Small Mortgage Loan Underwritten NCF (Underwritten NCF)
Requirements
You must calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. as follows:
- for a MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. , per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703: Property Income and Underwriting; except that Replacement ReservesReplacement ReservesCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. may be calculated per the table in this Section;
- for a MH CommunityMH CommunityResidential real estate development with lots on which manufactured homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure. , per Part III, Chapter 6: Manufactured Housing Communities, Section 606: Property Income and Underwritten NCF;
- for a Cooperative PropertyCooperative PropertyMultifamily residential property owned by a Cooperative Organization. , per Part III, Chapter 8: Cooperative Properties, Section 804: Income Analysis; and
- for all conventional Small Mortgage LoansSmall Mortgage LoansMortgage Loan with an original loan amount less than or equal to $9 million. , you must use the following table.
REQUIRED UNDERWRITTEN NET CASH FLOW |
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Item |
Function |
Description |
CALCULATION OF NET RENTAL INCOME | ||
1 |
GROSS RENTAL INCOME – the lesser of
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2 |
PLUS |
To the extent deducted as an operating expense, rents for other non-revenue units. For example:
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EQUALS |
GROSS POTENTIAL RENT (GPR) |
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3 |
MINUS |
Premiums and corporate premiums. |
4 |
MINUS |
Physical vacancy – market rents for vacant units based on a current rent roll (multiplied by 12).4 |
5 |
MINUS |
Concessions – the aggregate amount of forgone residential rental income from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.4 |
6 |
MINUS |
Bad debt – the aggregate amount of unpaid rental income determined to be uncollectable, including any adjustments to other income for bad debt.4 |
EQUALS |
NET RENTAL INCOME (NRI) |
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1 (a) In the New York-Northern New Jersey-Long Island, NY-NJ-PA MSA, you may use actual rents in place plus projected increases for rent-regulated units that have rent increases scheduled before, or through, the first 12 months of the loan term. Any units subject to rent regulation on the Commitment Date must be treated as rent-regulated for this calculation even if converting to market rate after origination.
(b) For Properties located in New York City that are currently subject to the J51 Tax Incentive Program, you must ensure that the Gross Rental Income is calculated per Item 1 in Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis.
2 You must deduct owner-occupied units as an expense unless
3 You must deduct as an expense the portion of the market rent used as employee compensation.
4 The total of Items 4, 5, and 6 must be greater than or equal to
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CALCULATION OF OTHER INCOME |
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7 |
PLUS |
Actual other income (except premiums and corporate premiums) generated through ongoing operations. The income must:
You must assess the individual month's other income within the prior full-year operating statement; or at a minimum, an operating statement covering at least the trailing 6 month's (annualized). |
CALCULATION OF COMMERCIAL INCOME |
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8 |
PLUS |
Actual income from leased and occupied commercial space per Part II, Chapter 1: Attributes and Characteristics, Section 109: Commercial Leases. |
9 |
PLUS |
Actual income from 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. |
10 |
MINUS |
10% of the actual commercial space income (total of Items 8 plus 9).5 |
11 |
PLUS |
Commercial parking income (e.g., public parking) that does not exceed actual trailing 12-month collections.5 |
12 |
PLUS |
Laundry and vending, and all other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
5 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI. | ||
EQUALS |
EFFECTIVE GROSS INCOME (EGI) |
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CALCULATION OF OPERATING EXPENSES |
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13 |
MINUS |
Line-by-line stabilized operating expenses. Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operations, not affected by a
Non-recurring, extraordinary operating expenses must not be included.
You must assess:
You must:
You cannot include any operating expense that reflects blanket or bulk discounts that benefit the BorrowerBorrowerPerson who is the obligor per the Note. or 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. (e.g., blanket property or casualty insurance policies, or utilities purchased in bulk). Operating expenses must reflect 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). expenses on a stand-alone basis. |
14 |
MINUS |
Property management fee equal to the greatest of:
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15 |
MINUS |
Real estate taxes per Item 17(b) in Part II, Chapter 2: Valuation and Income, Section 202.01: Underwritten Net Cash Flow (Underwritten NCF).
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16 |
MINUS |
Insurance equal to:
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17 |
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 as detailed in Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
EQUALS |
UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI) |
|
18 |
MINUS |
Replacement ReserveReplacement ReserveCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. expense equal to at least6
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). ratings are the ratings reported on the Comprehensive Assessment Addendum (“Comp Assmt Addendum”) tab of the MBAMBAMortgage Bankers Association Standard Inspection Form. |
EQUALS |
UNDERWRITTEN NET CASH FLOW (UNDERWRITTEN NCF) |
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6 If a PCA was completed, the Replacement Reserve must equal the amount required per Part II, Chapter 4: Inspections and Reserves, subject to a minimum of $200 per unit. |