Chapter 6

Manufactured Housing Communities

Section 601

Description

Requirements

An MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. is a residential real estate development with lots on which Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. are located, together with amenities, utility services, landscaping, roads, and other infrastructure.

Section 602

Lender Eligibility

Requirements

You must be approved in writing to 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. MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. 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. .

Section 603

Legal and Property Compliance
603.01

Borrower and the MH Community
603.01A

Borrower Ownership

Requirements

If the BorrowerBorrowerPerson who is the obligor per the Note. is a non-profit entity, then you must ensure that each of the following complies with Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals:

  • the BorrowerBorrowerPerson who is the obligor per the Note. ;
  • Key PrincipalsKey PrincipalsPerson 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. ;
  • GuarantorsGuarantorsKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ; and
  • 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. .

Guidance

If the BorrowerBorrowerPerson who is the obligor per the Note. is a non-profit entity, you may reimburse the BorrowerBorrowerPerson who is the obligor per the Note. from the Origination FeeOrigination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. for up to a combined total of $10,000 for the cost of any required MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. 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. third-party reports (e.g., AppraisalAppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. , Environmental Site AssessmentEnvironmental Site AssessmentInvestigation and resulting report (Phase I ESA or Phase II ESA) conducted per Environmental Due Diligence Requirements (Form 4251), identifying if a Property has Recognized Environmental Conditions or Business Environmental Risks. ).

Operating Procedures

Fannie Mae will reimburse the cost of any third-party report within 2 months after the delivery 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. .  To receive reimbursement, you must:

  • request an invoice from the vendor with the report cost listed as a separate line item from any ancillary charges (Fannie Mae will not reimburse other costs such as fees for expediting a report);
  • within 1 month after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. :
    • complete Form 4829, detailing the Lender’sLender’sPerson Fannie Mae approved to sell or service Mortgage Loans. information, the commitment number or loan number, PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). information, wiring instructions, and listing the third-party cost as “Other” (note that any fields related to servicing may be left blank); and
    • manually sign or e-sign Form 4829, scan or save it as a PDF file, and email the signed PDF Form 4829 and the third-party report invoice to: [email protected].
603.01B

Collateral; Tenant-Occupied and Affiliate-Owned Homes

Requirements

The collateral for an MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. 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. consists of

  • the MH Community'sMH Community'sResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. land and infrastructure,
  • the rents for the MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. , and
  • any other BorrowerBorrowerPerson who is the obligor per the Note. -owned property used for the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. .

The percentage of tenant-occupied Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. must not exceed 35%.  If the percentage of tenant-occupied Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. is greater than 25%, then:

  • the Borrower’sBorrower’sPerson who is the obligor per the Note. business plan must reflect the conversion of tenant-occupied Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. to owner-occupied over time; and
  • ongoing business related to the sale, financing, or rental of a Manufactured HomeManufactured HomeFactory-built home complying with the Manufactured Home HUD Code. 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). must be performed 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….

If any Affiliate-Owned Manufactured HomesAffiliate-Owned Manufactured HomesManufactured Home or park model home located on an MH Site that is owned by an Affiliate of the Borrower. are leased to tenants 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 either the BorrowerBorrowerPerson who is the obligor per the Note. or a 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. , then:

  • The MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. lease must be at a market rate rent.
  • If the tenant’s rent payment includes both the rent for the Affiliate-Owned Manufactured HomeAffiliate-Owned Manufactured HomeManufactured Home or park model home located on an MH Site that is owned by an Affiliate of the Borrower. and the rent for the MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. , then either:
    • the check must be payable to and deposited by the BorrowerBorrowerPerson who is the obligor per the Note. , which must pay all required P&IP&IPrincipal and interest , and escrows before remitting the rent payment to the 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…; or
    • you must consider whether it is appropriate to require a lockbox arrangement with the BorrowerBorrowerPerson who is the obligor per the Note. and the 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…
      • into which all rent checks for the Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. and MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. must be deposited, and
      • from which you can control the disbursement of funds for P&IP&IPrincipal and interest , required escrows, and the Manufactured HomeManufactured HomeFactory-built home complying with the Manufactured Home HUD Code. rentals, with the remainder disbursed to the BorrowerBorrowerPerson who is the obligor per the Note. .
603.01C

MH Community

Requirements

An eligible MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. must:

  • have a minimum of 50 MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. ;
  • consist of contiguous parcels or, if the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. is made up of Non-Contiguous ParcelsNon-Contiguous ParcelsMultiple parcels of land securing a Mortgage Loan that do not share common boundaries or that are separated by dedicated or private streets that are major arterials. :
    • all parcels must be located within the same MSAMSAGeographic delineation for a metropolitan area determined by the U.S. Census Bureau. ; and
    • each separate parcel (individually), and all Non-Contiguous ParcelsNon-Contiguous ParcelsMultiple parcels of land securing a Mortgage Loan that do not share common boundaries or that are separated by dedicated or private streets that are major arterials.  (together), must comply with the GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. ; and
  • achieve at least a Level 3 Quality Rating per the Manufactured Housing Community Quality Rating Standards table in Part III, Chapter 6: Manufactured Housing Communities, Section 603.02: MH Community Score.

An MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. must be served by either

  • public underground utilities, or
  • private sewage treatment plants, septic systems, and private water wells which are:
    • common for the market;
    • owned by the BorrowerBorrowerPerson who is the obligor per the Note. or 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…; and
    • in compliance with all applicable government requirements.

Guidance

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. may be secured by either an Age-Restricted MH CommunityAge-Restricted MH CommunityMH Community that limits residents to those who are over a particular age (e.g., persons who are age 62 or older, or at least 80% of the Manufactured Homes occupied by at least 1 person who is age 55 or older). or an All-Age MH CommunityAll-Age MH CommunityMH Community that accepts residents of any age. .

You should consider the following:

  • For an MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. that is more than 25 years old, does the BorrowerBorrowerPerson who is the obligor per the Note. have a plan for placing new Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. in the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. as MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. with older Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. are vacated?
  • Are the landscaping and entrance signage high quality and well maintained?
  • For an MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. served by a private sewage treatment plant, septic system, or a private water well, then:
    • Address the availability and cost of obtaining a backup source for water if the 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 a private water well.
    • Ensure that the operator of the facility, including its employees and contractors, meet all applicable government requirements to perform ongoing operation and maintenance.
    • If the operator is an employee of the BorrowerBorrowerPerson who is the obligor per the Note. , identify a local, qualified vendor that could be retained if substitute services are needed.
    • Exercise reasonable due diligence, including contacting municipal agencies, to confirm that
      • the MH Community’sMH Community’sResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. connection to a municipal system has not been mandated, and
      • no mandate is expected to occur during the term 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. .
    • If hookup is imminent, determine if an escrow for the cost is appropriate.
603.02

MH Community Score

Requirements

You must determine the MH Community ScoreMH Community ScoreScore of 3 through 5 based on characteristics of the MH Community per Part III, Chapter 6: Manufactured Housing Communities, Section 603.02: MH Community Score. using the MH Community Quality Rating Standards table.  The overall MH Community Quality Rating is based on the lowest rating for any 1 characteristic.  

The MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. must:

  • meet a Level 3 Quality Rating; or
  • achieve most of the minimum Quality Rating characteristics and either
    • the unsatisfactory characteristics are not materially detrimental to the performance, overall appearance, desirability, and quality of the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. , or
    • any failed characteristic must be remediated as a Completion/RepairCompletion/RepairRepairs or capital item replacements and deferred maintenance: identified per the Property Condition Assessment; and required per the Completion/Repair Schedule, or Completion/Repair Agreement. item.

Manufactured Housing Community Quality Rating Standards

Characteristic

Level 3 Quality Rating

Level 4 Quality Rating

Level 5 Quality Rating

 

Minimum Standard

Minimum Standard applies

(except as detailed)

Level 4 applies

(except as detailed)

Streets

Paved Roads.

Same as Level 3.

Rolled curbs (if warranted by layout/drainage needs).

Home Sites
  • Area under the Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. consists of concrete, crushed rock, or dirt.
  • Entry to the Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. is through a patio or porch.
  • Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. are supported by stacks of hollow concrete block or steel pier systems along the main beams (with ground anchors and steel straps holding the frame against movement) that meet local and state requirements.

Same as Level 3 with at least 60% of MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. having commercial grade porch/cabanas or patios.

Same as Level 3 with all MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. having commercial grade porch/cabanas or patios.

Site Size

Preference for 50% doublewide MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. , however you have delegated discretion on the percentage of doublewide sites as long as the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. is competitive with a clear market demand for singlewide MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. .

Same as Level 3.

Minimum 50% doublewide MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. .

Density

Density reflects the norm 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). market.  Generally, maximum density is 12 MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. per acre, however you have delegated discretion to determine the typical density in your market.

Density reflects the norm 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). market.  Generally, maximum density is 7 MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. per acre, or 10 MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. per acre if developed before 2000.

Same as Level 4.

Skirts/Hitches

100% of the Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. are professionally skirted, with hitches covered or removed.

You can meet this requirement through a Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement, or other Fannie Mae-approved agreement, evidencing: the Borrower’s agreement to fund the Completion/Repair Escrow, and perform Completion….

Same as Level 3.

All of the Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. are professionally skirted, with hitches removed.

Parking

Minimum of 2 on- or off-street parking spaces per MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. that are properly maintained, paved, concrete, or gravel (if common in the market).  You have delegated discretion to determine compliance based on prevailing market conditions, subject to local ordinances.

Same as Level 3.

2 paved off-street parking spaces per MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. .

Amenities

Not required, but amenity package should be competitive based on market comparables.

Competitive amenity package required.

High quality amenity package competitive with other high-quality MH CommunitiesMH CommunitiesResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. .
603.03

Code Standards

Requirements

You must:

  • determine if all Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. in the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. meet the requirements of the Manufactured Home HUD CodeManufactured Home HUD CodeNational Manufactured Home Construction and Safety Standards Act of 1974 (HUD Code) (42 USC 5401 et seq) and the Manufactured Home Construction and Safety Standards (24 CFR Part 3280), as amended. ; and 
  • ensure the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. require BorrowerBorrowerPerson who is the obligor per the Note. certification that no additional Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. predating the Manufactured Home HUD CodeManufactured Home HUD CodeNational Manufactured Home Construction and Safety Standards Act of 1974 (HUD Code) (42 USC 5401 et seq) and the Manufactured Home Construction and Safety Standards (24 CFR Part 3280), as amended. will be added to the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. during 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.

Guidance

Fannie Mae may allow Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. predating the Manufactured Home HUD CodeManufactured Home HUD CodeNational Manufactured Home Construction and Safety Standards Act of 1974 (HUD Code) (42 USC 5401 et seq) and the Manufactured Home Construction and Safety Standards (24 CFR Part 3280), as amended. if

  • they are BorrowerBorrowerPerson who is the obligor per the Note. -owned Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. or Affiliate-Owned HomesAffiliate-Owned HomesManufactured Home or park model home located on an MH Site that is owned by an Affiliate of the Borrower.  that comply with local codes with no identified life safety issues, and
  • you document the number of Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. predating the Manufactured Home HUD CodeManufactured Home HUD CodeNational Manufactured Home Construction and Safety Standards Act of 1974 (HUD Code) (42 USC 5401 et seq) and the Manufactured Home Construction and Safety Standards (24 CFR Part 3280), as amended. . 

Fannie Mae may allow rental units that do not comply with the Manufactured Home HUD CodeManufactured Home HUD CodeNational Manufactured Home Construction and Safety Standards Act of 1974 (HUD Code) (42 USC 5401 et seq) and the Manufactured Home Construction and Safety Standards (24 CFR Part 3280), as amended. (e.g., certain park model recreational vehicles) if the rental income is included as commercial income in Part III, Chapter 6: Manufactured Housing Communities, Section 606: Property Income and Underwritten NCF.

603.04

Flood Zone
603.04A

Rising Water

Requirements

For an MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. located in a flood zone with rising water (e.g., flood water that quickly dissipates and flood zone A or AE) you must ensure the BorrowerBorrowerPerson who is the obligor per the Note.  notifies all HomeownersHomeownersFor an MH Community, a tenant of the Borrower who pays ground rent to the owner for use and occupancy of the MH Site and for use of the MH Community’s utilities and amenities. and all tenants of BorrowerBorrowerPerson who is the obligor per the Note. -owned or Affiliate-Owned HomesAffiliate-Owned HomesManufactured Home or park model home located on an MH Site that is owned by an Affiliate of the Borrower. occupying an MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. located in the flood zone before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

For Manufactured Homes located in a rising water flood zone...

If you

 
  • do not know the base flood elevation for the flood zone (e.g., flood zone A), or
  • know that the living floor levels are below the base flood elevation

Then:

 

  • you must calculate the Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and… excluding the site rent for Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. with living floor levels within the flood zone; and
  • if the resulting Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and… decreases to more than 10 basis points below the minimum TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 standard, you cannot underwrite the site rent for those Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. .
603.04B

Moving Water

Requirements

For an MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. located in a flood zone with the potential for flooding due to moving water (e.g., typically in flood zone A and AE and located next to a stream, river, etc.), you must ensure:

  • your underwriting assumes that MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. located in the flood zone are considered non-income producing MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. ; and
  • the BorrowerBorrowerPerson who is the obligor per the Note. notifies all HomeownersHomeownersFor an MH Community, a tenant of the Borrower who pays ground rent to the owner for use and occupancy of the MH Site and for use of the MH Community’s utilities and amenities. and all tenants of BorrowerBorrowerPerson who is the obligor per the Note. -owned or Affiliate-Owned HomesAffiliate-Owned HomesManufactured Home or park model home located on an MH Site that is owned by an Affiliate of the Borrower. occupying an MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. located in the flood zone before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .
603.05

Lease Terms
603.05A

Master Leases

Requirements

You must ensure there are no master lease arrangements affecting any of the MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. .

603.05B

MH Site Leases

Requirements

MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. LeasesLeasesWritten 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. must

  • be in writing, and
  • not contain an option to purchase the MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. .

The BorrowerBorrowerPerson who is the obligor per the Note. must agree to implement the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,… for all MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. by the end of the first loan year.

Operating Procedures

The Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,… may be incorporated

  • by amending each MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. 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. ; or 
  • within the MH Community’sMH Community’sResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. rules and regulations, if the MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. 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. incorporates the rules and regulations by reference.

The Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing Mortgage Loan terms using Form 6001 series Loan Documents, or another Fannie Mae-approved form. must include a:

  • covenant to implement the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,… by the end of the first loan year;
  • requirement that, if the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,… were implemented within the MH Community’sMH Community’sResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. rules and regulations:
    • the rules and regulations are publicly posted; and 
    • each lessee of an MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. 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. receives written notice of the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,…; and
  • BorrowerBorrowerPerson who is the obligor per the Note. :
    • representation stating the percentage of MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. LeasesLeasesWritten 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. with the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,…;
    • covenant to continue the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,… over the entire Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. term; and
    • requirement to annually submit to you a:
      • certified copy of the MH Community’sMH Community’sResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. current Rules and Regulations;
      • certified copy of the notice sent to all MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. 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. tenants if the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,… were implemented by the Rules and Regulations;
      • certified copy of the current form of Residential Leases for MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. ;
      • copy of any requested MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. LeasesLeasesWritten 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. ; and
      • certification of the percentage of MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. LeasesLeasesWritten 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. with the Tenant Site Lease ProtectionsTenant Site Lease ProtectionsMH Site Lease with the Homeowner or tenant of a Manufactured Home with: a 1-year renewable (at the MH Site Lease tenant’s election) lease term, unless good cause for nonrenewal exists; a minimum 30-day written notice of rent increases; 5-day minimum grace period for non-payment of rent,….

Guidance

You may allow

  • month-to-month lease terms,
  • lease terms for up to 2 years, and
  • lease terms longer than 2 years, but only if the lease provides for:
    • an annual rent increase sufficient to cover the current and/or projected Consumer Price Index (CPI);
    • the pass-through of real estate taxes over a base year;
    • the pass-through of any utilities provided by the BorrowerBorrowerPerson who is the obligor per the Note. ; and
    • cannot result in the Manufactured HomeManufactured HomeFactory-built home complying with the Manufactured Home HUD Code. on the MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. being titled as real estate.
603.05C

Loan Document Modification

Requirements

You must modify the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan.  to reflect the use of short-term or long-term leases.

Section 604

Property Insurance

Requirements

You must ensure that the security for an MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. 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. (per Part III, Chapter 6: Manufactured Housing Communities, Section 603.01B: Collateral; Tenant-Occupied and Affiliate-Owned Homes) complies with Part II, Chapter 5: Property and Liability Insurance.

Section 605

Survey

Requirements

If you obtain an acceptable as-built survey 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). , it must comply with Part II, Chapter 3: Legal Compliance, Section 305: Survey.

Guidance

You should ensure that the survey only shows the location or dimensions of

  • the individual MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. ,
  • any individual Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. or recreational vehicles, and/or
  • the related MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. or recreational vehicle site, piers, and/or foundations, that constitute encroachments.
605.01

Public Roadways, Private Interior Roadways, and Drives

Guidance

You should ensure that the survey accurately shows all public roadways.

For any private interior access roads, streets, drives, parking areas, visible utilities, and structures without foundations, the survey:

  • does not need to show them accurately from field measurements, unless they constitute encroachments;
  • should include a sketch showing their approximate location; and
  • may locate them by photogrammetric or other approximate methods.
605.02

Setbacks

Guidance

You should identify and show 2 different types of setbacks on the survey:

  • setback restrictions shown in documents of record; and
  • setbacks imposed by applicable zoning ordinances or building codes.

You should ensure that the survey:

  • states that the zoning setbacks apply only to permanent buildings and not to the Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. ; and
  • includes recorded references or citations to authority for the zoning setbacks, or gives the reason why this information is not available.
605.03

Encroachments

Guidance

You may show the following encroachments by a simple indicating mark (i.e., a distinctive mark or symbol identified in the legend), without indicating dimensions:

  • nonpermanent outbuildings or other structures; and
  • recreational vehicles that are not set upon a supporting foundation, MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. , or pier.
Section 606

Property Income and Underwritten NCF

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 203: Income Analysis and the applicable products and features in Part III. .

REQUIRED UNDERWRITTEN NCF
(MANUFACTURED HOUSING COMMUNITY)

Item

Function

Description
CALCULATION OF NET RENTAL INCOME

1

 

GROSS RENTAL INCOME1 – actual MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. rents in place where Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. are installed under leases with residents in occupancy, plus market rents for vacant MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. and MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. with vacant Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. based on a current rent roll (multiplied by 12).

2

PLUS

To the extent deducted as an operating expense, MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. rents for other non-revenue MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. , such as:

 

  • MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. with model Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. deducted in the “model apartment” operating expense in the “general and administrative” category; and
  • actual MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. rent from employee Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. deducted in the “employee” operating expense in the “payroll and benefits” category.

 

EQUALS

GROSS POTENTIAL RENT (GPR)

3

MINUS

Physical vacancy2 –

 

  • market rents for vacant MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. based on a current rent roll (multiplied by 12); and
  • net rental collections for occupied MH SitesMH SitesDeveloped lot within an MH Community on which a Manufactured Home can be located. where the Manufactured HomeManufactured HomeFactory-built home complying with the Manufactured Home HUD Code. is vacant, and the MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. rent is paid by the MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. owner, prior occupants, or a third party (e.g., a retail creditor).
4

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.2

5

MINUS

Bad debt – the aggregate amount of unpaid rental income determined to be uncollectable, including any adjustments to other income for bad debt.2

 

EQUALS

NET RENTAL INCOME (NRI)3,4

1 Includes the MH Site rent for any Affiliate-Owned Manufactured Home or Borrower-owned Manufactured Homes, but excludes the rent (or that portion of the rent) for the Manufactured Home.

 

2 The total of Items 3, 4, and 5 must equal the greater of

 

  • the difference between the trailing 3-month net rental collections (annualized) and GPR, or
  • 5% of GPR.

If a rent increase with verified actual collections was instituted within the trailing 3 months, then NRI may be calculated based on the trailing 1-month net rental collections (annualized).

 

3 If NRI is greater than the trailing 1-month of actual NRI (annualized), then reduce to actual NRI.

 

4 You must assess any decline in NRI per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, and adjust Underwritten NRI as required.

CALCULATION OF OTHER INCOME

6

PLUS

Actual other income generated through ongoing operations.  The income must:

 

  • be stable;
  • be common in the market;
  • exclude one-time extraordinary non-recurring items; and
  • be supported by prior years.

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.

7

PLUS

For RV Sites with lease terms of 30 days or more, the lesser of

 

  • actual average net collections for the past 3 years, or
  • the current trailing 12-month RV Site rents, minus a 10% vacancy.5

CALCULATION OF COMMERCIAL INCOME6

8

PLUS

Actual income from leased and occupied commercial space per Part II, Chapter 1: Attributes and Characteristics, Section 109: Commercial Leases.

9

PLUS

Actual average RV Site rental income for RV Sites with lease terms of less than 30 days.
10 PLUS Actual MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. rental income for Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. that predate the Manufactured Home HUD CodeManufactured Home HUD CodeNational Manufactured Home Construction and Safety Standards Act of 1974 (HUD Code) (42 USC 5401 et seq) and the Manufactured Home Construction and Safety Standards (24 CFR Part 3280), as amended. .

11

MINUS

10% of the actual commercial space income (total of Items 8, 9, and 10).

12

PLUS

Commercial parking income (e.g., public parking) that does not exceed actual trailing 12-month collections.6

5 If the average RV Site rental income for RV Sites with lease terms of 30 days or more is greater than 20% of EGI, then reduce to 20% of EGI.

 

6 If net commercial income is greater than 10% of EGI, then reduce to 10% of EGI.  Additionally, total RV Site income from Items 7 and 9 (less 10% vacancy) cannot exceed 20% of EGI.

13

PLUS

Laundry and, vending, parking, and all other income per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis.

 

EQUALS

EFFECTIVE GROSS INCOME (EGI)

CALCULATION OF OPERATING EXPENSES

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

 

  • lease-up,
  • rehabilitation, or
  • other short-term positive or negative factors. 

Non-recurring, extraordinary operating expenses must not be included.

 

You must assess:

 

  • past operating history;
  • the Appraiser’sAppraiser’sPerson engaged to estimate a Property’s market value per USPAP. expense analysis;
  • all information available to you (including PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). contracts, utility bills, real estate tax assessments, insurance policies, and comparable assets); and
  • the Borrower'sBorrower'sPerson who is the obligor per the Note.  budget (in the case of an acquisition).

 

You must:

 

  • analyze historical operations 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
  • apply an appropriate increase over the prior year’s operations in determining an estimate.

15

MINUS

Property management fee equal to the greatest of:

 

  • 3% of EGIEGIOn 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 203: Income Analysis and the applicable products and features in Part III. ;
  • actual property management fee (exclude any portion of a non-arm’s length property management fee that is subordinated to the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. ); or
  • market property management fee.

16

MINUS

Real estate taxes based on the greatest of:

 

  • actual future tax bill(s) covering a full calendar year;
  • prior full year’s taxes multiplied by 103% (the 3% trending is not required for trailing 12-month or year-to-date annualized expenses); or
  • in California, the sum of:
    • any special assessments; plus
    • the millage rate multiplied by the greater 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. amount, or
      • assessed value.

 

You must:

 

  • consider any automatic reassessment upon acquisition in the next 12-month period;
  • include ad valorum taxes for BorrowerBorrowerPerson who is the obligor per the Note. -owned Manufactured HomesManufactured HomesFactory-built home complying with the Manufactured Home HUD Code. ; and
  • for any tax abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. expiring within 36 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , underwrite fully assessed real estate taxes.

 

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 real estate tax abatements, exemptions, deferrals, or PILOTsPILOTsPayment In Lieu Of Taxes. , they must:

 

  • be in effect at closing, per written documentation from the state or local tax assessor; and
  • survive a foreclosure on 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. such that Fannie Mae or a subsequent owner will retain the abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. (i.e., it is tied 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 the owner).

 

If the timeframe for the real estate tax abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. is shorter than 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, or begins phasing out or expires within 5 years after the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must consider:

 

  • a Bifurcated Mortgage LoanBifurcated Mortgage LoanSingle Senior Mortgage Loan that is evidenced by 2 Notes with the same payment and collateral priority. structure (i.e., 2 notes secured by a single first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. );
  • an amortization schedule that accommodates the elimination of the abatement; or
  • providing clear justification and support in the refinance analysis.

17

MINUS

Insurance equal to:

 

  • the quoted expense, for insurance policies with a bona fide written quote from a reputable broker for a new 12-month policy; or
  • 110% of the current expense, for insurance policies with a remaining term less than 6 months.

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 203: Income Analysis.

 

EQUALS

UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI)

19

MINUS

Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense per Part II, Chapter 4: Inspections and Reserves, Section 405: Replacement Reserve, with a minimum annual amount of $25 per MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. .

 

EQUALS

UNDERWRITTEN NCF
 
Section 607

Replacement Reserve

Requirements

If the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. determined by the Property Condition AssessmentProperty Condition AssessmentAssessment of the Property's physical condition and historical operation. is more than $75 per MH SiteMH SiteDeveloped lot within an MH Community on which a Manufactured Home can be located. , full funding of the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. is required per Part II, Chapter 4: Inspections and Reserves, Section 405: Replacement Reserve.