Section 701 | |
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701.01 | |
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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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per 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 LIHTCsLIHTCsFederal 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 | |
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Requirements
You must be approved in writing to DeliverDeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. 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 | |
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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).
- HAP contract: at least 20% of all units are subject to a project-based HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract.
- Special Public Purpose: 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… 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.
- Sponsor-Initiated Affordability: the BorrowerBorrowerPerson who is the obligor per the Note.
may voluntarily self-impose rent and income restrictions to preserve or create multifamily affordable housing. These restrictions must:
- require the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the
fee simple or Leasehold interest,
Improvements, and
personal property (per the Uniform Commercial Code).
to have
- rent and income restrictions that meet or exceed 20% @ 80%: at least 20% of all units have rent and income restrictions in place making them affordable to households earning no more than 80% of AMI as adjusted for family size, and
- restricted unit rent limits not exceeding 30% of the adjusted AMI;
- be placed on record against the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). by executing the Sponsor-Initiated Affordability Agreement (Form 6490);
- be in place at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
- require the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). to comply with the Sponsor-Initiated Affordability Agreement (Form 6490) within 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
- remain in place during the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. term; and
- be certified annually by the BorrowerBorrowerPerson who is the obligor per the Note. and monitored by an Administering AgentAdministering AgentThird-party compliance monitoring company. for compliance with the Sponsor-Initiated Affordability Agreement (Form 6490).
- require the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the
fee simple or Leasehold interest,
Improvements, and
personal property (per the Uniform Commercial Code).
to have
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 LIHTCsLIHTCsFederal 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , including Rural Housing Service (RHS) Section 515 Loans, and Loans insured 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). restrictions in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. .
Operating Procedures
For any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with Sponsor-Initiated AffordabilitySponsor-Initiated AffordabilityVoluntary rent and income restrictions recorded against the Property by the Borrower to preserve or create multifamily affordable housing. , the BorrowerBorrowerPerson who is the obligor per the Note. must execute the:
- Sponsor-Initiated Affordability Agreement (Form 6490); and
- Modifications to Multifamily Loan and Security Agreement (Sponsor-Initiated Affordability Restrictions) (Form 6271).
To commit and DeliverDeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. that qualifies as Special Public Purpose or Sponsor-Initiated AffordabilitySponsor-Initiated AffordabilityVoluntary rent and income restrictions recorded against the Property by the Borrower to preserve or create multifamily affordable housing. , refer to:
Requirements
You must not underwrite or price the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). as 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. ; or
- 3 or more years of LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. restrictions remaining, but the BorrowerBorrowerPerson who is the obligor per the Note. intends to enter into the Qualified Contract Process (per Section 42 of the Internal Revenue Code) within 3 years after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .
Operating Procedures
If a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). will have existing rent, income, and/or occupancy restrictions when 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 indicate the “MAH type” in C&DC&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. under “Other Attributes”, even if you cannot underwrite the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). as 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 Affordable Preservation Transaction per this Section 702.02: Ineligible Characteristics and Underwriting.
Section 703 | |
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703.01 | |
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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 |
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Item |
Function |
Description |
CALCULATION OF NET RENTAL INCOME | ||
1 |
GROSS RENTAL INCOME – the least of:
Rent from non-project based Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. must not exceed the average rent for comparable units without non-project based Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. .
You must include incremental HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract income per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 707.01: Properties with Both HAP Contracts and LIHTC Units. |
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2 |
PLUS |
To the extent deducted as an operating expense, rents for other non-revenue units (e.g., model units deducted in the “model apartment” operating expense in the “general and administrative” category, or actual rent from employee units deducted in the “employee” operating expense in the “payroll and benefits” category). |
EQUALS |
GROSS POTENTIAL RENT (GPR)1 |
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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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract) based on a current rent roll (multiplied by 12).3 |
4 |
MINUS |
Concessions – the aggregate amount of forgone residential rental income from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.).3 |
5 |
MINUS |
Bad debt – the aggregate amount of unpaid rental income determined to be uncollectable, including any adjustments to other income for bad debt.3 |
EQUALS |
NET RENTAL INCOME (NRI)2, 3, 4 |
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1 For Properties with HAP contracts, you
2 You may underwrite HAP contract rents up to:
3 The total of Items 3, 4, and 5 must equal the greater of
4 You must assess the NRI, including any declines, and make adjustments per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
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CALCULATION OF OTHER INCOME5 |
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6 |
PLUS |
Actual other income (except premiums and corporate premiums) generated through ongoing operations. The income must:
You must assess the individual month's other income within the prior full-year operating statement or, at a minimum, an operating statement covering at least the trailing 6 months (annualized).
If there are fluctuations, you may use other income that exceeds the trailing 3-month other income (annualized), provided it does not exceed the highest 1-month other income used in the trailing 3-month other income calculation. |
5 If premiums or corporate premiums are applicable for a particular MAH Property, inclusion of premium income is permitted consistent with Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
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CALCULATION OF COMMERCIAL INCOME |
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7 |
PLUS |
Actual income from leased and occupied commercial space per Part II, Chapter 1: Attributes and Characteristics, Section 109: Commercial Leases. |
8 | PLUS | Actual income from STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… units. |
9 |
MINUS |
10% of the actual commercial space income.6 |
10 |
PLUS |
Commercial parking income (e.g., public parking) that does not exceed actual trailing 12-month collections.6 |
11 |
PLUS |
Laundry and vending, parking, and all other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis. |
6 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI. | ||
EQUALS |
EFFECTIVE GROSS INCOME (EGI) |
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CALCULATION OF OPERATING EXPENSES |
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12 |
MINUS |
Line-by-line stabilized operating expenses. Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operations, not affected by a
Non-recurring, extraordinary operating expenses must not be included.
You must assess:
You must:
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13 |
MINUS |
PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management fee equal to the greatest of:
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7 Minimum management fee may be 3.5% of EGI (rather than 4% of EGI) if the:
If the MAH Property is located in a Strong Market or Eligible MSA and the Mortgage Loan's original UPB is greater than $6 million, the minimum management fee may be the greatest of
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14 |
MINUS |
Real estate taxes based on the greatest of:
You must:
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14 continued |
MINUS |
If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has real estate tax abatements, exemptions, deferrals, or PILOTsPILOTsPayment In Lieu Of Taxes. , they must:
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14 continued |
MINUS |
If governed under the Florida affordable housing property exemption (per Sections 196.1978(1) and (2) of the Florida Statutes),
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). benefits from real estate tax abatements, exemptions, deferrals, or a PILOTPILOTPayment In Lieu Of Taxes. that will not survive a Foreclosure EventForeclosure EventAny of the following: Foreclosure per the Security Instrument; Fannie Mae's exercise of rights and remedies per the Security Instrument or applicable law (including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, where Fannie Mae (or its designee or nominee),…, then you may use a reduced real estate tax payment only if:
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14 continued |
MINUS |
If the timeframe for the real estate tax abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. is shorter than the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. term, or begins phasing out or expires within 5 years after the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must consider:
For a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with a tax abatement, the Modifications to Multifamily Loan and Security Agreement (Tax Abatement or Exemption) (Form 6251) must be executed even if you do not underwrite the tax abatement. |
15 |
MINUS |
Insurance equal to:
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16 |
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) |
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17 |
MINUS |
Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense per Part II, Chapter 2: Valuation and Income, Section 202.01: Underwritten Net Cash Flow (Underwritten NCF). |
EQUALS |
UNDERWRITTEN NCF |
703.02 | |
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Requirements
In addition to the AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. requirements in Part II, Chapter 2: Valuation and Income, Section 201.02: Appraisal, you must:
- Include 2 separate opinions of the Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide.
based on:
- Restricted ValueRestricted ValueAppraised Value assuming a Property's Affordable Regulatory Agreement is in effect.
from 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 Property’sProperty’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). submarket,
- properties with similar rent or income restrictions, and
- any tax abatements or exemptions.
- Unrestricted ValueUnrestricted ValueAppraised Value assuming a Property's Affordable Regulatory Agreement is not in effect.
from the Property’sProperty’sMultifamily residential real estate securing the Mortgage Loan, including the
fee simple or Leasehold interest,
Improvements, and
personal property (per the Uniform Commercial Code).
income and expenses without the Affordable Regulatory AgreementAffordable Regulatory 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,
- the Property’sProperty’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). submarket, and
- full taxes if rental income restrictions are required by a tax abatement or exemption.
- Restricted ValueRestricted ValueAppraised Value assuming a Property's Affordable Regulatory Agreement is in effect.
from 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
- Ensure that each Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide.
is based on a market cap rate without any upward or downward adjustment for:
- special financing (other than adjusted cap rates for Credit Enhancement Mortgage LoansCredit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. ); or
- tax credit benefits.
- Determine the appropriate Appraised ValueAppraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. for the Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 201: Market and Valuation. per Part II, Chapter 2: Valuation and Income, Section 201: Market and Valuation.
703.02B | |
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Requirements
If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is subject to a HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. 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 Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must include a market study (which can be part of the AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. ) that:
- is prepared by a qualified real estate professional; and
- identifies the absorption rate, lease-up period, and rent level for comparable market rate rental properties in the submarket.
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 Mortgage Loan amounts 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 LIHTCs. standards in the Form 4660, taking into account factors such as:
- restricted rents below market rate rents;
- 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). 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
- the Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Mortgage Loan amounts 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 real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). compares to comparable market rate properties in terms of occupancy, condition, and amenities if the BorrowerBorrowerPerson who is the obligor per the Note. intends to convert the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). to 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.
703.02D | |
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Requirements
If you use a 35-year amortization term, the:
- PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). must have LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. with at least 8 years remaining in the initial 15-year compliance period; and
- minimum 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 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 must equal the greater of
- the remaining initial compliance period, and
- 10 years.
703.02E | |
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Guidance
When a SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). elects LIHTC Income AveragingLIHTC Income AveragingInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI, and the… for a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with new LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , you should consider:
- Will LIHTC Income AveragingLIHTC Income AveragingInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI, and the… impact other non-LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. regulatory agreements?
- Is LIHTC Income AveragingLIHTC Income AveragingInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI, and the… compatible with other funding and subsidy source requirements, including any project-based HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract?
- Has LIHTC Income AveragingLIHTC Income AveragingInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided
a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI, and
the… been approved by the
- state agency, and
- LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or syndicator?
- Will the on-site PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management staff have sufficient experience?
- Will the unit mix be impacted, including
- unit parity,
- multi-building election,
- floating units, and
- market rate units?
- What is the rent advantage, especially for units above 60% of AMI?
- For a Forward CommitmentForward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property.
,
- is the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). not a resyndication of a property previously developed or preserved using LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. and subject to an existing extended use agreement, or
- if the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is a resyndication, have you confirmed the property has completed its extended use period?
- Does the market study include capture rates for each unit designation supporting LIHTC Income AveragingLIHTC Income AveragingInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI, and the…?
Requirements
You must identify and mitigate any risks from electing LIHTC Income AveragingLIHTC Income AveragingInternal Revenue Code Section 42 election allowing LIHTC property owners to rent units to households earning up to 80% of AMI, provided a minimum of 40% of the residential units are both rent-restricted and occupied by households with a maximum income up to an average of 60% of AMI, and the….
703.02F | |
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Requirements
For any 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. with new LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , you must ensure at least 20% of the aggregate LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity that the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or syndicator must contribute into the limited partnership is received on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .
703.02G | |
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Guidance
You should analyze the development budget, including the
- developer fee due the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). or any AffiliateAffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key…, and
- any deferred developer fee (i.e., the portion of the developer fee shown as a source in the sources and uses statement).
If the deferred developer fee is greater than 50% of the total developer fee, you should confirm there are sufficient
- hard and soft contingency budgets, and
- projected surplus cash flows to repay the deferred developer fee within the initial compliance period.
703.02H | |
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Guidance
Refer to Part II, Chapter 2: Valuation and Income, Section 205: Rent-Stabilized Properties regarding rent-stabilized 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. units.
Section 704 | |
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704.01 | |
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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 | |
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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.
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
- Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.07: Subordination Agreement,
- Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.08: Lien Priority and Title Insurance Policy, and
- Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 704.09: Form of Subordinate Loan Documents; and
- 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 | |
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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 |
|
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 202: 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 | |
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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
|
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 | |
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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 | |
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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.
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.
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 | |
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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 | |
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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 ACheck 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 |
|
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 |
|
Subordination Agreement | Conventional Form | Conventional Form | Affordable Form |
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 | |
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706.01 | |
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Requirements
You must ensure 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 financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. using a Credit Enhancement InstrumentCredit Enhancement InstrumentAgreement between Fannie Mae and a Bond Trustee where Fannie Mae provides credit enhancement of a Credit Enhancement Mortgage Loan, Bonds issued to finance a Credit Enhancement Mortgage Loan, or an Interest Rate Hedge Agreement; and if applicable, a Bond liquidity facility. ;
- has a fixed rate;
- has a minimum Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. amount of $5 million; and
- is secured by an MAH PropertyMAH PropertyProperty 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 Stabilized Residential OccupancyStabilized Residential OccupancyPercentage of Property units physically occupied by Qualified Occupants, per Part II, Chapter 1: Attributes and Characteristics, Section 105.02: Qualified Occupants as adjusted for the applicable Part III products and features. , but will likely experience tenant displacement significant enough to lower the Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis, as adjusted for the applicable products and…, calculated using the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. , below the required DSCRDSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of: principal, interest, and required Mezzanine Financing or Hard Preferred Equity payments. set forth in Form 4660; and
- will undergo repairs, replacements, or improvements costing $10,000 per unit or more (based on the total number of residential units at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ), or qualifies as a Moderate Rehabilitation PropertyModerate Rehabilitation PropertyProperty that will undergo at least $8,000 per unit of Rehabilitation Work. .
706.02 | |
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Requirements
Within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower.
- the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. must be completed, and
- Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. must be achieved.
706.03 | |
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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 you fund a Mortgage Loan to the Borrower. ;
- the Borrower’sBorrower’sPerson who is the obligor per the Note. 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.
Requirements
You must underwrite the ROAR LoanROAR LoanReduced Occupancy Affordable Rehabilitation Loan per the following table.
Topic | Description |
---|---|
Underwritten NCF |
GPRGPROn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.01: Underwritten NCF; Underwritten 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 you fund a Mortgage Loan to the Borrower. . |
Appraisal |
The AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. must include an opinion of the value 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). on both an “as is” and an “as completed” basis that incorporates the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. to be completed after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. . |
Occupancy During ROAR Work |
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
|
Rehabilitation Reserve Agreement |
Required. |
Key Principal Guaranties |
The Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. must execute a
|
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:
|
Additional Credit Support |
May be required. |
Underwriting Fee |
You must:
|
Section 707 | |
|
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
Applicable LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. rents are the lower of
|
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:
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 202: Income Analysis, as adjusted for the applicable products and… is greater than or equal to
|
707.02 | |
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Requirements
For all TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 and TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. , you must establish a Restabilization Reserve for an MAH PropertyMAH PropertyProperty 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 HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract if the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract term (excluding any annual or incremental government appropriation conditions) expires before the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
The Restabilization Reserve must:
- equal the monthly Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by
the Loan Documents, or
a mortgage debt obligation with a Fannie Mae credit enhancement.
P&IP&IPrincipal and interest
, multiplied by the greater of
- 6 months, or
- the lease-up period determined by the market study per Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.02B: Market Study; and
- remain in place until
- the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). achieves underwritten occupancy for 90 days at market rate rents, or
- the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract is renewed with an expiration date after the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
You may eliminate the Restabilization Reserve if the:
- weighted average LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. unit rents are at least 10% below market;
- 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
- 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.
707.03 | |
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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.
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 | |
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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 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 202: Income Analysis, as adjusted for the applicable products and….
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 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, Chapter 2: Valuation and Income, Section 202: 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 202: 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.
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 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 | |
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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 specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. , 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.
- a description of the relationship among the