Chapter 7

Multifamily Affordable Housing Properties

Section 701

Generally
701.01

Description

Requirements

An MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. is a PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). that is encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction (an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…) that

  • limits rents that can be charged to tenants, or
  • imposes income limits on tenants.

An Affordable Preservation Transaction is any transaction involving an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. that:

  • currently has rent or income restrictions meeting the eligibility criteria of an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. , but the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). is potentially at risk of being lost from the affordable housing inventory through conversion to market-rate housing;
  • is not receiving new LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. ; and
  • is being acquired or refinanced, but excludes 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. paying off the initial construction loan.
701.02

Eligible Lenders

Requirements

You must be approved in writing to DeliverDeliverMeeting all of the data delivery requirements in , and submitting an acceptable Mortgage Loan Delivery Package per Part IV A: Mortgage Loan Commitment, Delivery and Purchase Procedures, Chapter 5.  A Mortgage Loan is “Delivered,” when all documents, data, and information are correct, accurate, and… MAHMAHProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. .

Section 702

MAH Property Eligibility
702.01

Eligible Characteristics and Underwriting

Requirements

You must ensure that an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. has rent or income restrictions that meet or exceed 1 of the following:

  • 20% @ 50%:  at least 20% of all units have rent or income restrictions in place making them affordable to households earning no more than 50% of AMI as adjusted for family size.
  • 40% @ 60%:  at least 40% of all units have rent or income restrictions in place making them affordable to households earning no more than 60% of AMI as adjusted for family size (except for New York City, where at least 25% of all units have rent or income restrictions in place, making them affordable to households earning no more than 60% of AMI as adjusted for family size).
  • Section 8 HAP contract:  at least 20% of all units are subject to a project-based HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract.
  • Special Public Purpose:  the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code).
    • is subject to an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… imposed by a government entity, containing other rent and/or income restrictions,
    • has rent or income restrictions that meet or exceed 20% @ 80%:  at least 20% of all units have rent or income restrictions in place making them affordable to households earning no more than 80% of AMI as adjusted for family size, and
    • meets a noteworthy special public purpose.
  • Self-Imposed Restrictions:  Even though a government entity generally imposes rent or income restrictions, the BorrowerBorrowerPerson who is the obligor under the Note. may voluntarily self-impose such restrictions to preserve multifamily affordable housing.  These restrictions must:
    • be placed on record against the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ;
    • remain in place beyond 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 amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. ; and
    • be monitored by you or a government entity annually to ensure the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s compliance.

Guidance

An MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. may also:

  • be subject to FHAFHAFederal Housing Administration  Risk Sharing;
  • 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. ;
  • receive LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions.  under Section 42 of the Internal Revenue Code, and its related U.S. Treasury regulations;
  • be subject to inclusionary zoning (e.g., targeting certain income levels or employees of certain firms or institutions, etc.) or resale restrictions; 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 property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). , including Rural Housing Service (RHS) Section 515 Loans, and Loans insured under Section 202 or Section 236 of the National Housing Act. 

Requirements

You must:

  • Reflect the impact of the rent or income restrictions in your underwriting.
  • Maintain a copy of the applicable Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… or PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). restrictions in your Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .
702.02

Ineligible Characteristics and Underwriting

Requirements

You must not underwrite or price the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). as an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. if it:

  • has less than 3 years of rent or income restrictions remaining on the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…; and
  • is expected to transition to market rents during the term of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. .
Section 703

Property Income and Underwriting
703.01

Underwritten NCF

Requirements

You must use the following table to calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: 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 property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). , as adjusted for AMI, family size, and number of bedrooms in a unit, and reductions for the applicable utility allowances;
  • rents permitted under any restrictive covenants, subordinate financing requirements, or an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… recorded on the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ; or
  • actual rents in place for occupied units, plus the lesser of
    • market rents, or
    • permitted rents, described above for vacant units based on a current rent roll (multiplied by 12).

You must include incremental HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract income as described in 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)

3

MINUS

Physical vacancy – applicable actual rents for vacant units and MAHMAHProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. unit type (e.g., 20% @ 50%, 40% @ 60%, or HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract) based on a current rent roll (multiplied by 12).1

4

MINUS

Concessions – the aggregate amount of forgone residential rental income resulting from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.).1

5

MINUS

Bad debt – the aggregate amount of unpaid rental income determined to be uncollectable:  include any adjustments to other income for bad debt.1
 

EQUALS

NET RENTAL INCOME (NRI)2

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

 

  • the difference between the trailing 3-month net rental collections (annualized) and GPR, or
  • either
    • 5% of GPR, or
    • 3% of GPR if:
      • the Property is located in a Strong Market per Form 4660;
      • the Property has a HAP contract that will expire after the Maturity Date; 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.

2 You must assess whether there was any decline in NRI per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis.

CALCULATION OF OTHER INCOME3

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 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), as long as it does not exceed the highest 1-month other income used in the trailing 3-month other income calculation.

3 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 202: Income Analysis.

CALCULATION OF COMMERCIAL INCOME

7

PLUS

Actual income from occupied commercial space (and parking revenue for commercial spaces, if applicable).

8

MINUS

10% of the actual commercial income.4

4 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI.

9

PLUS

Laundry and vending, parking, and all other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis.
 

EQUALS

EFFECTIVE GROSS INCOME (EGI)

CALCULATION OF OPERATING EXPENSES

10

MINUS

Line-by-line stabilized operating expenses.  Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). operations, not affected by lease-ups, 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’s expense analysis;
  • all information available to you (including PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). contracts, utility bills, real estate tax assessments, insurance policies, and comparable assets); and
  • the BorrowerBorrowerPerson who is the obligor under the Note.’s budget (in the case of an acquisition).

You must analyze historical operations at the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). and apply an appropriate increase over the prior year’s operations in determining an estimate.

11

MINUS

PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). management fee equal to the greatest of:

 

  • 4% of EGIEGIOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II: Property, Section 202 and the applicable products and features in Part III. 5;
  • actual property management fee (exclude any portion of a non-arm’s-length property management fee that is subordinated to the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. ); or
  • market property management fee.

5 Minimum management fee may be 3.5% of EGI (rather than 4% of EGI) provided that the:

 

  • underwritten management fee is at least $300 per unit;
  • actual management fee is equal to or less than the underwritten management fee; and
  • market management fees support the underwritten management fee for similarly sized properties.

12

MINUS

Real estate taxes based on the greatest of:

 

  • actual future tax bill(s) covering a full calendar year;
  • prior full year’s taxes multiplied by 103% (the 3% trending is not required for trailing 12-month or year-to-date annualized expenses); or
  • in California, the greater of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. amount or the assessed value, multiplied by the millage rate, plus any special assessments.

You must consider any automatic reassessment upon acquisition in the next 12-month period.

12

continued

 MINUS

If the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). has real estate tax abatements, exemptions, or deferrals, they must:

 

  • be in effect at closing (or at conversion in the case of a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property per Part XV of the DUS Guide, subject to certain conditions. ), per written documentation from the state or local tax assessor;
  • survive a foreclosure on the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. such that Fannie Mae or a subsequent owner will retain the abatement, exemption, or deferral benefit as long as the rent, income, or other restrictions are maintained (i.e., it is tied to the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). and not the owner); and
  • if governed under the California Welfare Tax Exemption Program, meet the following:
    • if a refinance, the BorrowerBorrowerPerson who is the obligor under the Note. must be in and remain in compliance with the California Welfare Tax Exemption program; or
    • if an acquisition or a Transfer/AssumptionTransfer/AssumptionTransaction resulting in a change in the ownership of the Borrower or Property. where the AffiliateAffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… with ControlControlPossessing, directly or indirectly, the power to direct or cause the management and operations of an entity (e.g., through the ownership of voting securities or other ownership interests, or by contract). of the BorrowerBorrowerPerson who is the obligor under the Note. (which is typically a non-profit entity), or the non-profit entity itself, is changing you must:
      • escrow at least 6 months of full real estate taxes at closing which will be released after confirming that the California Welfare Tax Abatement is approved and in place at the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ;
      • ensure that the BorrowerBorrowerPerson who is the obligor under the Note. has demonstrated experience with the California Welfare Tax Abatement Program; and
      • ensure that the BorrowerBorrowerPerson who is the obligor under the Note. is and remains eligible for the California Welfare Tax Abatement Program.

12

continued

 MINUS

If the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). benefits from real estate tax abatements, exemptions, or deferrals that will not survive a Foreclosure EventForeclosure EventAny of the following: Foreclosure under the Security Instrument; any other exercise by the Lender of rights and remedies (whether under the Security Instrument or under applicable law, including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, as a result of…, then you may use a reduced real estate tax payment only if:

 

  • upon reapplying for the original underwritten tax abatement or an alternative tax abatement, Fannie Mae or a subsequent PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). owner would qualify for the tax abatement;
  • the rent or income restrictions at the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). are maintained; and
  • you have ensured that:
    • if a qualified non-profit entity is required to participate in the ownership structure of the MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. in order to qualify for the tax abatement, exemption, or deferral, a sufficient number of qualified non-profits currently operate in the market (at least 3 for an MSAMSAGeographic delineation for a metropolitan area determined by the U.S. Census Bureau. with a population of less than 1 million and at least 5 for an MSAMSAGeographic delineation for a metropolitan area determined by the U.S. Census Bureau. with a population of 1 million or greater), and in the event of a foreclosure, could serve in the replacement ownership structure to qualify for the tax abatement, exemption, or deferral; and
    • the original or alternative tax abatement, exemption, or deferral has
      • been established in the state’s statutes,
      • been in effect for at least 10 years, and
      • the LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. conducted all appropriate due diligence and confirmed that there is no material risk that the tax abatement, exemption, or deferral legislation will be repealed or revised in a manner that would affect the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s ability to continue to qualify for the tax abatement, exemption, or deferral.

12

continued

 MINUS

If the timeframe for the real estate tax abatement, exemption, or deferral 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, 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 obligations under the Loan Documents. ),
  • an amortization schedule that accommodates the elimination of the abatement, or
  • providing clear justification and support in the refinance analysis.

13

MINUS

Insurance equal to:

 

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

14

MINUS

Utilities, water and sewer, repairs and maintenance, payroll and benefits, advertising and marketing, professional fees, general and administrative, ground rent, and all other expenses per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis.
 

EQUALS

UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI)

15

MINUS

Replacement ReserveReplacement ReserveCustodial Account established by the Lender and funded by deposits from the Borrower over the term of the Mortgage Loan to fund the replacement of capital items at the Property. expense per Part II, Chapter 2: Valuation and Income, Section 202.01: Underwritten Net Cash Flow (Underwritten NCF).
 

EQUALS

UNDERWRITTEN NCF
703.02

Underwriting
703.02A

Not-for-Profit (IRC §501[c][3]) Borrower may be a Multi-Asset Borrower

Requirements

Although a single-asset entity is preferred, a not-for-profit BorrowerBorrowerPerson who is the obligor under the Note. may be a multi-asset entity.

If the not-for-profit BorrowerBorrowerPerson who is the obligor under the Note. is a multi-asset BorrowerBorrowerPerson who is the obligor under the Note., you must analyze the Borrower'sBorrower'sPerson who is the obligor under the Note. other assets and general financial condition per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 302: Borrower Organizational Structure.

703.02B

Appraised Value and Underwriting Value

Requirements

In addition to the AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion as to the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. requirements in Part II, Chapter 2: Valuation and Income, Section 201.02: Appraisal, you must:

  • Include 2 separate opinions of the Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. based on:
    • the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…, using
      • comparable multifamily rental properties,
      • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s submarket, and
      • properties with similar rent or income restrictions; and
    • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s income and expenses without the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… (e.g., market rents, occupancy, and operating expenses), using
      • comparable multifamily market rate rental properties, and
      • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s submarket.
  • Ensure that each Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by 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 underwritten and serviced by the Lender and financed by the issuance of Bonds where Fannie Mae is providing a Credit Enhancement Instrument. );
    • tax credit benefits; or
    • any perceived special risks or benefits associated with the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). and its Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower….
  • Determine the appropriate Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. for the Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II: Property, Section 201. per Part II, Chapter 2: Valuation and Income, Section 201: Market and Valuation.
703.02C

Market Study

Requirements

If the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). is subject to a HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract that 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 amounts due and owing under the Mortgage Loan 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 as to the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. ) that:

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

Restabilization Reserve

Requirements

You must establish a Restabilization Reserve for an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. that has a HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract if the HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract term (disregarding any annual or other 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 amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. .

The Restabilization Reserve must:

  • equal the monthly P&IP&IPrincipal and interest  on the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. , multiplied by the greater of
  • remain in place until
    • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). achieves underwritten occupancy for 90 days at market rate rents, or
    • the HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract is renewed and expires 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 amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. .
703.02E

Affordable Regulatory Agreement Restrictions

Guidance

To 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. as an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. , the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… restrictions should remain in effect for the term of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. .

Requirements

When the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… restrictions have 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 amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. , you must provide support to underwrite to the MAHMAHProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. PreservationPreservationRenewal or continuation of rent, income and/or occupancy restrictions on multifamily rental housing eligible as an MAH Property, but is potentially at risk of being lost from the affordable housing inventory through conversion to market-rate housing, and is not receiving new LIHTC. standards in the Form 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. , taking into account factors such as:

  • restricted rents below market rate rents;
  • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s history of operating as an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. ;
  • the BorrowerBorrowerPerson who is the obligor under the Note.’s history and experience owning and operating MAHMAHProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. PropertiesPropertiesMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ;
  • the BorrowerBorrowerPerson who is the obligor under the Note.’s intention to renew the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…;
  • the amount of time between the Maturity DateMaturity DateDate all amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. and when the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… restrictions expire;
  • market strength; and
  • how the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). compares to comparable market rate properties in terms of occupancy, condition, and amenities if the BorrowerBorrowerPerson who is the obligor under the Note. intends to convert the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). to market rate rents and if no rent advantage exists.

See Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702.01: Eligible Characteristics and Underwriting regarding self-imposed restrictions.

Section 704

Subordinate Financing
704.01

Interest Rate and Payments

Requirements

You must ensure that the subordinate loan has:

  • a fixed rate;
  • interest payable on a current basis; and
  • no deferrals, except as described in this Section.
704.02

Loan Term

Requirements

A fully amortizing subordinate loan may mature at any time regardless of the:

  • Maturity DateMaturity DateDate all amounts due and owing under the Mortgage Loan 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. or 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. ; or
  • expiration date of the Fannie Mae 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. .

You must ensure that any subordinate loan that does not fully amortize, including any Soft Financing, does not mature before 90 days after the earlier of the:

  • final Maturity DateMaturity DateDate all amounts due and owing under the Mortgage Loan 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. or 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. ; or
  • expiration date of the Fannie Mae 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. for the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. or 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. .
704.03

Collateral

Guidance

You may secure the subordinate loan with a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). if:

  • the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. is subordinated to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. per Sections 704.08 - 704.11 of this Chapter; and
  • the granting clause of the security instrument creating the subordinate LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. is the same as that of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. .
704.04

Credit Support

Requirements

You must ensure that 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. secured by the MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. obtains the same credit support and collateral as any subordinate loan, including any

  • recourse to the BorrowerBorrowerPerson who is the obligor under the Note. or third-party GuarantorGuarantorKey Principal or other Person who executes a Payment Guaranty, a Non-Recourse Guaranty, or any other guaranty in connection with the Mortgage Loan. , or
  • additional collateral.
704.05

Soft Financing

Requirements

To be considered Soft Financing, subordinate debt must have all of the following:

  • P&IP&IPrincipal and interest payments made only from the surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). remaining after all other payments (due and owing) are made on 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. ;
  • unpaid interest that either
    • does not accrue, or
    • accrues, but can only be satisfied from the surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). ;
  • agreement from the subordinate LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. to execute a Subordination Agreement with any future first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. that refinances any UPBUPBUnpaid Principal Balance on the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. secured by the MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. ;
  • the BorrowerBorrowerPerson who is the obligor under the Note.’s failure to make an interest or principal payment due to a lack of surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). is not considered a default under the Soft Financing subordinate debt; and
  • the BorrowerBorrowerPerson who is the obligor under the Note. retains a minimum 25% equity share in the surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). unless
    • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). has LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. ,
    • the Soft Financing Note is payable to the developer, and
    • the developer (or entities related to the developer) owns or controls more than 50% of the general partner (or equivalent managing) interest of the BorrowerBorrowerPerson who is the obligor under the Note..

Guidance

Soft Financing may also include:

  • a Loan term significantly longer than the term of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. , with the subordinate loan either
    • being forgiven over time or at the maturity date of the Soft Financing, or
    • due only upon the sale of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ;
  • a nominal interest rate (e.g., 1% or 2%); or
  • principal payments on the Soft Financing that do not fully amortize the subordinate debt over its term.
704.06

Subordinate Lender

Requirements

If the Lender type is...

 Then...

Public / Quasi-Public / Not-for-Profit Lender

A subordinate loan provided by a public, quasi-public, or not-for-profit LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. may

 

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

Private Lender

You must ensure that any subordinate financing originated by a private, for-profit LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. is Soft Financing per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.05: Soft Financing.
704.07

Developer's Notes

Requirements

You must ensure that the BorrowerBorrowerPerson who is the obligor under the Note. only secures a commitment to repay developer advances or unpaid development costs with the proceeds of a mortgage loan secured by the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). if the subordinate financing is Soft Financing per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.05: Soft Financing.

704.08

Subordination Agreement

Requirements

You, the BorrowerBorrowerPerson who is the obligor under the Note., and the subordinate LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. must enter into either:

  • Fannie Mae form Subordination Agreement (Affordable) (Form 6456), if the subordinate LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. is a government entity; or
  • Fannie Mae form Subordination Agreement (Conventional) (Form 6414), if the subordinate LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. is not a government entity.
704.09

Lien Priority and Title Insurance Policy

Requirements

You must ensure that:

  • The LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. securing the subordinate loan remains, at all times, subordinate to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. securing the 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. or Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan underwritten and serviced by the Lender and financed by the issuance of Bonds where Fannie Mae is providing a Credit Enhancement Instrument. , including any refinancing of the 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. .
  • The Subordination Agreement is recorded in the land records immediately after the subordinate security instrument is recorded.
  • The title insurance policy reflects the recordation of the Subordination Agreement.
704.10

Form of Subordinate Loan Documents

Requirements

You must confirm that the subordinate loan documents:

  • comply with this Chapter;
  • include the specific provisions required by the Subordination Agreement; 
  • do not require the BorrowerBorrowerPerson who is the obligor under the Note. to maximize rents at the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). (even if the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). is subject to an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…); and 
  • are not in the form of subordinate 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. .
704.11

Prepayment

Requirements

The BorrowerBorrowerPerson who is the obligor under the Note. may not prepay or redeem the subordinate loan without Fannie Mae’s consent.

Section 705

Restrictive Covenants and Affordable Regulatory Agreements

Requirements

You must review the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… to ensure there are no provisions that, if a BorrowerBorrowerPerson who is the obligor under the Note. defaulted, would

  • grant rights, remedies, or powers similar to that of a secured creditor to any aggrieved party, or
  • impair the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. rights or priority of the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. .

If the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… contains any of these provisions, Fannie Mae will only purchase 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 Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… is subordinated to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents.

  • using a Subordination Agreement approved by Fannie Mae, or
  • if the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… is in connection with a subordinate loan, using Fannie Mae form Subordination Agreement (Affordable) (Form 6456).

Guidance

The rights, remedies, and powers of a secured creditor would typically include:

  • the ability to appoint a receiver;
  • the right to collect rents directly from the mortgaged property;
  • the right to take possession of the mortgaged property;
  • limitations on transferring title to you or to a subsequent transferee by foreclosure or deed in lieu;
  • no requirement to give you notice of violations of or amendments to the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…; and
  • the ability to remove or replace the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). manager without your prior consent.

The Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… does not need to be subordinated to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. if the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…:

  • has no BorrowerBorrowerPerson who is the obligor under the Note. obligations other than the affordability restrictions;
  • has no rights or remedies to enforce the affordability restrictions other than specific performance or injunctive relief; and
  • terminates upon foreclosure 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. .
Section 706

ROAR Loan
706.01

Generally

Requirements

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

  • is 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. or Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan underwritten and serviced by the Lender and financed by the issuance of Bonds where Fannie Mae is providing a Credit Enhancement Instrument. 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;
  • currently has Stabilized Residential OccupancyStabilized Residential OccupancyPercentage of Property units physically occupied by Qualified Occupants, per Part II: Property, Section 104.02 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: Property, Section 202, as adjusted for the applicable products and features in Part III. , 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 Preferred Equity payments. set forth in Form 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ; and
  • is secured by an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants.
    • that 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 property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in 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. , and
    • the repairs and improvements will be completed within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate the Lender funds a Mortgage Loan to the Borrower. .
706.02

Timing

Requirements

Within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate the Lender funds 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 reasonableness of the estimated cost of the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. and the completion schedule;
  • whether the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. can be completed and the Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. achieved within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate the Lender funds a Mortgage Loan to the Borrower. ;
  • the BorrowerBorrowerPerson who is the obligor under the Note.’s experience in developing or rehabilitating properties similar to the ROAR Property;
  • the tenant relocation plan, including budget and schedule;
  • the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. budget, including monthly sources and uses during the rehabilitation period;
  • any construction risks;
  • the 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
  • the 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: Property, Section 202 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 NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. 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 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate the Lender funds a Mortgage Loan to the Borrower. .

Appraisal

The AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion as to the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. must include an opinion of the value of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). 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 the Lender funds a Mortgage Loan to the Borrower. .

Occupancy During ROAR Work

Physical Occupancy:  minimum of 50%; and

Economic Occupancy:  minimum of 50%.

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(s) who control and/or manage the Borrower or the Property, are critical to the successful operation and management of the Borrower and the Property, and who may be required to provide a Guaranty. must execute a

 

  • Completion Guaranty (Form 6018), and
  • an operating deficit guaranty.

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:

 

  • comply with Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit; 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
    • the “as is” value.

Additional Credit Support

May be required.

Underwriting Fee

You must:

 

  • charge the BorrowerBorrowerPerson who is the obligor under the Note. an underwriting fee equal 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

For a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents or a mortgage debt obligation with a Fannie Mae credit enhancement. secured by an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. or a Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan underwritten and serviced by the Lender and financed by the issuance of Bonds where Fannie Mae is providing a Credit Enhancement Instrument. , if the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). has both HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contracts 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 HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract units using the lowest of

 

  • market rents,
  • HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract rents, or
  • Applicable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents.

Option 2

Underwrite the rents from HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract 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 HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract rents are less than market rents.  If the HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract 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 amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. , you must ensure that:

 

  • 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: Property, Section 202, as adjusted for the applicable products and features in Part III. 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
  • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). 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: Property, Section 202, as adjusted for the applicable products and features in Part III. greater than or equal to 1.10 based on the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents when the HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contract expires.

You may use Option 2, or eliminate the Restabilization Reserve under either option, if you meet all of the following:

  • all LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents are at least 10% below market;
  • the MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. is located in a market or submarket with 90% or greater economic occupancy; and
  • the SponsorSponsorPrincipal equity owner and/or the primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). is experienced and successful in owning and operating properties with HAPHAPHousing assistance payment provided to a Borrower by HUD in connection with a HUD Section 8 Property. contracts. 
707.02

HAP Contract Review Sheet

Requirements

Before you DeliverDeliverMeeting all of the data delivery requirements in , and submitting an acceptable Mortgage Loan Delivery Package per Part IV A: Mortgage Loan Commitment, Delivery and Purchase Procedures, Chapter 5.  A Mortgage Loan is “Delivered,” when all documents, data, and information are correct, accurate, and… 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 that 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 , the BorrowerBorrowerPerson who is the obligor under 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 under 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 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: Property, Section 202, as adjusted for the applicable products and features in Part III. .

708.02

Additional Proceeds from Mortgage Loan

Requirements

If the BorrowerBorrowerPerson who is the obligor under 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 that:

  • 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 NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. meets Fannie Mae's LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  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: Property, Section 202, as adjusted for the applicable products and features in Part III. 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: Property, Section 202, as adjusted for the applicable products and features in Part III. 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 per Part XV of the DUS Guide, subject to certain conditions. 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 under 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 PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ’s overall LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  ; and
  • comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704: Subordinate 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 an LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). in which you are an equity investor (directly or indirectly) in the BorrowerBorrowerPerson who is the obligor under the Note. if the following conditions are met:

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 property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). securing 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. qualifies for LIHTCLIHTCFederal 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 plans to acquire a direct or indirect equity interest in the BorrowerBorrowerPerson who is the obligor under the Note., it does not 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. .
  • If Fannie Mae owns or plans 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. , it does not own or intend to acquire a direct or indirect equity interest in the BorrowerBorrowerPerson who is the obligor under the Note..
710.02

Fannie Mae Credit-Enhanced Tax-Exempt Bond Issuance

Requirements

You must confirm that 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. , it does not also own or intend to acquire a direct equity interest in the BorrowerBorrowerPerson who is the obligor under the Note..

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

  • Fannie Mae’s indirect equity interest in the BorrowerBorrowerPerson who is the obligor under the Note. is less than 50%;
  • in the case of an LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. transaction:
    • the IRS documentation filed in connection with 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. issuance shows that none of 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. proceeds were applied to pay any portion of Fannie Mae’s credit enhancement fee;
    • 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 under the Note. have either
      • entered into an LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. agreement that acknowledges Fannie Mae’s equity interest, or
      • consented in writing to Fannie Mae’s equity interest; and
    • any required notices to the BorrowerBorrowerPerson who is the obligor under the Note. and the issuer under an LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. agreement have been provided; and
  • in the case of a non-LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. transaction, the issuer and the BorrowerBorrowerPerson who is the obligor under the Note. have consented in writing to 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 encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. transactions.  HUDHUDU.S. Department of Housing and Urban Development ’s 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 under the Note. (and each Key PrincipalKey PrincipalPerson(s) who control and/or manage the Borrower or the Property, are critical to the successful operation and management of the Borrower and the Property, and who may be required to provide a Guaranty. , GuarantorGuarantorKey Principal or other Person who executes a Payment Guaranty, a Non-Recourse Guaranty, or any other guaranty in connection with the Mortgage Loan. , and PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I: Mortgage Loan, Section 303. <