6020.PIR).
  • 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 located in
      • Texas, or
      • North Carolina;
    • is not already required to accept Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. as a financing condition, such as per
      • an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…,
      • Sponsor-Initiated Affordability Agreement, or
      • LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. agreement; and
    • on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , has at least 20% of its units within the applicable HUDHUDU.S. Department of Housing and Urban Development Fair Market Rent or Small Area Fair Market Rent, as adjusted per the applicable Public Housing Agency payment standard, with the qualifying unit mix being in proportion 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). overall unit mix.

Operating Procedures

Use the Housing Choice Vouchers: Expanded Housing Choice (EHC) Job Aid to commit and 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. a 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. qualifying for an Expanded Housing Choice pricing incentive.

Guidance

For an acceptable unit mix within the applicable HUDHUDU.S. Department of Housing and Urban Development Fair Market Rent or Small Area Fair Market Rent, the qualifying units must be proportional 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). overall unit mix.  An acceptable unit mix at a sample 100-unit building would be:

Sample 100-Unit Building
Apartment Type Number of Units Minimum 20% Unit Mix
Studio 10 2
1 Bedroom 50 10
2 Bedroom 30 6
3 Bedroom 10 2
Total 100 20
Section 102

Multiple Properties
102.01

Single Borrower Ownership

Requirements

If more than 1 PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). secures a 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. , you must determine if all multifamily buildings are part of the same 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.  .  Buildings on multiple PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). are a single 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.  if all PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). :

  • are only separated by publicly dedicated or private streets primarily intended for local residents or access to 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 not by major arteries or thoroughfares (i.e., streets primarily intended for traffic traveling through the area); and
  • have the following characteristics:
    • all buildings have been operated as a single complex (e.g., no buildings are marketed separately to tenants);
    • the PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). are within
      • 0.5 miles or less of each other, and
      • the same submarket;
    • amenities at any building are available to tenants in other buildings;
    • amenities located in one building do not materially, adversely affect the rents at other buildings without similar amenities; and
    • the overall building configuration across the PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). does not result in elevated vacancy levels at any building.

If multiple PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). are not part of the same 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.  , you must:

  • collect detailed individual data 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). , including separate
    • rent rolls, and
    • operating statements;
  • enter 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). in the “Properties” section of DUS GatewayDUS GatewayMultifamily pre-acquisition system including deal registration, Pre-Review and/or waiver tracking, decision records, or any successor systems. ;
  • complete a Multifamily Affordability Estimator (MAE) 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). per Part I, Chapter 2: Mortgage Loan, Section 201: Registration and Multifamily Affordability Estimator;
  • require every third-party report to assess
    • the PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). in each 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.  separately, and
    • all PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). in the aggregate; and
  • enter 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). as a separate PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). CollateralCollateralProperty, Personal Property, or other property securing a Mortgage Loan. record in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .

When a  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. not  in a Credit FacilityCredit FacilityStructured Transaction governed by a Master Credit Facility Agreement requiring Mortgage Loans and Properties to be cross-defaulted, and cross-collateralized. is secured by multiple PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). (whether in the same or multiple 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.  ), each multifamily PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). must individually:

Guidance

For a 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 multiple PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). not part of the same 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.  , you may:

  • accept a consolidated third-party report for multiple 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.  , if 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). is identified and assessed separately; and
  • consolidate the 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. and overall underwriting in a single Transaction Approval Memo.
102.02

Joint and Several Borrower Ownership

Requirements

If... Then...

A Mortgage Loan

 

  • is made to joint and several Borrowers,
  • is secured by multiple Properties, and
  • has a Property owned by a different Borrower.

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. and each BorrowerBorrowerPerson who is the obligor per the Note. must comply with

 
Section 103

Property Ownership; Leasehold

Requirements

You must ensure that 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 owned in fee simple, unless 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 held under an acceptable LeaseholdLeaseholdProperty held under a long-term lease or Ground Lease. estate.

Section 104

Ground Leased Properties
104.01

Generally

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). has a Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. , 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. collateral must include a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on the LeaseholdLeaseholdProperty held under a long-term lease or Ground Lease. estate.

You must ensure that the Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis.  complies with the Ground Lease Review Checklist (Form 6479), unless

  • the ground lessor joins with the BorrowerBorrowerPerson who is the obligor per the Note. in executing the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. and grants a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on the ground lessor's fee estate, or
  • the absence of the LeaseholdLeaseholdProperty held under a long-term lease or Ground Lease. estate would not have a material adverse effect on 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). operation or value.
104.02

Ground Lease Rents

Requirements

You must:

  • establish an escrow for ground rents;
  • ensure the BorrowerBorrowerPerson who is the obligor per the Note. deposits sufficient funds; and
  • make all payments due per the Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. .
104.03

Ground Lease Estoppel Certificate

Requirements

You must obtain an executed Ground Lessor Estoppel Certificate (Form 6495). 

104.04

Ground Lease Review

Requirements

You must:

  • review and analyze the Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. to ensure compliance with the requirements of this Section; and
  • retain the completed Form 6479 in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .
Section 105

Minimum Occupancy
105.01

Residential Occupancy

Requirements

You must ensure 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). meets these minimum occupancy levels:

  • 85% physical occupancy; and
  • 70% economic occupancy.

These minimum levels apply on the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. and for the preceding 3-month period.

105.02

Qualified Occupants

Requirements

When calculating physical occupancy, you must only include tenants who

  • physically occupy the unit, and
  • have commenced paying rent.

Guidance

You may include any tenant who:

  • was under a standard lease for at least 6 months, then converted to a month-to-month lease when the lease expired; or
  • is under a lease with a term of less than 6 months, if shorter-term leases
    • are commonly accepted in the market area, and
    • do not reflect weakness in the market.

You may include non-revenue producing units such as

  • management units,
  • employee occupied units,
  • maintenance units, and
  • model units.

Such units should not exceed what is usual and customary for stabilized properties in the market.

Section 106

Certificates of Occupancy

Requirements

Certificates of Occupancy
For any... You must...
Property with construction or rehabilitation work completed within the last 12 months
  • Ensure all units have a certificate of occupancy.
  • Obtain copies of all certificates of occupancy from the BorrowerBorrowerPerson who is the obligor per the Note. .
  • Retain them in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .
Other Property
  • Determine if each unit had a certificate of occupancy at some point.
  • Attempt to obtain copies of them.
  • Retain them in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .

Guidance

No Certificate of Occupancy
If you cannot obtain... You should...
Copies of certificates of occupancy for a Property (for example, because of the Property's age, or the records of the jurisdiction where the Property is located)
  • Exclude the income generated by any units without a certificate of occupancy, but include all expenses (including replacement reserves) for the maintenance of these units.
  • Look for other evidence that certificates of occupancy had been issued. 
Copies or other sufficient evidence of a certificate of occupancy

Analyze the risk to 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). if one had never been issued, by considering if: 

 

  • your physical inspection reveals any life safety issues;
  • all units are accessible through normal access routes (and not, for example, through a former janitorial closet);
  • the insurance excludes coverage of a casualty originating from a unit without a certificate of occupancy; and
  • 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 located in a market that exhibits low vacancies and barriers to entry.
Section 107

Phased Properties

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 Phased PropertyPhased PropertyProperty that is one section of an existing or future complex and the Property is intended to be operated together with another property in the complex, and/or with shared access and amenities. , you must evaluate

  • how 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). will be affected by other phases, and
  • 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). can succeed independently from other phases.

Guidance

In determining if a Phased PropertyPhased PropertyProperty that is one section of an existing or future complex and the Property is intended to be operated together with another property in the complex, and/or with shared access and amenities. is viable as a separate 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 should consider if:

  • its ownership and operation are separate from all other phases of the complex;
  • the BorrowerBorrowerPerson who is the obligor per the Note. is able to provide a separate leasing office;
  • your underwriting has discounted any benefits derived from staff or facilities shared with other phases;
  • the records and accounts used to underwrite 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). are separate from those of other phases;
  • any cross-easements for the complex will survive an adverse action against another phase;
  • any development of a future phase could materially interfere with or disturb 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).
    • occupancy,
    • marketability,
    • or living environment; and
  • 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:
    • marketable to tenants or a new owner, separately from other phases;
    • visible to the public without passing through another phase of the complex; and
    • accessible from a public roadway.

In assessing the impact of future phases on a 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 should consider:

  • the short-term impact of construction activity; and
  • long-term implications for the continued economic viability 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). , taking into account the allocation of costs for shared facilities (such as roadways).

Requirements

You may only 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. a 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. on a Phased PropertyPhased PropertyProperty that is one section of an existing or future complex and the Property is intended to be operated together with another property in the complex, and/or with shared access and amenities. if Fannie Mae holds all other Mortgage LoansMortgage LoansMortgage 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 other phases of the complex.

When the Phased PropertyPhased PropertyProperty that is one section of an existing or future complex and the Property is intended to be operated together with another property in the complex, and/or with shared access and amenities. is owned or ControlledControlledPossessing, directly or indirectly, the power to direct or cause the management and operations of an entity (e.g., through the ownership of voting securities or other ownership interests, or by contract). by the same BorrowerBorrowerPerson who is the obligor per the Note. or PrincipalsPrincipalsPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. as the other phases in the complex:

  • all Fannie Mae Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. on each phase must be cross-defaulted and cross-collateralized;
  • when any new Phased PropertyPhased PropertyProperty that is one section of an existing or future complex and the Property is intended to be operated together with another property in the complex, and/or with shared access and amenities. 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. is underwritten, the 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. (per Form 4254.DEF) and current LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  for all existing Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. on each phase must comply with Form 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans.  for the same loan term, product, and Pricing and Underwriting TierPricing and Underwriting TierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). , where each property value is determined by
    • dividing the current NCFNCFOn 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 202: Income Analysis and the applicable products and… by the capitalization rate (i.e., a Direct Cap with Sales Comparables analysis),
    • broker's opinion of value, or
    • most recent AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. ; and
  • the new Phased PropertyPhased PropertyProperty that is one section of an existing or future complex and the Property is intended to be operated together with another property in the complex, and/or with shared access and amenities. 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. must have a Prepayment Premium Period End DatePrepayment Premium Period End DateLast date when a Borrower owes a Prepayment Premium for a voluntary Mortgage Loan prepayment. on or before the Prepayment Premium Period End DatePrepayment Premium Period End DateLast date when a Borrower owes a Prepayment Premium for a voluntary Mortgage Loan prepayment. of the Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. on the other phases.

Guidance

If a future phase is expected, consider issuing the first phase MBSMBSMortgage-Backed Security with a potential future cross.

Section 108

Commercial Leases

Requirements

You must only underwrite actual income from occupied commercial space with an executed lease or lease extension agreement, if:

  • the remaining lease term is at least 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
  • the tenant is
    • paying rent, and
    • not delinquent on rent due outside the lease’s cure period; and
  • the underwritten commercial income includes the actual commercial rent due under the lease within 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , including any
    • discounts, or
    • concessions.

Guidance

Your evaluation of any commercial space's viability should include:

  • AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. sub-market comparable commercial space rents supporting the underwritten rents;
  • sub-market data confirming a low commercial space vacancy rate;
  • existing sustainable demand for the tenant’s business type; and
  • evidence that 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).  location has sufficient foot traffic to support the tenant’s business.
108.01

Material Commercial Leases
108.01A

Lease Review

Requirements

You must analyze all aspects of each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… and its

  • tenants,
  • grantees, or
  • other beneficiaries.

If Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… approval is required per Part II, Chapter 1: Attributes and Characteristics, Section 108.01B: Lease Approval you must:

  • prepare a written summary of the material terms of the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…; and
  • keep a copy of your summary in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .

Guidance

As you analyze the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…, you should consider if:

  • each tenant has the ability to fulfill its financial and other performance obligations under the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…;
  • the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… insurance provisions are consistent with the insurance requirements in the applicable Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. or otherwise prescribed by Fannie Mae;
  • each tenant is required to obtain the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. consent before the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… is
    • assigned,
    • subleased,
    • subcontracted, or
    • otherwise transferred; and
  • the tenant
    • has early termination clauses, and
    • understands the conditions under which they can terminate, including
      • a material casualty or condemnation, or
      • if the landlord cannot substantially restore the premises in a reasonable period of time following a casualty or condemnation.
108.01B

Lease Approval

Requirements

Material Commercial Lease Type

Lease with Property Assessed Clean Energy (PACE) Financing

You must not approve any Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… that includes PACE financing.

Renewable Energy Generation Lease

You must only approve leases for renewable energy systems that comply with Part II, Chapter 1: Attributes and Characteristics, Section 109: Renewable Energy Generation Systems.

Other Material Commercial Leases

You must only approve other Material Commercial LeasesMaterial Commercial LeasesLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… that comply with Part II, Chapter 1: Attributes and Characteristics, Section 108: Commercial Leases.
108.01C

Lease Modifications

Requirements

As you review each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… modification, you must consider if it:

  • violates any of the requirements of this Section;
  • contains terms that are inconsistent with 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. ; or
  • presents risks that are inappropriate for 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. .

If any of these conditions are present you must:

  • require the BorrowerBorrowerPerson who is the obligor per the Note. to modify the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… appropriately; or
  • address the items in the Tenant Estoppel Certificate (Form 6413) and/or the Subordination, Non-Disturbance, and Attornment Agreement (Form 6415).
108.01D

Tenant Estoppel Certificate

Requirements

You must obtain a Tenant Estoppel Certificate (Form 6413) for each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other….

108.01E

Subordination, Non-Disturbance and Attornment

Requirements

You must use Form 6415 if:

  • the Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… contains provisions for the BorrowerBorrowerPerson who is the obligor per the Note. to assume liability or other risks as landlord that would be unacceptable to the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans.  in case of a Foreclosure EventForeclosure EventAny of the following: Foreclosure under the Security Instrument; any other exercise by the Lender of rights and remedies (whether under the Security Instrument or under applicable law, including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, as a result of…; or 
  • the form
    • is necessary for subordination and attornment, or
    • would otherwise be beneficial.

You must ensure that each Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… (including any renewal or extension):

  • is subordinate to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. ; and
  • requires the tenant to attorn to the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. under 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. .
108.02

Non-Material Commercial Leases
108.02A

Tenant Estoppel Certificate; Lease Modification

Requirements

You must make reasonable efforts to get a Form 6413 for each non-Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other…, other than leases relating only to equipment or maintenance services.

If a non-Material Commercial LeaseMaterial Commercial LeaseLease, sublease, license, concession, grant, or other possessory interest for commercial purposes that comprises 5% or more of the Property's annual EGI, or relates to: solar power, thermal power generation, or co-power generation, or for the installation of solar panels or any other… has terms that are inconsistent with the terms of 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. or present inappropriate risks for 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. , then you must:

  • require the BorrowerBorrowerPerson who is the obligor per the Note. to modify the lease appropriately; or
  • address any inconsistencies or risks in a Form 6413.
108.02B

Non-Material Commercial Lease Types

Requirements

Non-Material Commercial Lease Type

Telecommunications and Cell Tower Leases

You must review any telecommunications and cell tower lease to ensure it does not:

 

  • comprise more than 5% 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).  Effective Gross IncomeEffective Gross IncomeOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. ;
  • negatively impact 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,
    • visibility,
    • livability, or
    • marketability;
  • impose an undue financial or operating burden on 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). or the BorrowerBorrowerPerson who is the obligor per the Note. ;
  • obligate the BorrowerBorrowerPerson who is the obligor per the Note. to rebuild any ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now constructed or hereafter constructed or placed on the land upon which the Property is located, together with all fixtures (as defined in the Uniform Commercial Code). 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). post-casualty or condemnation;
  • have a lease term (including extension options) in excess of 25 years;
  • contain a purchase option; or
  • convey any right to the tenant other than simple lessee rights (e.g., a perpetual easement, a purported sale of a portion of the ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now constructed or hereafter constructed or placed on the land upon which the Property is located, together with all fixtures (as defined in the Uniform Commercial Code). , unjustified exclusivity, etc.).
Communications Service Agreement

You do not need to subordinate the service agreement to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if:

 

  • the BorrowerBorrowerPerson who is the obligor per the Note. certifies to you that neither the BorrowerBorrowerPerson who is the obligor per the Note. , nor any Key PrincipalKey PrincipalAny Person 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 who may be required to provide a Guaranty. or PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. , is an 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… of the communications service provider; and
  • the lease does not contain provisions for the BorrowerBorrowerPerson who is the obligor per the Note. to assume liabilities and risks as landlord that would not be acceptable for you (as lender under 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 context of a Foreclosure EventForeclosure EventAny of the following: Foreclosure under the Security Instrument; any other exercise by the Lender of rights and remedies (whether under the Security Instrument or under applicable law, including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, as a result of….

If a communications service agreement is accompanied by a lease or easement, then the lease or easement must end automatically when the service agreement expires, unless the service agreement is subordinated to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. .

Mineral Rights; Oil and Natural Gas Leases

You must review each agreement or lease of mineral rights or rights relating to subsurface oil and natural gas to ensure that it does not:

 

  • comprise more than 5% 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).  Effective Gross IncomeEffective Gross IncomeOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. ;
  • grant surface entry for any purpose (e.g., pipes, access across, or storage on 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). );
  • grant subsurface rights within
    • 250 feet below the surface 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). , or
    • 600 feet from any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). boundary line;
  • have a material adverse effect on
    • public health and safety,
    • air quality or noise levels, or
    • 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). marketability or occupancy;
  • permit oil or gas well activities with potential negative effects on 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).
    • access,
    • visibility, or
    • storm water drainage;
  • have a negative effect on 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).
    • zoning, or
    • allowable density;
  • facilitate drilling, storage, or processing of oil or gas on 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). or any adjacent property; or
  • fail to require the lessee to indemnify and hold harmless the BorrowerBorrowerPerson who is the obligor per the Note. , as lessor, for any damage to 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). or any other damage or liability caused directly or indirectly as a result of the oil and gas exploration or drilling activities.

The BorrowerBorrowerPerson who is the obligor per the Note. must execute Form 6262 if a lease or deed reservation of rights allows for the subsurface exploration of oil, natural gas, or minerals, but no evidence of active or planned exploration or drilling exists on 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). .

Laundry Lease

You do not need to subordinate the lease to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if you confirm that the lease:

 

  • is not with an 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… of the BorrowerBorrowerPerson who is the obligor per the Note. or any Key PrincipalKey PrincipalAny Person 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 who may be required to provide a Guaranty. or PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. ;
  • has market terms;
  • contains an acceptable termination for cause provision; and
  • meets recognized industry standards.

Equipment or Related Maintenance Services Lease

You must ensure that the lease:

 

  • is subordinate to the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. ;
  • contains an acceptable termination for cause provision; and
  • meets recognized industry standards.

Guidance

Non-Material Commercial Lease Type

Storage Unit Lease

You do not need to subordinate the lease to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if you determine the unit is being leased pursuant to a residential LeaseLeaseWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent. .
108.03

Short Term Rentals

Requirements

You must ensure that:

  • the residential nature of any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with units available for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… is maintained, even though any LeaseLeaseWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent. of an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… unit will be
    • classified as a commercial lease, and
    • subject to the space and income limitations per Form 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ;
  • no more than 5% 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). ’s units (not counting recreational vehicle sites) are available for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…; and
  • the 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. accurately incorporates all STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… income.

You must include the following information in your underwriting analysis:

  • Borrower'sBorrower'sPerson who is the obligor per the Note.  strategy for implementing STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…;
  • a description of the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… arrangement;
  • length of time the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… has been in place;
  • Borrower'sBorrower'sPerson who is the obligor per the Note.  action plan for handling liability issues for
    • STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… tenants 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). , and
    • safety concerns for non-STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… tenants;
  • if the STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… units are furnished or unfurnished; and
  • confirmation that the
    • STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… is legally permissible and in compliance with applicable laws and zoning,
    • Borrower'sBorrower'sPerson who is the obligor per the Note.  or master tenant’s insurance covers any STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…, and
    • 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 residential in nature (i.e., not operated as a hotel or other single room occupancy arrangement).

Guidance

Examples of an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… arrangement include an arrangement between the BorrowerBorrowerPerson who is the obligor per the Note. and:

  • a tenant/master tenant, where the tenant/master tenant has an agreement with an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… provider or platform (such as Airbnb, VRBO®, etc.); or
  • an STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… provider or platform, where the Borrower'sBorrower'sPerson who is the obligor per the Note.  tenants may make their units available for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer….

You should seek to establish a leasing history of at least 12 months for any STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… unit.

Section 109

Renewable Energy Generation Systems
109.01

Acceptable Renewable Energy Generation Systems

Requirements

Any operational renewable energy generation system benefitting 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). or the BorrowerBorrowerPerson who is the obligor per the Note. must be:

  • located on 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). ;
  • comprised of a Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored…;
  • BorrowerBorrowerPerson who is the obligor per the Note. -owned; and
  • installed, or installation will begin, on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .
109.02

Solar Photovoltaic Systems

Requirements

For any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with an acceptable Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored…, you must ensure:

  • All equipment, including energy storage, is located on 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 owned by the BorrowerBorrowerPerson who is the obligor per the Note. . 
  • The BorrowerBorrowerPerson who is the obligor per the Note. has all required permits, licenses, and certificates to comply with all utility tariffs and laws governing the
    • generation,
    • storage,
    • transmission, and
    • distribution of electricity.
  • 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). will remain connected to the utility grid even if the Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored… output is sufficient for all 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). energy needs.
  • The BorrowerBorrowerPerson who is the obligor per the Note. will not be characterized or regulated as a public utility.
  • Any power generated from the Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored… that is not consumed or stored on-site is only sold to the local utility, not to any other third party.
  • Any battery storage system is designed only for on-site uses (e.g., peak shaving), and the BorrowerBorrowerPerson who is the obligor per the Note. has not arranged for ancillary services with any utility or third party.
  • The BorrowerBorrowerPerson who is the obligor per the Note. executes Modifications to Multifamily Loan and Security Agreement (Mortgage Loan with installed Solar Photovoltaic System) (Form 6270).

Guidance

You should engage legal counsel with solar photovoltaic system experience and state-specific knowledge to review all applicable local laws, contracts, and agreements regarding the Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored… installation and operation, including:

  • the interconnection agreement with local distribution company or utility;
  • any net metering agreements;
  • engineering, procurement, and construction contracts or agreements;
  • any Operating and Maintenance Agreements;
  • notice of Permission to Operate (or similar document) provided by local distribution company or utility;
  • any supplemental financing or financing incentives (e.g., grants, tax credits, etc.) used by the BorrowerBorrowerPerson who is the obligor per the Note. to finance the Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored… to determine if any competing liens or other restrictions might result;
  • any leases or contractual arrangements, such as agreements for
    • renewable energy certificates, 
    • solar renewable energy certificates, or 
    • purchasing power; and
  • confirming that BorrowerBorrowerPerson who is the obligor per the Note. will not be deemed a public utility. 
109.03

Solar PV System Module

Requirements

The PCAPCAAssessment of the current physical condition and historical operation of the Property. must include an evaluation of the Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored… equipment and roofs/structures where the equipment is mounted per the Solar PV Module of Form 4099.

109.04

Underwritten NCF

Requirements

When calculating 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. :

  • do not include any income derived from the Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored…, except for tenant utility reimbursement;
  • any utility reimbursement income must
    • not exceed the trailing 12-month period, and
    • consider any decrease from the lower utility expense;
  • utility expense must be supported by the trailing 12-month operating history; and
  • include all additional Solar PV SystemSolar PV SystemA renewable energy system located on the Property that converts sunlight into electricity and/or a battery storage system containing lithium ion batteries or equivalent technology capable of storing electricity received from the electric grid or a renewable energy system and delivering stored… operating expenses such as:
    • operating and maintenance contract fees;
    • fixed utility fees;
    • incremental real estate taxes;
    • insurance coverage; and
    • Replacement ReservesReplacement ReservesCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. for equipment replacement and/or system removal and reinstallation upon roof replacement. 
Section 110

Oil/Gas Wells and Mineral Exploration
110.01

Active Oil and Gas Wells

Requirements

You must ensure 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 no evidence of any surface entry related to active mineral, oil, or gas activities.

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 mineral, oil, or gas exploration on an adjacent property, you must:

  • Identify whether the exploration is active or inactive.
  • 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. a Phase I ESAPhase I ESAEnvironmental report and site assessment performed according to the process described in current ASTM E 1527, including any report summarizing the conclusions of the assessment. 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). reporting no Recognized Environmental Conditions.
  • Confirm all mineral, oil, or gas:
    • equipment is located more than 600 feet from any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). boundary line; and
    • exploration on the adjacent property does not impact the health or safety 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 or have a material adverse impact to its marketability.
  • Confirm:
    • the adjacent property is not owned by an 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… of the BorrowerBorrowerPerson who is the obligor per the Note. ; and
    • either:
      • no history of spills or leaks exists; or
      • if spills or leaks have occurred, all applicable permits are in place.

Guidance

Evidence of active mineral, oil, or gas activities on 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). may include:

  • wells associated with production, exploration, or extraction;
  • active storage or processing; or
  • associated pits, ponds, or lagoons.
110.02

Inactive Oil and Gas Wells

Requirements

You must ensure 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 no evidence of inactive mineral, oil, or gas equipment, unless:

  • 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).  Phase I ESAPhase I ESAEnvironmental report and site assessment performed according to the process described in current ASTM E 1527, including any report summarizing the conclusions of the assessment. is acceptable;
  • 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 subject to an oil and gas lease, the lease complies with Part II, Chapter 1: Attributes and Characteristics, Section 108.02B: Non-Material Commercial Lease Types; and
  • for a refinance, all mineral, oil, or gas equipment has been removed, capped, and closed per regulatory requirements before closing, and you have a permit or closure letter from the governing authority; or
  • for an acquisition, you:
    • require the mineral, oil, or gas equipment/wells to be removed, capped, and closed per regulatory requirements within 180 days after 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. closing;
    • escrow the applicable cost to remove equipment, close wells, and remediate the site per regulatory requirements;
    • receive a permit or closure letter from the governing authority; and
    • modify the Environmental Indemnity Agreement as required by Fannie Mae.
Section 111

Property Management and Agreement
111.01

Property Management

Requirements

You must ensure 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). management team is adequate.

 Guidance

An independent, professional 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 company is not required.  However, when analyzing 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, you should consider if the management team:

  • has adequate experience to ensure effective PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code).
    • administration,
    • leasing,
    • marketing, and
    • maintenance; and
  • is staffed appropriately 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). type and size, and
    • services provided.
111.02

Property Management Agreement

Requirements

If the BorrowerBorrowerPerson who is the obligor per the Note. is not 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). manager, you must ensure the:

  • BorrowerBorrowerPerson who is the obligor per the Note. has a written management agreement with a 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 company allowing LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans.  cancellation without penalty or prior notice in case of a BorrowerBorrowerPerson who is the obligor per the Note. default per the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. ; or
  • BorrowerBorrowerPerson who is the obligor per the Note. and PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager complete the Assignment of Management Agreement (Form 6405). 

Guidance

You should ensure 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). management agreement clearly states 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). manager's responsibilities, and
  • amount of the management fee (or fee determination methodology).