Chapter 7

Multifamily Affordable Housing Properties

Section 701	Generally

Section 702	MAH Property Eligibility

Section 703	Property Income and Underwriting

Section 704	Subordinate Financing

704.01	Interest Rate and Payments

Requirements

You must ensure any subordinate loan:

has a fixed rate; and
any non-Soft Financing has:
- interest payable on a current basis; and
- no deferrals or accruals.

704.02	Loan Term

Requirements

You must ensure any non-fully amortizing subordinate loan, 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

A fully amortizing subordinate loan may mature at any time regardless 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. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. . A subordinate loan may also be fully or partially forgiven at any time per its 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. obtains the same credit support and collateral as any subordinate loan, including any

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

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 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. :

is subordinated 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. per
includes only the same collateral covered by 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. Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. .

704.04	Soft Financing

Requirements

Provision	To be considered Soft Financing...
Financing Terms	Subordinate loan terms must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704: Subordinate Financing.
Payments	Any subordinate loan 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, including any fees, must be payable 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, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and… remaining after all other payments (due and owing) are made 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. 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. . No more than 75% of 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, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and… must be available for payments on all Soft Financing unless the note is payable 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….
Events of Default	Failure to pay principal and/or interest due to 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, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and… must not be an event of default.
Subordination	Subordination must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.07: Subordination Agreement.

Guidance

Soft Financing may have:

a nominal interest rate (e.g., 1% or 2%);
interest that does not accrue;
principal payments that do not fully amortize the subordinate loan over its term; or
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 subordinate loan either
- being forgiven over time or at its maturity date, or
- due only upon the sale 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). .

704.05	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 Fannie Mae approved 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 Fannie Mae approved to sell or service Mortgage Loans. is Soft Financing per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.04: Soft Financing.

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 Fannie Mae approved 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 Fannie Mae approved to sell or service Mortgage Loans. is Soft Financing per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.04: Soft Financing.

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 subordinate financing, including Soft Financing, you, the BorrowerBorrowerPerson who is the obligor per the Note. , and the subordinate LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. must enter into either:

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

704.08	Lien Priority and Title Insurance Policy

Requirements

You must ensure:

The subordinate loan, 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's title insurance policy reflects the recordation of the Subordination Agreement.

704.09	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; 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 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…).

704.10	Prepayment

Requirements

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

704.11	LIHTC Equity Bridge Loans

Requirements

LIHTC Equity Bridge Loan	Requirements
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.
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 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	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	Conventional Form	Conventional Form	Affordable Form

Section 705	Restrictive Covenants and Affordable Regulatory Agreements

Requirements

For 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and non-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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , 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…, except for 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. , must 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 Loan Document obligations. if the agreement:

grants rights, remedies, or powers similar to that of a secured creditor to any aggrieved party;
impairs 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 Loan Document obligations. ;
contains any BorrowerBorrowerPerson who is the obligor per the Note. obligations other than the affordability restrictions;
contains any rights or remedies to enforce the affordability restrictions other than specific performance or injunctive relief; or
does not terminate upon 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. foreclosure.

To subordinate 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 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.

use an approved Subordination Agreement, or
for 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… with a subordinate loan, use 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager without your prior consent.

Section 706	ROAR Loan

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 financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , 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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. 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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract units using the lowest of market rents, HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract rents, and applicable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents. Applicable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents are the lower of maximum allowable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents minus utility allowances, and actual rents in place for occupied units subject to a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. 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….
Option 2	Underwrite the rents from HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. 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: at least 20% 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). units are subject to a project-based HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract; the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract rents are less than or equal to market rents; the 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; 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, both for market rate 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. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and 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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contracts. If the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. 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 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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract expires.

Choice

Requirements

Option 1

Underwrite the rents from HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract units using the lowest of

market rents,
HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract rents, and
applicable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents.

Applicable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents are the lower of

maximum allowable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents minus utility allowances, and
actual rents in place for occupied units subject to a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. 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….

Option 2

Underwrite the rents from HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. 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:

at least 20% 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). units are subject to a project-based HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract;
the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract rents are less than or equal to market rents;
the 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;
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, both for market rate 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. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and
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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contracts.

If the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. 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 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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract expires.

707.02	HAP Contract Review Sheet

Requirements

Before you 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. 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 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 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 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: 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 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
- servicing 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. .
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

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. 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

711.03	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 .

Guidance

Fannie Mae will make this FHAFHAFederal Housing Administration premium payment on or before its due date.

711.04	Subsidy Layering Review

Requirements

You must ensure the BorrowerBorrowerPerson who is the obligor per the Note. obtains a subsidy layering review when required by federal laws. FHA Risk Sharing Mortgage Loans are a source of federal government assistance.

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).