Chapter 7

Multifamily Affordable Housing Properties

Section 701

Generally
701.01

Description

Requirements

To qualify as an MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. 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. , the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. must:

701.02

Underwriting

Requirements

You must:

701.03

Committing and Delivery

Operating Procedures

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. for 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). subject to rent or income restrictions (even 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). does not qualify as an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. ), refer to the Affordable Housing & Tax Relief Data Guidance.

Section 702

MAH Property Eligibility
702.01

Eligibility Characteristics

Requirements

You must ensure an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. is subject to:

  • either a:
  • at least 1 Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. that:
    • is imposed by a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …;
    • is recorded against the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
    • complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702.02: Minimum Set Asides and Other Criteria;
    • for an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. , has a minimum remaining term of 3 years; and
    • for a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. 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 minimum remaining term of 3 years; and
      • for which the BorrowerBorrowerPerson who is the obligor per the Note. must sign the Modifications to Multifamily Loan and Security Agreement (Tax Credit Properties) (Form 6219) agreeing not to pursue a Qualified Contract Process available under the
        • Internal Revenue Code, and 
        • if applicable, Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. .

If any Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. has 3 or more years remaining but will expire before 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must document in the Transaction Approval Memo your analysis of the following factors to support underwriting to the applicable MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. standards in Form 4660:

  • restricted rents below market rate rents;
  • history 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). operating as an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. ;
  • the Sponsor’sSponsor’sPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). history and experience owning and operating multifamily properties subject to affordability restrictions;
  • the Borrower’sBorrower’sPerson who is the obligor per the Note. intention to renew that Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ;
  • how much 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. term will remain after that Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. expires;
  • market strength; and
  • how the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. compares to comparable market rate properties in terms of occupancy, condition, and amenities if
    • the BorrowerBorrowerPerson who is the obligor per the Note. intends to convert the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. to market rate rents, and
    • no rent advantage exists.

Guidance

An MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. may also:

  • be subject to:
  • be financed using tax-exempt BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. ; or
  • receive other state, local, or federal subsidies which are conditioned on the affordability of some or all of the units in 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). , including:
    • Rural Housing Service (RHS) Section 515 Loans; and
    • loans insured per the National Housing Act
      • Section 202, or
      • Section 236.
702.02

Minimum Set Asides and Other Criteria

Requirements

You must ensure the:

You must use existing tenant files, lease sampling, and rent roll testing, to verify the required occupancy by eligible tenants per:

However, you may rely on

  • BorrowerBorrowerPerson who is the obligor per the Note. certifications,
  • compliance reports, and
  • documentation of exceptions.

You may treat an over-income tenant as an income eligible tenant if allowed by the applicable Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or … program requirements, with the exception documented in your Transaction Approval Memo.

702.03

Affordability Types
702.03A

LIHTC

Requirements

You must verify that by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , restricted units:

  • are occupied by income eligible tenants per the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. program requirements; and
  • meet at least 1 of the following:
    • 20% @ 50%:  at least 20% of all units are restricted to occupancy by households earning no more than 50% of AMI as adjusted for family size with rents not exceeding 30% of the income limit, as adjusted for family size;
    • 40% @ 60%:  at least 40% of all units are restricted to occupancy by households earning no more than 60% of AMI as adjusted for family size with rents not exceeding 30% of the income limit, as adjusted for family size;
    • Average Income:  at least 40% (or 25% for New York City only) of all units are restricted to occupancy by households earning not more than the income limitation designated for that unit.  The average of the income limits must not be more than 60% of AMI as adjusted for family size with rents not exceeding 30% of the designated income limit.  The income limit can only be 20%, 30%, 40%, 50%, 60%, 70% or 80% of AMI.  This option is only available for LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. projects that made this set-aside election after March 23, 2018, using Internal Revenue Service Form 8609; or
    • 25% @ 60% in New York City:  at least 25% of all units are restricted to occupancy by households earning no more than 60% of AMI as adjusted for family size with rents not exceeding 30% of the income limit, as adjusted for family size.
702.03B

HAP Contract

Requirements

You must ensure that, by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , at least 20% of all units are:

  • subject to a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). ; and
  • restricted by the HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). to households earning no more than 80% of AMI.
702.03C

Properties with Both Rent Restrictions and Income Restrictions

Requirements

By the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must verify the restricted units are occupied by households that qualify for 1 of the following rent and income restrictions:

  • 20% @ 50%:  at least 20% of all units are restricted:
    • to occupancy by households earning no more than 50% of AMI, as adjusted for family size; and
    • with rents not exceeding 30% of 50% of AMI, as adjusted for family size; or
  • 40% @ 60%:  at least 40% of all units are restricted:
    • to occupancy by households earning no more than 60% of AMI, as adjusted for family size; and
    • with rents not exceeding 30% of 60% of AMI, as adjusted for family size.
702.03D

Properties with Either Rent Restrictions or Income Restrictions

Requirements

By the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must confirm the following.

For Properties with... You must confirm...
Rent restrictions (but no income restrictions) The rent roll reflects the restricted rents are implemented.
Income restrictions (but no rent restrictions) The restricted units are occupied by income eligible tenants.

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 have:

  • 20% @ 50%:  at least 20% of all units restricted:
    • to occupancy by households earning no more than 50% of AMI, as adjusted for family size; or
    • with rents not exceeding 30% of 50% of AMI, as adjusted for family size; or
  • 40% @ 60%:  at least 40% of all units restricted:
    • to occupancy by households earning no more than 60% of AMI, as adjusted for family size; or
    • with rents not exceeding 30% of 60% of AMI, as adjusted for family size.
702.03E

Special Public Purpose

Requirements

You must have verified, on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , that at least:

  • 20% of all units are restricted to occupancy by households earning no more than 80% of AMI, as adjusted for family size, and the restricted units are occupied by income eligible households; and/or
  • 20% of all units have rents not exceeding 30% of 80% of AMI, as adjusted for family size.

Operating Procedures

For general information, as well as information for how to register, obtain a CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. , 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 Special Public Purpose Mortgage Loan, refer to Multifamily Affordable Housing Property Definition – Special Public Purpose FAQs.

702.03F

Sponsor-Initiated Affordability

Requirements

You must ensure the BorrowerBorrowerPerson who is the obligor per the Note. voluntarily self-imposes affordability restrictions preserving or creating multifamily affordable housing by requiring 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). to have affordability restrictions meeting all of the following:

  • 20% @ 80%:  at least 20% of all units are restricted to occupancy by households earning no more than 80% of AMI, as adjusted for family size, with rents not exceeding 30% of the income limit;
  • are recorded against 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). by executing the Sponsor-Initiated Affordability Agreement (Form 6490);
  • are in place 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). by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
  • require 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). to comply with the Sponsor-Initiated Affordability Agreement (Form 6490) within 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
  • remain in place 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; and
  • are certified annually by the BorrowerBorrowerPerson who is the obligor per the Note. and monitored by an Administering AgentAdministering AgentThird-party compliance monitoring company. for compliance with the Sponsor-Initiated Affordability Agreement (Form 6490).

Operating Procedures

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 SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). -Initiated Affordability, the BorrowerBorrowerPerson who is the obligor per the Note. must execute the:

  • Sponsor-Initiated Affordability Agreement (Form 6490); and
  • Modifications to Multifamily Loan and Security Agreement (Sponsor-Initiated Affordability Restrictions) (Form 6271).

For general information, as well as information for how to register, obtain a CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. 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 SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). -Initiated Affordability 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. , refer to the Sponsor-Initiated Affordability FAQs.

Section 703

Property Income and Underwriting
703.01

Underwritten NCF

Requirements

You must use the following table to calculate Underwritten NCFNCFAt underwriting or for any specified period, the amount calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. .

REQUIRED UNDERWRITTEN NCF
(MULTIFAMILY AFFORDABLE PROPERTY)

Item

Function

Description
CALCULATION OF NET RENTAL INCOME

1

  

GROSS RENTAL INCOME – the least of:

 

  • rents permitted under any federal, state, or local subsidy program applicable 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). , as adjusted for AMI, family size, and number of bedrooms in a unit, and reductions for the applicable utility allowances;1, 2
  • rents permitted under the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. , any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. , or any Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … documents; or
  •  based on a current rent roll:
    • actual rents in place for occupied units; and
    • for vacant units, the lowest of: 
      • actual rents in place for comparable occupied units;
      • market rents; and
      • permitted rents, described above (multiplied by 12).

 

For MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. 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 units occupied by tenant-based Housing Choice VoucherHousing Choice VoucherAny 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. (HCVHCVAny 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. ) holders, you may underwrite the excess of the annualized HCVHCVAny 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. unit income over Gross Rental Income up to 5% of GPRGPROn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. , when 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). current and average 3-year physical occupancy is at least 95%; and
  • MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. is located in a Strong Market or an Eligible MSA.

 

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 both a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). and LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , you must include incremental HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). income per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 707.01: Properties with Both HAP Contracts and LIHTC Units.

2

PLUS

To the extent deducted as an operating expense, rents for other non-revenue units (e.g., model units deducted in the “model apartment” operating expense in the “general and administrative” category, or actual rent from employee units deducted in the “employee” operating expense in the “payroll and benefits” category).
 

EQUALS

GROSS POTENTIAL RENT (GPR)1

3

MINUS

Physical vacancy – applicable actual rents for vacant units and MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. unit type (e.g., 20% @ 50%, 40% @ 60%, or HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). ) based on a current rent roll (multiplied by 12).3

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.3

5

MINUS

Bad debt – the aggregate amount of unpaid rental income determined to be uncollectable, including any adjustments to other income for bad debt.3
 

EQUALS

NET RENTAL INCOME (NRI)2, 3, 4

1 For Properties with HAP Contracts, you may:

 

  • use newly approved rents if they are effective by the first day of the month after the Mortgage Loan Origination Date, even if the rents exceed trailing GPR; but
  • not use rents based on
    • an agreement to enter into a HAP Contract (AHAP),
    • a commitment to enter into a Housing Assistance Payment contract (CHAP), or
    • a "comfort letter".

 

2 If a Property has a HAP Contract expiring after the Maturity Date, and current and average 3-year physical occupancy is at least 95%, and the Property’s most recent HUD REAC or NSPIRE score is passing, you may underwrite HAP Contract rents up to:

 

  • 5% above market rents, by unit type, if located in an Eligible MSA; 
  • 10% above market rents, by unit type, if located in a Strong Market; or 
  • 20% above market rents, by unit type, if:
    • located in a Strong Market; and
    • the HAP Contract type is:
      • Option 4 renewal;
      • Low-income Housing Preservation and Resident Homeownership Act (LIHPRHA); or
      • Emergency Low-Income Housing Preservation Act (ELIHPA).

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

 

  • the GPR, including any permitted HAP Contract rent increases per Footnote 1, multiplied by the percentage difference between the trailing
    • 3-month net rental collections (annualized), and
    • GPR, but excluding any HAP Contract rent increases not in effect before the Mortgage Loan Origination Date; and
  • either:
    • 5% of GPR, including any permitted HAP Contract rent increases per Footnote 1; or
    • less than 5%, but no less than 3% of GPR, including any permitted HAP Contract rent increases per Footnote 1; if:
      • the Property is located in an Eligible MSA, Strong Market, or Nationwide Market per Form 4660;
      • for a Property with 95+% of the units restricted per the Affordable Regulatory Agreement and without a HAP Contract, the actual rents for restricted units are at least 10% below comparable market rents; and
      • the economic vacancy (i.e., the total of Items 3, 4, and 5) is supported by current and 3 years of historical economic vacancy data of no less than the actual vacancy.

 

4 You must assess the NRI, including any declines, and make adjustments per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis.

CALCULATION OF OTHER INCOME5

6

PLUS

Actual other income (except premiums and corporate premiums) 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.

5 If premiums or corporate premiums are applicable for a particular MAH Property, inclusion of premium income is permitted consistent with Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis.

CALCULATION OF COMMERCIAL INCOME

7

PLUS

Actual income from leased and occupied commercial space per Part II, Chapter 1: Attributes and Characteristics, Section 111: Commercial Leases.
8 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.

9

MINUS

10% of the actual commercial space income.6

10

PLUS

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

11

PLUS

Laundry and vending, parking, and all other income per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis.
6 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI.
 

EQUALS

EFFECTIVE GROSS INCOME (EGI)

CALCULATION OF OPERATING EXPENSES

12

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:

 

  • the 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 (for AcquisitionsAcquisitionsAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. ).

 

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). ;
  • apply an appropriate increase over the prior year’s operations in determining an estimate; and
  • include 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…-related expenses in their respective expense line items, including
    • cleaning,
    • furnishing, and
    • repairs.

13

MINUS

PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management fee equal to the greatest of:

 

  • 4% of EGIEGIFor any specified period, the Property's total Net Rental Income, plus commercial income, plus other income, all calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. ;7
  • actual property management fee, provided you
    • 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. , and
    • include any known contractual fee increases occurring over the next 24 months; or
  • the Appraiser'sAppraiser'sPerson engaged to estimate a Property’s market value per USPAP. concluded market property management fee, based primarily on
    • asset type,
    • operational complexity, and
    • market standards.

7 You may underwrite the minimum management fee using 3.5% of EGI (rather than 4% of EGI) if the:

 

  • underwritten management fee is at least $400 per unit;
  • actual management fee is equal to or less than the underwritten management fee, provided you:
    • include any known contractual fee increases scheduled to occur over the next 24 months; and
    • exclude any portion of a non-arm's length property management fee that is subordinated to the Mortgage Loan; and
  • Appraiser’s concluded market management fees, based primarily on asset type, operational complexity, and market standards, support the underwritten management fee.

 

If the original Mortgage Loan amount is greater than $9 million, you may underwrite the minimum management fee using 3% of EGI (rather than 4% of EGI) if the:

 

  • underwritten management fee is at least $450 per unit;
  • actual management fee is equal to or less than the underwritten management fee, provided you:
    • include any known contractual fee increases scheduled to occur over the next 24 months; and
    • exclude any portion of a non-arm's length property management fee that is subordinated to the Mortgage Loan;
  • Appraiser’s concluded market management fees, based primarily on asset type, operational complexity, and market standards, support the underwritten management fee; and
  • the Affordable Regulatory Agreement does not terminate before the Mortgage Loan term.

 

If the MAH Property is located in a Strong Market or Eligible MSA and the Mortgage Loan's original UPB is greater than $9 million, you may underwrite the minimum management fee using the greatest of:

 

  • 2.5% of EGI;
  • $500 per unit;
  • the actual management fee, provided you:
    • include any known contractual fee increases scheduled to occur over the next 24 months; and
    • exclude any portion of a non-arm's length property management fee that is subordinated to the Mortgage Loan; or
  • the Appraiser’s concluded market management fees, based primarily on asset type, operational complexity, and market standards.

14

MINUS

Real estate taxes calculated per Lines 17(b) of Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF), provided that every unit benefiting from the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. is subject to either a rent restriction or an income restriction per an Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. with a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or ….

 

Notwithstanding the requirements of Lines 17(b) of Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF), provided you comply with the specified requirements below, you may use a reduced real estate tax payment if the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. :

 

  • is not in place on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. per written documentation from the state or local tax assessor; or
  • would not survive a Foreclosure EventForeclosure EventAny of the following: Foreclosure per the Security Instrument; Fannie Mae's exercise of rights and remedies per the Security Instrument or applicable law (including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, where Fannie Mae (or its designee or nominee),….

 

If the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. is not in place on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must:

 

  • confirm the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. is listed in Form 4164; and
  • comply with Form 4164.

 

If the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. would not survive a Foreclosure EventForeclosure EventAny of the following: Foreclosure per the Security Instrument; Fannie Mae's exercise of rights and remedies per the Security Instrument or applicable law (including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, where Fannie Mae (or its designee or nominee),…, you must confirm:

 

  • when reapplying for the original underwritten Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. , or an alternative Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. with equivalent benefits, Fannie Mae or another PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). owner would qualify;
  • 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). rent and income are maintained; and
  • if the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. requires a qualified non-profit entity in the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. ownership:
    • a sufficient number of qualified non-profits exist in the market (i.e., at least 3 if the MSA’sMSA’sGeographic delineation for a metropolitan area determined by the U.S. Census Bureau. population is less than 1 million, and at least 5 if the MSA’sMSA’sGeographic delineation for a metropolitan area determined by the U.S. Census Bureau. population is 1 million or more) who could become part of the ownership structure to qualify for the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. ;
    • the original, or an alternative Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. with equivalent benefits, has been
      • established in the state’s statutes, and
      • in effect for at least 10 years; and
    • based on your due diligence, no material risk exists of the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. legislation
      • sunsetting,
      • being repealed, or
      • being revised such 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). would no longer qualify.

14

continued

 MINUS

If the timeframe for the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. 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.

For 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). with a Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. , the Modifications to Multifamily Loan and Security Agreement (Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. or Exemption) (Form 6251) must be executed even if you do not underwrite the Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. .

15

MINUS

Insurance per Item 17(c) in Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF).

16

MINUS

Utilities, water and sewer, repairs and maintenance, payroll and benefits, advertising and marketing, professional fees, general and administrative, ground rent, supportive services, mandatory and ongoing fees payable per the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. , and Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. , or Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … documents, and all other expenses per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis.
 

EQUALS

UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI)

17

MINUS
  • Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense per Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF); 
  • any mandatory and ongoing Partnership Agreement or Operating Agreement reserve; and
  • any mandatory and ongoing reserve not already included in the Loan Agreement for
    • the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ,
    • any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. , or
    • Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … documents.
 

EQUALS

UNDERWRITTEN NCF
703.02

Underwriting
703.02A

Appraised Value and Underwriting Value

Requirements

In addition to the 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. requirements in Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation, you must:

  • Include 2 separate opinions of the Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. based on:
    • Restricted ValueRestricted ValueAppraised Value assuming an Affordable Regulatory Agreement or Private Affordability Agreement is in effect. from the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. , the Sponsor-Initiated Affordability Agreement (Form 6490), or any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. , using
      • comparable multifamily rental properties,
      • 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). submarket,
      • properties with similar rent or income restrictions, and
      • any Tax AbatementsTax AbatementsAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. or programs that reduce 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). assessed valuce.
    • Unrestricted ValueUnrestricted ValueAppraised Value assuming an Affordable Regulatory Agreement or Private Affordability Agreement is not in effect. from 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). income and expenses without the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. , the Sponsor-Initiated Affordability Agreement (Form 6490), or any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. (e.g., market rents, occupancy, and operating expenses), using
      • comparable multifamily market rate rental properties,
      • 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). submarket, and
      • full taxes if rental income restrictions are required by a Tax AbatementTax AbatementAny abatement, reduction, lessening, exemption, or deferral of real estate or other taxes levied against a Property, including any PILOT. or programs that reduce 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). assessed value.
  • Ensure each Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. is based on a market cap rate without any upward or downward adjustment for:
    • special financing (other than adjusted cap rates for Credit Enhancement Mortgage LoansCredit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. ); or
    • tax credit benefits.
  • Determine the appropriate Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. for the Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation. per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation.
703.02B

Market Study

Requirements

If a TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 or TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 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 secured by 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). with a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). expiring before 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must include a market study (which can be part of the 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. ) that:

  • is prepared by a qualified real estate professional; and
  • for comparable market rate rental properties in the submarket, identifies the
    • absorption rate,
    • lease-up period, and
    • rent level.
703.02C

35-Year Amortization

Requirements

If you use a 35-year amortization term, 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 have:
    • LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. with at least 8 years remaining in the initial 15-year compliance period; and/or
    • a new HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). covering at least 95% of the units under the:
      • Rental Assistance Demonstration (RAD) program; or
      • Capital Repairs Program per the Section 8 Renewal Policy Guidebook available on HUD’sHUD’sU.S. Department of Housing and Urban Development website; and
  • MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. 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 be a first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. 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. with a minimum term equal to the greater of
    • the remaining initial LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. compliance period, or
    • 10 years.
703.02D

LIHTC Average Income

Requirements

You must identify and mitigate any risks from the Borrower’sBorrower’sPerson who is the obligor per the Note. electing LIHTC Average IncomeLIHTC Average IncomeInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided: a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI; and … per the Internal Revenue Code.

Guidance

When a BorrowerBorrowerPerson who is the obligor per the Note. elects LIHTC Average IncomeLIHTC Average IncomeInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided: a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI; and … per the Internal Revenue Code for 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). with new LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , you should consider:

  • Will LIHTC Average IncomeLIHTC Average IncomeInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided: a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI; and … impact other non-LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. regulatory agreements?
  • Is LIHTC Average IncomeLIHTC Average IncomeInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided: a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI; and … compatible with other funding and subsidy source requirements, including any HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). ?
  • Has LIHTC Average IncomeLIHTC Average IncomeInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided: a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI; and … been approved by the
    • state agency, and
    • LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or syndicator?
  • Will the on-site 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 staff have sufficient experience?
  • Will the unit mix be impacted, including
    • unit parity,
    • multi-building election,
    • floating units, and
    • market rate units?
  • What is the rent advantage, especially for units above 60% of AMI?
  • For a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ,
    • is the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). not a re-syndication of 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). previously developed or preserved using LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. and subject to an existing extended use agreement, or
    • 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 re-syndication, have you confirmed 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 completed its extended use period?
  • Does the market study include capture rates for each unit designation supporting LIHTC Average IncomeLIHTC Average IncomeInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided: a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI; and …?
703.02E

Initial LIHTC Equity

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 new LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , you must ensure at least 20% of the aggregate LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity that the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or syndicator must contribute into the limited partnership is received on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

703.02F

Developer Fees

Guidance

You should analyze the development budget, including the

  • developer fee due the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). or any 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
  • any deferred developer fee (i.e., the portion of the developer fee shown as a source in the sources and uses statement).

If the deferred developer fee is greater than 50% of the total developer fee, you should confirm there are sufficient

  • hard and soft contingency budgets, and
  • projected surplus cash flows to repay the deferred developer fee within the initial compliance period.
703.02G

Rent-Stabilized Units

Guidance

Refer to Part II, Chapter 2: Valuation and Income, Section 207: Rent-Stabilized Properties regarding rent-stabilized MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. units.

Section 704

Third-Party Financing
704.01

Interest Rate and Payments

Requirements

You must ensure any Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. …:

  • has a fixed interest rate or no interest payable; and
  • for non-Soft Financing, interest:
    • is payable on a current basis; and
    • does not defer or accrue.
704.02

Loan Term

Requirements

You must ensure any Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … that does not fully amortize, including any Soft Financing, matures at least 180 days after the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. 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. , and
  • any Pre-Existing Mortgage LoansPre-Existing Mortgage LoansMultifamily residential real estate loan secured by Liens against the Property having higher priority than the Lien securing the Subordinate Loan purchased by Fannie Mae. .

Guidance

Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … may:

  • if it fully amortizes, mature before the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. 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. , and
    • any Pre-Existing Mortgage LoansPre-Existing Mortgage LoansMultifamily residential real estate loan secured by Liens against the Property having higher priority than the Lien securing the Subordinate Loan purchased by Fannie Mae. ; and/or
  • be fully or partially forgiven before 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
704.03

Collateral and Credit Support

Requirements

You must ensure 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. is secured by the same credit support and collateral as any Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. …, including any

  • recourse to the BorrowerBorrowerPerson who is the obligor per the Note. or any guarantor, or
  • additional collateral.

You may secure the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … with a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. 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). if the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. :

704.04

Soft Financing

Requirements

Provision To be considered Soft Financing...
Financing Terms Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … terms must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704: Third-Party Financing.
Payments

Any Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … payments due 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 (excluding ongoing fees which are addressed separately) must be payable only from Excess NCFExcess NCFFor any specified period, the Net Cash Flow remaining after subtracting, in order of priority: first, all amounts due and owing on the Mortgage Loan, including: principal and interest; and any other funding obligations per the Loan Documents;  second, any payments due on any…, with up to:

 

  • 100% of the available Excess NCFExcess NCFFor any specified period, the Net Cash Flow remaining after subtracting, in order of priority: first, all amounts due and owing on the Mortgage Loan, including: principal and interest; and any other funding obligations per the Loan Documents;  second, any payments due on any… (after subtracting amounts payable per Subsections 1 and 2 of the definition) for all Soft Financing payments to the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). 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…; or
  • 75% of the available Excess NCFExcess NCFFor any specified period, the Net Cash Flow remaining after subtracting, in order of priority: first, all amounts due and owing on the Mortgage Loan, including: principal and interest; and any other funding obligations per the Loan Documents;  second, any payments due on any… (after subtracting amounts payable per Subsections 1 and 2 of the definition) for all other Soft Financing.
Ongoing Mandatory Fees

The loan documents for any Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … may require paying ongoing mandatory fees, such as facility fees, servicing fees, and fees for monitoring compliance with an Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. or any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. , provided you:

 

  • include any ongoing mandatory fees as an expense in calculating NCFNCFAt underwriting or for any specified period, the amount calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. ; and
  • at 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 at least 12 months of ongoing mandatory fees, which must be funded from a source other than 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. proceeds.
Events of Default

Failure to pay principal and/or interest due to lack of available Excess NCFExcess NCFFor any specified period, the Net Cash Flow remaining after subtracting, in order of priority: first, all amounts due and owing on the Mortgage Loan, including: principal and interest; and any other funding obligations per the Loan Documents;  second, any payments due on any… must not be an event of default per the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … loan documents.
Subordination Subordination must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.07: Subordination Agreement.

To determine the acceptability of Soft Financing if multiple Soft Financing loans exist, you must:

  • consider the maximum aggregate Soft Financing payments 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;
  • if the Borrower’sBorrower’sPerson who is the obligor per the Note. agreements (including Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. documents, any other documents evidencing any Soft Financing, and Borrower’sBorrower’sPerson who is the obligor per the Note. organizational documents) do not specify Soft Financing payment priority, ensure intercreditor arrangements document payment priority among Soft Financing creditors; and
  • confirm the Excess NCFExcess NCFFor any specified period, the Net Cash Flow remaining after subtracting, in order of priority: first, all amounts due and owing on the Mortgage Loan, including: principal and interest; and any other funding obligations per the Loan Documents;  second, any payments due on any… requirements are not exceeded in the aggregate among the applicable intercreditor provisions.

Guidance

Soft Financing may have:

  • a nominal interest rate;
  • principal payments that do not fully amortize the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … over its term; 
  • optional principal payments;
  • a covenant to comply with an Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ;
  • an event of default resulting from non-compliance with an Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ; and
  • a loan term significantly longer 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, with the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … either
    • being forgiven over time or at its maturity date, or
    • due only upon 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).  sale.
704.05

Third-Party Lender

Requirements

If the lender type1 is...

 Then a Third-Party Financing...
  • Public Entity; or
  • non-profit

Can:

 

  • be Soft Financing; or
  • require mandatory payments of
    • P&IP&IPrincipal and interest , or
    • interest only.

Affiliate of the Borrower that is not a:

 

  • Public Entity; or
  • non-profit
 Must qualify as Soft Financing per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.04: Soft Financing.

Any other lender

Is not permitted.
1 For a Third-Party Financing structured as a bond financing, the bondholder is the lender for this analysis.
704.06

Developer's Notes

Requirements

You must ensure any developer note or advance due the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). 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… is Soft Financing per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.04: Soft Financing.

704.07

Subordination Agreement

Requirements

For all Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. …, including Soft Financing, you, the BorrowerBorrowerPerson who is the obligor per the Note. , and the third-party lender must enter into:

  • if the third-party lender is a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …, a Fannie Mae form
    • Subordination and Standstill Agreement (Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …) (Form 6456), or
    • Subordination and Standstill Agreement (Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …) (Form 6456.SUB); or
  • if the third-party lender is not a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …, a Fannie Mae form Subordination and Standstill Agreement (Non-Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …) (Form 6414).

If a Public Entity, as issuer of a bond financing…

 Then you must enter into…
Assigns its Third-Party Financing documents to a bond trustee
 

Form 6414 with the

 

  • BorrowerBorrowerPerson who is the obligor per the Note. ,
  • Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …,
  • bond trustee, and
  • bondholder.
Reserves certain rights under the Third-Party Financing documents that remain unassigned

Form 6456, but only as to the reserved rights, with the

 

  • BorrowerBorrowerPerson who is the obligor per the Note. , and
  • Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …, as third-party lender.
  • Assigns its Third-Party Financing documents to a bond trustee; and
  • Reserves certain rights under the Third-Party Financing documents that remain unassigned

Both: 

 

  • Form 6414 with the
    • BorrowerBorrowerPerson who is the obligor per the Note. ,
    • Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …,
    • bond trustee, and
    • bondholder; and
  •  Form 6456, but only as to the reserved rights, with the
    • BorrowerBorrowerPerson who is the obligor per the Note. , and
    • Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …, as third-party lender.
704.08

Lien Priority and Title Insurance Policy

Requirements

You must ensure:

  • The Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. …, along with any LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. securing the subordinate loan, remains at all times, subordinate to the Security Instrument'sSecurity Instrument'sInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , including any refinancing.
  • The Subordination Agreement is recorded in the land records immediately after the subordinate security instrument is recorded.
  • The Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. title insurance policy reflects the recordation of the Subordination Agreement.
704.09

Form of Loan Documents for Third-Party Financings

Requirements

You must confirm the loan documents for the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. …:

  • comply with this Chapter; and
  • do not require the BorrowerBorrowerPerson who is the obligor per the Note. to maximize rents 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). , even 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 Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. , or
    • any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. .
704.10

Prepayment

Requirements

The BorrowerBorrowerPerson who is the obligor per the Note. may not prepay or redeem the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. … without Fannie Mae’s consent.

704.11

LIHTC Equity Bridge Loans

Requirements

LIHTC Equity Bridge Loan Requirements
LIHTC Type Must be federal LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. .
Lender Eligibility The LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity bridge lender must not be on ACheckACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. .
Repayment Must be completely repaid on or before the final LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity payment associated with 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). placed-in-service date.
Amount
  • Maximum of 80% of aggregate LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity contribution.
  • Per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.02E: Initial LIHTC Equity, you must ensure at least 20% of the aggregate LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity that the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or syndicator must contribute into the limited partnership is received by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .​​​
Funding Conditions No performance hurdles or PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). performance benchmarks tied to bridge loan payments.
Note
  • Non-recourse to BorrowerBorrowerPerson who is the obligor per the Note. .
  • Fixed or variable rate.
Guaranty (Repayment and/or Completion) Must be subordinated to any GuarantyGuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. in favor of Fannie Mae.

 

Bridge Loan Collateral Types (multiple types allowed) Bridge Lender Affiliated with You or LIHTC Investor Bridge Lender Unaffiliated with You, LIHTC Investor, or Sponsor Bridge Lender Affiliated with Sponsor
Assignment of Rights to Capital Contribution from LIHTC Equity Investor Acceptable Acceptable Unacceptable
Assignment of Development Fee Acceptable Acceptable Acceptable
Subordinate Security Instrument

Unacceptable

 Unacceptable Unacceptable
Assignment of General or Limited Partnership Interests (but not both) Acceptable if Bridge Lender has LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. experience Acceptable if Bridge Lender has LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. experience
  • Acceptable for general partnership Interests
  • Unacceptable for limited partnership Interests
Subordination Agreement Form provided by Fannie Mae Form provided by Fannie Mae Form provided by Fannie Mae
704.12

Grant Funding

Requirements

You must determine whether any Grant FundingGrant FundingFunding for the Property’s construction or renovation given to the Borrower, or to a Borrower Affiliate that in turn loans or grants the funds to the Borrower, with no repayment obligation if specified requirements are met. is received:

  • directly by the BorrowerBorrowerPerson who is the obligor per the Note. ; or
  • by any BorrowerBorrowerPerson who is the obligor per the Note. 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 used to fund any:
    • Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. …; or
    • Grant FundingGrant FundingFunding for the Property’s construction or renovation given to the Borrower, or to a Borrower Affiliate that in turn loans or grants the funds to the Borrower, with no repayment obligation if specified requirements are met. from the BorrowerBorrowerPerson who is the obligor per the Note. 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… to the BorrowerBorrowerPerson who is the obligor per the Note. .

If any Grant FundingGrant FundingFunding for the Property’s construction or renovation given to the Borrower, or to a Borrower Affiliate that in turn loans or grants the funds to the Borrower, with no repayment obligation if specified requirements are met. above is subject to clawback, recapture, or other contingent repayment (e.g., upon an event of non-compliance or default), you must:

  • ensure any collateral for the contingent repayment complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.03: Collateral and Credit Support; and
  • with the BorrowerBorrowerPerson who is the obligor per the Note. , the BorrowerBorrowerPerson who is the obligor per the Note. 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 applicable), and the grantor, enter into and record the applicable:
    • Subordination Agreement (Affordable) (Form 6456), if the grantor is a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …; or
    • Subordination Agreement (Conventional) (Form 6414), if the grantor is not a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or ….

If any BorrowerBorrowerPerson who is the obligor per the Note. 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… receives Grant FundingGrant FundingFunding for the Property’s construction or renovation given to the Borrower, or to a Borrower Affiliate that in turn loans or grants the funds to the Borrower, with no repayment obligation if specified requirements are met. and, in turn, loans those funds to the BorrowerBorrowerPerson who is the obligor per the Note. :

Section 705

Affordable Restriction Checklist and Subordination and Standstill Agreements

Requirements

For all Affordable Regulatory AgreementsAffordable Regulatory AgreementsRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. and Private Affordability AgreementsPrivate Affordability AgreementsRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. , you must submit an Affordability Restriction Checklist (Form 6419).

You must ensure any Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. or any Private Affordability AgreementPrivate Affordability AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, agreement, or restriction that is imposed by any non-Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property. :

  • only encumbers 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 executed and, if a recorded document, is recorded against the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ; and
  • does not contain any affordability restrictions that are unusual or material to the finances or operation 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). , other than the restrictions contemplated by Part II of Form 6419.

Unless the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. is a HUD Use AgreementHUD Use AgreementContract between HUD and the Borrower identifying Property use restrictions and default remedies for HUD programs such as Housing Assistance Payments and Rental Assistance Demonstration. , if you responded “yes” in Part III or Part IV of Form 6419, you must subordinate the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. to the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. using the applicable Subordination and Standstill Agreement.

If a Public Entity... Use...
Provided Third-Party Financing
  • Subordination and Standstill Agreement (Public Entity) (Form 6456); or
  • both the:
    • Subordination and Standstill Agreement (Public Entity) (Form 6456.REG), for the Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ; and
    • Subordination and Standstill Agreement (Public Entity) (Form 6456.SUB), for the Third-Party FinancingThird-Party FinancingAny loan to, or indebtedness of, a Borrower that: is not a Supplemental Mortgage Loan or Pre-Existing Mortgage Loan; and either: requires repayment by the Borrower; or is forgiven (over time or at maturity) subject to Borrower compliance with certain covenants or conditions. ….
Did not provide Third-Party Financing Subordination and Standstill Agreement (Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …) (Form 6456.REG).

 

If a Non-Public Entity... Use...
Provided Third-Party Financing Subordination and Standstill Agreement (Non-Public Entity) (Form 6414).
Did not provide Third-Party Financing A Fannie Mae-approved Subordination and Standstill Agreement.
Section 706

ROAR Loan
706.01

Generally

Requirements

You must ensure any ROAR LoanROAR LoanReduced Occupancy Affordable Rehabilitation Loan :

  • is a Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. using a Credit Enhancement InstrumentCredit Enhancement InstrumentAgreement between Fannie Mae and a Bond Trustee where Fannie Mae provides credit enhancement of a Credit Enhancement Mortgage Loan, Bonds issued to finance a Credit Enhancement Mortgage Loan, or an Interest Rate Hedge Agreement; and if applicable, a Bond liquidity facility. ;
  • has a fixed rate;
  • has a minimum 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 of $5 million; and
  • is secured by an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. that:
    • currently has Stabilized Residential OccupancyStabilized Residential OccupancyPercentage of Property units physically occupied by Qualified Occupants, per Part II, Chapter 1: Attributes and Characteristics, Section 105.02: Qualified Occupants as adjusted for the applicable Part III products and features. , but will likely experience tenant displacement significant enough to lower 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…, calculated using the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. , below the required 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 Pay Preferred Equity payments. set forth in Form 4660; and
    • will undergo repairs, replacements, or improvements costing $10,000 per unit or more (based on the total number of residential units 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). ), or qualifies as a Moderate Rehabilitation PropertyModerate Rehabilitation PropertyProperty that will undergo at least $8,000 per unit of Rehabilitation Work. .
706.02

Timing

Requirements

Within 24 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower.

  • the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. must be completed, and
  • Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. must be achieved.
706.03

General Underwriting

Guidance

In addition to complying with Part III, Chapter 3: Moderate Rehabilitation Mortgage Loans, you should also review and evaluate the:

  • Sponsor’sSponsor’sPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). experience developing or rehabilitating properties similar to the ROAR Property;
  • tenant relocation plan, including budget and schedule;
  • ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. budget, including monthly sources and uses during the rehabilitation period;
  • likelihood of any construction risks;
  • LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investors’
    • financial strength,
    • experience, and
    • reputation; and
  • projected rent levels relative to market rents.
706.04

Additional Underwriting and Loan Documents

Requirements

You must underwrite the ROAR LoanROAR LoanReduced Occupancy Affordable Rehabilitation Loan per the following table.

Topic Description

Underwritten NCF
  • GPRGPROn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.01: Underwritten NCF.
  • Underwritten NCFNCFAt underwriting or for any specified period, the amount calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. can be based on the Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. and normalized operating expenses achievable within 24 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

Appraisal

The 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. must include an opinion 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). market value on both an “as is” and an “as completed” basis that incorporates the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. to be completed after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

Occupancy During ROAR Work

Minimum 50%

 

  • Physical Occupancy, and
  • Economic Occupancy.

Minimum DSCR During ROAR Work

Using the ROAR Stressed NCFROAR Stressed NCFMinimum Underwritten NCF projected to occur during the ROAR Work period at a ROAR Property. , actual fixed interest rate, and maximum loan amount based on the “as completed” value

 

  • 0.75 on an amortizing basis, or
  • 1.00 on an interest-only basis, if applicable.

Rehabilitation Reserve Agreement

Required.

Key Principal Guaranties

The Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. must execute

 

  • a Completion Guaranty (Form 6018), and
  • an operating deficit guaranty.
  • Letter of Credit, or 
  • Cash in Lieu of Letter of Credit
  • Any Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:
  • Any cash escrow used in place of a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:
    • be limited to 3 years or convert to a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. after 3 years;
    • be in place on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
    • comply with Part V, Chapter 3: Custodial Accounts; and
    • equal at least 125% of the difference between the maximum 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, based on the
      • “as completed” value, and
      • “as is” value.

Additional Credit Support

May be required.

Underwriting Fee

You must:

 

  • charge the BorrowerBorrowerPerson who is the obligor per the Note. an underwriting fee equal to 3 basis points 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; and
  • pay that amount to Fannie Mae.
Section 707

HAP Contract Properties
707.01

Properties with Both HAP Contracts and LIHTC Units

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 both HAP ContractsHAP ContractsAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). and LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. units, you must underwrite 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. using 1 of the following options.

Choice

Requirements

Option 1

Underwrite the rents from HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). units using the lowest of

 

  • market rents,
  • HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). rents, and
  • applicable maximum allowable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. limits minus utility allowances.

Option 2

Underwrite the rents from HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). units using the additional income above the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents (LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. overage) if the:

 

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has at least 20% of its units subject to a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). ;
  • HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). rents are less than or equal to market rents;
  • weighted average LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. unit rents are least 10% below market;
  • MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. is located in a market or submarket with 90% or greater economic occupancy, both for market rate and affordable properties; and
  • SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). has experience and success owning and operating properties with HAP ContractsHAP ContractsAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). .

 

If the HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). expires before 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , 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). 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… is greater than or equal to

 

  • 1.05 based on the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents, and
  • 1.10 based on the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents after the HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). expires.
707.02

Restabilization Reserve

Requirements

For all TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 and TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 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. , you must establish a Restabilization Reserve for an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. with a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). if the HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). term (excluding any annual or incremental government appropriation conditions) expires before 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .

The Restabilization Reserve must:

  • equal the monthly 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. P&IP&IPrincipal and interest , multiplied by the greater of
  • remain in place until 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). achieves underwritten occupancy for 90 days at market rate rents, or
    • HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). is renewed with an expiration date 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .

You may eliminate the Restabilization Reserve for an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. with a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). , whether or not it also has LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. units, if:

  • the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). has experience and success owning and operating properties with HAP ContractsHAP ContractsAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). ;
  • the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. is located in a market or submarket with 90% or greater economic occupancy, both for market rate and affordable properties; and
  • for an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. with LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , the weighted average rents of the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. units are at least 10% below market.
707.03

HAP Contract Review Sheet

Requirements

Before you Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. 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. , you must:

  • complete the Section 8 Housing Assistance Payments (HAP) Contract Review Sheet and Certification (Form 6422); and
  • confirm all conditions for approval are met.
Section 708

Refinancing Section 236 Properties – IRP is Maintained

Requirements

For Fannie Mae to consider the cash flow from an IRPIRPInterest Reduction Payment for 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). with a loan insured under Section 236 of the National Housing Act, the BorrowerBorrowerPerson who is the obligor per the Note. must decouple the IRPIRPInterest Reduction Payment from the existing Section 236 note and mortgage by

  • prepaying the Section 236 Loan, and
  • having the IRPIRPInterest Reduction Payment transferred to a new 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. (which will be then considered a Section 236 Loan for purposes of continuing the IRPIRPInterest Reduction Payment ).
708.01

No Additional Proceeds

Requirements

If the BorrowerBorrowerPerson who is the obligor per the Note. is not seeking additional proceeds based on the IRPIRPInterest Reduction Payment , you must exclude the amount of the IRPIRPInterest Reduction Payment from the LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  and 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….

708.02

Additional Proceeds from Mortgage Loan

Requirements

If the BorrowerBorrowerPerson who is the obligor per the Note. is seeking additional proceeds from 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. based on the IRPIRPInterest Reduction Payment , then you must ensure:

  • 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. has equal monthly payments of P&IP&IPrincipal and interest .
  • The portion 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. sized based on the Underwritten NCFNCFAt underwriting or for any specified period, the amount calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. meets Fannie Mae's LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  and 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… requirements without considering the IRPIRPInterest Reduction Payment cash flow.
  • The portion 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. sized based on the IRPIRPInterest Reduction Payment cash flow has an 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… of at least 1.00.
  • The financing structure reflects the remaining term of the IRPIRPInterest Reduction Payment through a bifurcated note or amortization structure.

In a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. transaction, if the IRPIRPInterest Reduction Payment is decoupled from the original Section 236 Loan, you do not need to ensure principal amortization during the construction phase.

708.03

Additional Proceeds from Other Sources

Requirements

If the BorrowerBorrowerPerson who is the obligor per the Note. is seeking additional proceeds from sources other 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. based on the IRPIRPInterest Reduction Payment , you must:

  • factor the debt into 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 LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  ; and
  • comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704: Third-Party Financing.
Section 709

LIHTC Properties – Lender Equity Interest

Requirements

Fannie Mae will only purchase 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 a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. 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 which you are an equity investor (directly or indirectly) in the BorrowerBorrowerPerson who is the obligor per the Note. if the following conditions are met:

  • Your equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. is solely for obtaining the LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. in 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 you have no
    • management authority 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). , or
    • equity interest (other than the LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. ) in
      • the BorrowerBorrowerPerson who is the obligor per the Note. ,
      • any 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. ,
      • any PersonPersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). holding a Controlling InterestControlling InterestFor any entity, ownership or control of 50% or more of the ownership interests in the entity or the power or right to control or modify, directly or indirectly, the management and operations of the entity. in the BorrowerBorrowerPerson who is the obligor per the Note. or 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. ,
      • any PrincipalPrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,…, or
      • any GuarantorGuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. .
  • You and the equity syndicator are organized to ensure independent analysis and decision making occurs in the
    • underwriting and approval of the debt,
    • equity investments, and
    • 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. servicing.
  • Your underwriting submission includes:
    • a description of the relationship among the
      • LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. ,
      • BorrowerBorrowerPerson who is the obligor per the Note. , and
      • applicable Lender AffiliateLender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. ; and
    • an organizational chart or diagram showing:
      • the complete BorrowerBorrowerPerson who is the obligor per the Note. ownership structure, including any LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. or Lender AffiliateLender AffiliateOther Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. equity interest; and
      • each entity's ownership interest.
Section 710

Transactions with Fannie Mae Debt and Equity Interests
710.01

Transactions Funded with Tax-Exempt Bond Proceeds

Requirements

If 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. will be funded with tax-exempt bond proceeds 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). qualifies for LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , you must confirm if Fannie Mae owns or intends to acquire:

  • a direct or indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. , in which case, Fannie Mae cannot also own or intend to acquire an interest in the tax-exempt BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. ; or
  • an interest in the tax-exempt BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , in which case, Fannie Mae cannot also own or intend to acquire a direct or indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. .
710.02

Fannie Mae Credit-Enhanced Tax-Exempt Bond Issuance

Requirements

If Fannie Mae credit enhances tax-exempt BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. issued to fund 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 confirm Fannie Mae does not also own or intend to acquire a direct equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. .

If Fannie Mae owns or intends to acquire an indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. through a fund, you must:

  • immediately notify the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. ; and
  • confirm
    • Fannie Mae’s indirect equity interest in the BorrowerBorrowerPerson who is the obligor per the Note. is less than 50%,
    • the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. issuer and the BorrowerBorrowerPerson who is the obligor per the Note. have consented in writing to Fannie Mae’s equity interest, and
    • for any LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. transaction, the BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. issuer and the BorrowerBorrowerPerson who is the obligor per the Note. have notified bond counsel of Fannie Mae’s equity interest.
Section 711

FHA Risk Sharing
711.01

Description

Guidance

Fannie Mae and the HUDHUDU.S. Department of Housing and Urban Development  have a risk sharing agreement to share risk on 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. for certain MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .  HUD’sHUD’sU.S. Department of Housing and Urban Development risk sharing is in the form of mortgage insurance from FHAFHAFederal Housing Administration .  HUDHUDU.S. Department of Housing and Urban Development takes 50% of the risk of loss, and the remaining 50% of the loss is shared by you and Fannie Mae.

711.02

Eligibility
711.02A

Borrowers, Key Principals, Guarantors, and Principals

Requirements

You must ensure that the BorrowerBorrowerPerson who is the obligor per the Note. , and each 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. , GuarantorGuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. , and PrincipalPrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… are not on the most current “List of Parties Excluded from Federal Procurement or Nonprocurement Programs”.

711.02B

Generally

Requirements

You must ensure:

  • 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. :
    • is fixed rate with no interest-only period;
    • has a loan term with a
      • minimum of 15 years, and
      • maximum of 40 years;
    • is either:
      • fully amortizing; or
      • requires a balloon payment of the outstanding principal no sooner than the end of the 15th year, calculated on an amortization term of no more than 30 years;
    • is secured by a:
      • single first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on real property; and
      • project consisting of at least 5 or more dwelling units located on
        • a single parcel of land, or
        • two or more non-contiguous parcels comprising a readily marketable ProjectProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 103.01: Single Borrower Ownership.  within an area small enough for convenient and efficient management; and
    • is free of all LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. other than the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. in favor of Fannie Mae and any subordinate LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. approved by Fannie Mae;
  • at least 50% of the units are leased at rents:
    • at or above the underwritten rents; or
    • that can sustain 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 the BorrowerBorrowerPerson who is the obligor per the Note. owns a leasehold interest in 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). , on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , the lease term:
    • is at least 40 years; and
    • exceeds the amortization period by at least 10 years;
  • 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 affordability restrictions recorded against 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). monitored for compliance by a third party other than HUDHUDU.S. Department of Housing and Urban Development or Fannie Mae (except for a Section 8 HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). or Section 236 transaction for which HUDHUDU.S. Department of Housing and Urban Development may monitor compliance);
  • the affordability restrictions require that at least:
    • 20% of the units are rent-restricted and occupied by families with incomes no more than 50% of AMI, as adjusted for family size; or
    • 40% (25% in New York City) of the units are rent-restricted and occupied by families with incomes no more than 60% of AMI, as adjusted for family size;
  • the residential unit's gross rent is restricted to no more than 30% of the unit's Imputed Income Limitation per Section 42 of the Internal Revenue Code;
  • the affordability restrictions are in effect for at least 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;
  • for an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. , if the remaining affordability restrictions are less than 18 years, enforcement of those restrictions is considered senior to the Mortgage Loan’sMortgage Loan’sMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. ; 
  • 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. does not have an uncured payment default or performance default upon DeliveryDeliverySubmission 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. ; 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). qualifies on the Effective Date as an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. solely per:

You must ensure the ProjectProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 103.01: Single Borrower Ownership.  :

  • is not located in:
    • a 500-year floodplain and likely occupied by tenants who may not be sufficiently mobile to avoid injury or death during floods or storms as determined by HUDHUDU.S. Department of Housing and Urban Development (contact the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. to establish HUDS’s determination of this factor);
    • a Federal Emergency Management Agency-mapped Special Flood Hazard AreaSpecial Flood Hazard AreaSpecial Flood Hazard Area designated by FEMA. 100-year floodplain (except where no buildings or ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). other than minor grubbing will be in the floodplain and the floodplain area will be permanently dedicated to non-development, as determined by HUDHUDU.S. Department of Housing and Urban Development (contact the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. to establish HUDS’s determination of this factor);
    • the Coastal Barrier Resources System per the Coastal Barrier Resources Act, 16.U.S.C.3501; or
    • a Runway Clear Zone (at a civil airport) or Clear Zone (at a military airfield) 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 newly constructed or substantially rehabilitated; and
  • is not:
    • financed by a loan insured by the Federal Housing Administration or other federal full mortgage insurance, co-insurance, or risk shared insurance or reinsurance under Section 542(c) of the Act;
    • used for Transient Housing or Hotel Purposes (as defined in the Fannie Mae/HUD Risk Sharing Agreement); or
    • a Nursing Home, Intermediate Care Facility of Board, or Care/Assisted Living Facility (as defined in the Fannie Mae/HUD Risk Sharing Agreement).
711.02C

Cash Out

Guidance

There is no limit on the amount of cash out in an FHA Risk SharingFHA Risk SharingMAH Mortgage Loan with mortgage insurance from FHA. transaction.

711.03

Mortgage Insurance Premium

Requirements

Your pricing for an FHA Risk SharingFHA Risk SharingMAH Mortgage Loan with mortgage insurance from FHA. 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 include a sufficient amount to pay the mortgage insurance premium due to FHAFHAFederal Housing Administration .

711.04

Subsidy Layering Review

Requirements

You must:

  • ensure the BorrowerBorrowerPerson who is the obligor per the Note. :
    • obtains a subsidy layering review that meets federal laws; and
    • contacts the Housing Finance Agency or Regional HUDHUDU.S. Department of Housing and Urban Development office where 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 to request a subsidy layering review; and
  • contact the Fannie Mae Deal TeamFannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. if the BorrowerBorrowerPerson who is the obligor per the Note. is unable to obtain the subsidy layering review.

Operating Procedures

After the subsidy layering review is complete, the applicable reviewing office will issue a certification to the BorrowerBorrowerPerson who is the obligor per the Note. stating the total amount of governmental assistance is not more than is necessary to provide affordable housing after taking into account other government assistance.  You must receive the certification before

  • Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. , or
  • obtaining a CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. for a tax-exempt BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. transaction.
711.05

Lender FHA Risk Sharing Reserve and Loss Sharing Modifications

Operating Procedures

If 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. was approved for FHA Risk SharingFHA Risk SharingMAH Mortgage Loan with mortgage insurance from FHA. , you must indicate an "FHA risk sharing" Mortgage Loan Type on the Mortgage Loan Certificate (Form 6505).