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Part I
Mortgage Loan
  • Chapter 1
    Overview
    • Section 101
      Using the Guide
      • 101.01 Organization
      • 101.02 References
    • Section 102
      Delegation and Underwriting
    • Section 103
      Transaction Approval Memo
    • Section 104
      Representations
  • Chapter 2
    Mortgage Loan
    • Section 201
      Registration and Multifamily Affordability Estimator
    • Section 202
      Delegated Mortgage Loans
    • Section 203
      Pre-Review Mortgage Loans
    • Section 204
      Letters of Credit
      • 204.01 Generally
      • 204.02 Issuers and Ratings
      • 204.03 Verifying Issuer Ratings
      • 204.04 Restrictions on Issuer Collateral
      • 204.05 Drawing on Letter of Credit
  • Chapter 3
    Borrower, Guarantor, Key Principals, and Principals
    • Section 301
      Generally
    • Section 302
      Borrower Organizational Structure
      • 302.01 Single-Asset Entity
      • 302.02 Co-Tenant Borrowers
        • 302.02 A Tenancy-in-Common Agreement
        • 302.02 B Key Principal Execution of Guaranty
      • 302.03 Joint and Several Borrowers with Multiple Properties
    • Section 303
      Key Principals, Principals, and Guarantors
      • 303.01 Entity Review
      • 303.02 Fund
    • Section 304
      Financial Statements
    • Section 305
      Multifamily Underwriting Certificate
    • Section 306
      Fraudulent Conveyance
    • Section 307
      Applicant Experience Check
    • Section 308
      Compliance
    • Section 309
      Execution of Non-Recourse Guaranty
    • Section 310
      Conflict Mortgage Loans
      • 310.01 Description
      • 310.02 Restrictions
        • 310.02 A Underwriting
        • 310.02 B Servicing
        • 310.02 C No First Right of Refusal
        • 310.02 D Additional Disclosure
        • 310.02 E Notifications
Part II
Property
  • Chapter 1
    Attributes and Characteristics
    • Section 101
      Eligible Properties
      • 101.01 Generally
      • 101.02 Expanded Housing Choice
    • Section 102
      Multiple Properties
      • 102.01 Single Borrower Ownership
      • 102.02 Joint and Several Borrower Ownership
    • Section 103
      Property Ownership; Leasehold
    • Section 104
      Ground Leased Properties
      • 104.01 Generally
      • 104.02 Ground Lease Rents
      • 104.03 Ground Lease Estoppel Certificate
      • 104.04 Ground Lease Review
    • Section 105
      Minimum Occupancy
      • 105.01 Residential Occupancy
      • 105.02 Qualified Occupants
    • Section 106
      Certificates of Occupancy
    • Section 107
      Phased Properties
    • Section 108
      Commercial Leases
      • 108.01 Material Commercial Leases
        • 108.01 A Lease Review
        • 108.01 B Lease Approval
        • 108.01 C Lease Modifications
        • 108.01 D Tenant Estoppel Certificate
        • 108.01 E Subordination, Non-Disturbance and Attornment
      • 108.02 Non-Material Commercial Leases
        • 108.02 A Tenant Estoppel Certificate; Lease Modification
        • 108.02 B Non-Material Commercial Lease Types
      • 108.03 Short Term Rentals
    • Section 109
      Renewable Energy Generation Systems
      • 109.01 Acceptable Renewable Energy Generation Systems
      • 109.02 Solar Photovoltaic Systems
      • 109.03 Solar PV System Module
      • 109.04 Underwritten NCF
    • Section 110
      Oil/Gas Wells and Mineral Exploration
      • 110.01 Active Oil and Gas Wells
      • 110.02 Inactive Oil and Gas Wells
    • Section 111
      Property Management and Agreement
      • 111.01 Property Management
      • 111.02 Property Management Agreement
  • Chapter 2
    Valuation and Income
    • Section 201
      Market and Valuation
      • 201.01 Market Analysis
      • 201.02 Appraisal
        • 201.02 A Appraiser Role and Qualifications
        • 201.02 B Valuation Date
        • 201.02 C Appraised Value
      • 201.03 Underwriting Value
    • Section 202
      Income Analysis
      • 202.01 Underwritten Net Cash Flow (Underwritten NCF)
      • 202.02 Underwritten DSCR
    • Section 203
      Refinance Risk Analysis
      • 203.01 Base Assumptions
      • 203.02 Alternative Assumptions
    • Section 204
      Cash Out Analysis
    • Section 205
      Rent-Stabilized Properties
  • Chapter 3
    Legal Compliance
    • Section 301
      Zoning and Legally Non-Conforming Status
      • 301.01 Zoning and Legal Non-Conforming Use
      • 301.02 Legal Non-Conforming Characteristics
    • Section 302
      Easements
    • Section 303
      Liens and Encumbrances
      • 303.01 Generally
      • 303.02 Property Previously Secured Bond Financing
    • Section 304
      Title Insurance
      • 304.01 Title Insurance Company
      • 304.02 Policy Form
      • 304.03 Electronic Policies
      • 304.04 Insured
      • 304.05 Effective Date
      • 304.06 Survey Exception
      • 304.07 Exception for Taxes, Assessments, or Other Lienable Items
      • 304.08 Financing Statements
      • 304.09 Endorsements
        • 304.09 A Generally
        • 304.09 B Environmental Protection Lien Endorsement
        • 304.09 C Comprehensive Endorsement
      • 304.10 Document Retention
    • Section 305
      Survey
      • 305.01 Decision to Obtain a Survey
      • 305.02 Survey
      • 305.03 Decision Not to Obtain a Survey
      • 305.04 Location of Improvements
    • Section 306
      Security Interests in Personal Property
      • 306.01 Uniform Commercial Code (UCC) Financing Statements
      • 306.02 Creating and Perfecting the Security Interest
  • Chapter 4
    Inspections and Reserves
    • Section 401
      Site Inspection and Lease Audit
    • Section 402
      Property Condition Assessment (PCA)
      • 402.01 When to Perform a PCA
      • 402.02 Date of PCA Report and PCA Site Visit
      • 402.03 Conducting the PCA
    • Section 403
      Completion/Repairs
      • 403.01 Property Evaluation
      • 403.02 Completion/Repairs Funding
      • 403.03 Life Safety Issues
      • 403.04 Verifying Completion/Repairs
    • Section 404
      Replacement Reserve
      • 404.01 Determining Replacement Reserve
      • 404.02 Replacement Reserve Funding
      • 404.03 Alternative Replacement Reserve Funding
    • Section 405
      Escrow Requirements for Taxes and Insurance
      • 405.01 Escrows
      • 405.02 Real Estate Tax Escrow Funding
      • 405.03 Insurance Escrow Funding
  • Chapter 5
    Property and Liability Insurance
    • Section 501
      Property and Liability Insurance
      • 501.01 General Insurance – Applies to All Policies
        • 501.01 A Generally
        • 501.01 B Blanket and Other Policies Covering Multiple Properties
        • 501.01 C Insurance Carrier Rating
        • 501.01 D Term
        • 501.01 E Payment of Premium
        • 501.01 F Evidence of Insurance
        • 501.01 G Insurance Compliance and Data
        • 501.01 H Post Closing Insurance Exceptions
      • 501.02 Property Insurance
        • 501.02 A Minimum Coverage Amounts
        • 501.02 B Business Income (including Rental Value) Insurance
        • 501.02 C Ordinance or Law Insurance
        • 501.02 D Boiler and Machinery / Equipment / Mechanical Breakdown Insurance
        • 501.02 E Builder’s Risk Insurance
        • 501.02 F Fidelity Bond / Crime Insurance
        • 501.02 G Regional Perils Insurance
      • 501.03 Catastrophic Risk Insurance
        • 501.03 A Generally
        • 501.03 B Windstorm Insurance
        • 501.03 C Flood Insurance
        • 501.03 D Earthquake Insurance
        • 501.03 E Terrorism Insurance
      • 501.04 Liability Insurance
        • 501.04 A Commercial General Liability Insurance
        • 501.04 B Professional Liability Insurance
        • 501.04 C Risk Retention Groups and Captive Insurance
        • 501.04 D Workers’ Compensation Insurance
        • 501.04 E Directors’ and Officers’ Liability Insurance
        • 501.04 F Commercial Auto Liability Insurance
      • 501.05 Small Loans
        • 501.05 A Permanent Evidence
        • 501.05 B Excess/Umbrella Insurance
        • 501.05 C Terrorism Insurance
    • Section 502
      Environmental Matters
      • 502.01 Environmental Site Assessments
      • 502.02 Lender’s Responsibilities
      • 502.03 Environmental Indemnity Agreement
    • Section 503
      Seismic Risk
      • 503.01 Seismic Hazard and Risk Factors
      • 503.02 Seismic Risk Assessment (SRA)
      • 503.03 Acceptable Levels of Seismic Risk
      • 503.04 Seismic Retrofit Ordinances
      • 503.05 Seismic Risk Mitigants
Part III
Products and Features
  • Chapter 1
    Student Housing Properties
    • Section 101
      Description
      • 101.01 Student Housing Property
      • 101.02 Dedicated Student Housing Property
    • Section 102
      Generally
    • Section 103
      Dedicated Student Housing Property
      • 103.01 Eligible Property Characteristics
      • 103.02 Ineligible Property Characteristics
      • 103.03 Residential Leases
      • 103.04 Properties on College/University Land
      • 103.05 Additional Underwriting Documentation
    • Section 104
      Underwritten NCF
    • Section 105
      Replacement Reserve
      • 105.01 Determining Replacement Reserve
      • 105.02 Replacement Reserve Funding
  • Chapter 2
    Military Housing Properties
    • Section 201
      Description
    • Section 202
      Ineligible Property Types
    • Section 203
      Generally
  • Chapter 3
    Moderate Rehabilitation Mortgage Loans
    • Section 301
      Description
    • Section 302
      Underwriting
    • Section 303
      Rehabilitation Work Costing More than $20,000 Per Unit
      • 303.01 Rehabilitation Work Evaluation Report
      • 303.02 Rehabilitation Reserve Agreement
    • Section 304
      Supplemental Mortgage Loans
  • Chapter 4
    Green Mortgage Loans
    • Section 401
      Generally
      • 401.01 Description
      • 401.02 High Performance Building Module
      • 401.03 Technical Solar Report
      • 401.04 Green MBS
      • 401.05 Committing and Delivery
    • Section 402
      Green Building Certification
    • Section 403
      Green Rewards Mortgage Loans
      • 403.01 Eligibility
        • 403.01 A Generally
        • 403.01 B HPB Module, HPB Report, and Technical Solar Report Scoring
        • 403.01 C HPB Module, HPB Report, and Technical Solar Report Approval
        • 403.01 D Non-Contiguous Parcels
      • 403.02 Implementing Efficiency Measures
        • 403.02 A Generally
        • 403.02 B Solar PV System
      • 403.03 Underwritten NCF
      • 403.04 Maximum Amount
      • 403.05 Supplemental Mortgage Loans
    • Section 404
      Annual Energy Reporting
  • Chapter 5
    Seniors Housing Properties
    • Section 501
      Generally
      • 501.01 Description
      • 501.02 Eligible Lenders
      • 501.03 Key Principal/Sponsor Experience
    • Section 502
      Eligible Properties
      • 502.01 Eligible Properties
      • 502.02 Ineligible Properties
    • Section 503
      Continuing Care Retirement Communities (CCRCs)
    • Section 504
      Seniors Housing Property Income
      • 504.01 Underwritten NCF
      • 504.02 Skilled Nursing NCF Test
      • 504.03 Operating Lease Ratios
      • 504.04 Operating Lease Analysis
    • Section 505
      Replacement Reserve
    • Section 506
      Medicaid Funds
      • 506.01 Dependency and Medicaid Transition Reserve
      • 506.02 State Medicaid
    • Section 507
      Consultant Reports
      • 507.01 Management, Operations, and Regulatory Compliance
      • 507.02 Management and Operations Reports
      • 507.03 Regulatory Compliance Report
  • Chapter 6
    Manufactured Housing Communities
    • Section 601
      Description
    • Section 602
      Lender Eligibility
    • Section 603
      Legal and Property Compliance
      • 603.01 Borrower and the MH Community
        • 603.01 A Borrower Ownership
        • 603.01 B Collateral; Tenant-Occupied and Affiliate-Owned Homes
        • 603.01 C MH Community
      • 603.02 MH Community Score
      • 603.03 Code Standards
      • 603.04 Flood Zone
        • 603.04 A Rising Water
        • 603.04 B Moving Water
      • 603.05 Lease Terms
        • 603.05 A Master Leases
        • 603.05 B MH Site Leases
        • 603.05 C Loan Document Modification
    • Section 604
      Property Insurance
    • Section 605
      Survey
      • 605.01 Public Roadways, Private Interior Roadways, and Drives
      • 605.02 Setbacks
      • 605.03 Encroachments
    • Section 606
      Property Income and Underwritten NCF
    • Section 607
      Replacement Reserve
  • Chapter 7
    Multifamily Affordable Housing Properties
    • Section 701
      Generally
      • 701.01 Description
      • 701.02 Eligible Lenders
    • Section 702
      MAH Property Eligibility
      • 702.01 Eligible Characteristics and Underwriting
      • 702.02 Ineligible Characteristics and Underwriting
    • Section 703
      Property Income and Underwriting
      • 703.01 Underwritten NCF
      • 703.02 Underwriting
        • 703.02 A Appraised Value and Underwriting Value
        • 703.02 B Market Study
        • 703.02 C Affordable Regulatory Agreement Restrictions
        • 703.02 D 35-Year Amortization
        • 703.02 E LIHTC Income Averaging
        • 703.02 F Initial LIHTC Equity
        • 703.02 G Developer Fees
        • 703.02 H Rent-Stabilized Units
    • Section 704
      Subordinate Financing
      • 704.01 Interest Rate and Payments
      • 704.02 Loan Term
      • 704.03 Collateral and Credit Support
      • 704.04 Soft Financing
      • 704.05 Subordinate Lender
      • 704.06 Developer's Notes
      • 704.07 Subordination Agreement
      • 704.08 Lien Priority and Title Insurance Policy
      • 704.09 Form of Subordinate Loan Documents
      • 704.10 Prepayment
      • 704.11 LIHTC Equity Bridge Loans
    • Section 705
      Restrictive Covenants and Affordable Regulatory Agreements
    • Section 706
      ROAR Loan
      • 706.01 Generally
      • 706.02 Timing
      • 706.03 General Underwriting
      • 706.04 Additional Underwriting and Loan Documents
    • Section 707
      HAP Contract Properties
      • 707.01 Properties with Both HAP Contracts and LIHTC Units
      • 707.02 Restabilization Reserve
      • 707.03 HAP Contract Review Sheet
    • Section 708
      Refinancing Section 236 Properties – IRP is Maintained
      • 708.01 No Additional Proceeds
      • 708.02 Additional Proceeds from Mortgage Loan
      • 708.03 Additional Proceeds from Other Sources
    • Section 709
      LIHTC Properties – Lender Equity Interest
    • Section 710
      Transactions with Fannie Mae Debt and Equity Interests
      • 710.01 Transactions Funded with Tax-Exempt Bond Proceeds
      • 710.02 Fannie Mae Credit-Enhanced Tax-Exempt Bond Issuance
    • Section 711
      FHA Risk Sharing
      • 711.01 Description
      • 711.02 Eligibility
        • 711.02 A Borrowers, Key Principals, Guarantors, and Principals
        • 711.02 B Generally
        • 711.02 C Cash Out
      • 711.03 Mortgage Insurance Premium
      • 711.04 Subsidy Layering Review
      • 711.05 Lender FHA Risk Sharing Reserve and Loss Sharing Modifications
  • Chapter 8
    Cooperative Properties
    • Section 801
      Description
    • Section 802
      Eligible Mortgage Loans
      • 802.01 Basic Conditions
      • 802.02 Financial Conditions
      • 802.03 Property Management Conditions
      • 802.04 Other Considerations
    • Section 803
      Underwriting
      • 803.01 Financial Operation
      • 803.02 Property Valuation
      • 803.03 Subordinate Debt
    • Section 804
      Income Analysis
      • 804.01 Cooperative Market Rental Basis NCF (Underwritten NCF)
      • 804.02 Cooperative Market Rental Basis DSCR (Underwritten DSCR)
      • 804.03 Actual Cooperative Property NCF
      • 804.04 Actual Cooperative Property DSCR
    • Section 805
      Limited Equity Cooperative Properties
  • Chapter 9
    Small Mortgage Loans
    • Section 901
      Generally
      • 901.01 Description
      • 901.02 Applicability
    • Section 902
      Key Principal Guaranty Obligation
    • Section 903
      Occupancy
    • Section 904
      Corporate Leases; Leases to One Entity
    • Section 905
      Property Income Analysis
      • 905.01 Small Mortgage Loan Underwritten NCF (Underwritten NCF)
      • 905.02 Underwritten DSCR
    • Section 906
      Property Management
    • Section 907
      Property Condition
      • 907.01 Site Inspection by Lender or Other Third Party
      • 907.02 Site Inspection by Borrower
      • 907.03 PCA
    • Section 908
      Replacement Reserve
    • Section 909
      Environmental Matters and Inspections
    • Section 910
      Borrower, Key Principals, Guarantors, and Principals
      • 910.01 Borrower Organizational Structure
      • 910.02 Co-Tenant Borrowers
      • 910.03 Key Principals
      • 910.04 Principals
      • 910.05 Financial Statements
      • 910.06 Net Worth and Liquid Assets
    • Section 911
      Credit Reports
      • 911.01 Credit Report
      • 911.02 FICO Scoring
      • 911.03 Reviewing the Credit Report
  • Chapter 10
    Healthy Housing Rewards
    • Section 1001
      Healthy Housing Rewards
    • Section 1002
      Healthy Design
    • Section 1003
      Enhanced Resident Services
  • Chapter 11
    Adjustable Rate Mortgage (ARM) Loans
    • Section 1101
      Description
    • Section 1102
      Underwriting
    • Section 1103
      Prepayment Terms
      • 1103.01 Generally
      • 1103.02 1% Prepayment Premium Schedule
    • Section 1104
      ARM 5/5 Loan Optional 5-Year Adjustable Rate Term Renewal Eligibility
  • Chapter 12
    Structured Adjustable Rate Mortgage (SARM) Loans
    • Section 1201
      Description
    • Section 1202
      Underwriting
    • Section 1203
      Actual Amortization Calculation
    • Section 1204
      Prepayment Terms
      • 1204.01 Generally
      • 1204.02 Prepayment Option 1 – Declining Prepayment Premium Schedule
      • 1204.03 Prepayment Option 2 - 1% Prepayment Premium Schedule
    • Section 1205
      Interest Rate Caps
      • 1205.01 Replacement Interest Rate Cap
      • 1205.02 Determining the Cap Strike Rate
      • 1205.03 Including the Cap Cost Factor in the Variable Underwriting Rate
      • 1205.04 Establishing Interest Rate Cap Reserves
      • 1205.05 Interest Rate Cap Contract Documentation and Delivery
  • Chapter 13
    Hybrid Adjustable Rate Mortgage (Hybrid ARM) Loans
    • Section 1301
      Description
    • Section 1302
      Interest Rate Conversion Date
    • Section 1303
      Prepayment Terms
    • Section 1304
      Monthly Principal and Interest Payments
      • 1304.01 During the Fixed Rate Term
      • 1304.02 On the Hybrid ARM Loan Conversion Date
      • 1304.03 During the Adjustable Rate Term
  • Chapter 14
    Supplemental Mortgage Loans
    • Section 1401
      Description
    • Section 1402
      Supplemental Mortgage Loans
      • 1402.01 Description
      • 1402.02 Coterminous and Non-Coterminous
      • 1402.03 Loan Amount
        • 1402.03 A Maximum Loan Amount
        • 1402.03 B Calculating the Debt Service
        • 1402.03 C Calculating the DSCR and LTV
        • 1402.03 D New Loan Test
      • 1402.04 Tier Dropping
        • 1402.04 A Designating
        • 1402.04 B Eligibility
        • 1402.04 C Ineligible Mortgage Loans
      • 1402.05 Streamlined Underwriting
        • 1402.05 A Property
        • 1402.05 B Borrower, Guarantor, Key Principals, and Principals
  • Chapter 15
    Split Mortgage Loans and Bifurcated Mortgage Loans
    • Section 1501
      Description
    • Section 1502
      Characteristics
  • Chapter 16
    Mezzanine Financing and Preferred Equity
    • Section 1601
      Mezzanine Financing
      • 1601.01 Description
        • 1601.01 A Eligible Mortgage Loans
        • 1601.01 B Eligible Terms
        • 1601.01 C Loss Sharing
        • 1601.01 D Lender's Loan Application
      • 1601.02 Underwriting
      • 1601.03 Submission
        • 1601.03 A Materials
        • 1601.03 B Data
      • 1601.04 Intercreditor Agreement
      • 1601.05 Servicing
    • Section 1602
      Preferred Equity
      • 1602.01 Description
        • 1602.01 A Definitions
        • 1602.01 B Exclusions
        • 1602.01 C Eligible Mortgage Loans
        • 1602.01 D Structures
        • 1602.01 E Limitations
        • 1602.01 F Lender's Loan Application
      • 1602.02 Underwriting
      • 1602.03 Hard Preferred Equity
        • 1602.03 A Submission
        • 1602.03 B Outside Counsel and Due Diligence Fees
  • Chapter 17
    Structured Transactions
    • Section 1701
      Description
    • Section 1702
      Credit Facilities
    • Section 1703
      Bulk Deliveries
  • Chapter 18
    Choice Refinance Loans
    • Section 1801
      Eligibility
    • Section 1802
      Lender Delegation
    • Section 1803
      Prepayment Premiums
    • Section 1804
      Streamlined Underwriting
      • 1804.01 Property Condition Assessment (PCA)
      • 1804.02 Environmental Site Assessment
      • 1804.03 Survey
      • 1804.04 Borrower Structure and Experience
      • 1804.05 Borrower Credit
      • 1804.06 Property Management
      • 1804.07 Replacement Reserve
      • 1804.08 Real Estate Tax and Insurance Escrows
    • Section 1805
      Property Ownership Change
  • Chapter 19
    Bond Transactions and Credit Enhancement Mortgage Loans
    • Section 1901
      Description
    • Section 1902
      Outside Counsel
      • 1902.01 Engagement
      • 1902.02 Fees
    • Section 1903
      Third Parties
      • 1903.01 Generally
      • 1903.02 Remarketing Agent
    • Section 1904
      Legal Documents
      • 1904.01 Generally
      • 1904.02 Credit Enhancement Instrument
      • 1904.03 MBS for Bonds
      • 1904.04 Affordable Regulatory Agreements
    • Section 1905
      Fannie Mae LIHTC Investment in Credit-Enhanced Bonds
    • Section 1906
      Credit Enhancing Fixed Rate Bonds
      • 1906.01 Terms
      • 1906.02 Multiple Fixed Rate Bonds
    • Section 1907
      Credit Enhancing Variable Rate Bonds
      • 1907.01 Terms
      • 1907.02 Principal Reserve Fund
      • 1907.03 Interest Rate Cap
      • 1907.04 Cap Strike Rate
      • 1907.05 Interest Rate Cap Reserve
      • 1907.06 Interest Rate Cap Reserve Adjustments
      • 1907.07 Interest Rate Cap Contract Documentation and Delivery
    • Section 1908
      Facility Fee
    • Section 1909
      Taxable Tails and Supplemental Mortgage Loans
      • 1909.01 Taxable Tails
      • 1909.02 Supplemental Mortgage Loans
    • Section 1910
      Third-Party Subordinate Financing
    • Section 1911
      Moderate Rehabilitation Mortgage Loan with Side-by-Side Bond Financing
  • Chapter 20
    Forward Commitments
    • Section 2001
      Generally
      • 2001.01 Description
      • 2001.02 Eligible Properties
    • Section 2002
      Funded Forward Commitments
    • Section 2003
      Unfunded Forward Commitments
      • 2003.01 Terms and Interest Rate Determination
        • 2003.01 A Terms
        • 2003.01 B Interest Rate Determination and Rate Lock
      • 2003.02 Good Faith Deposit and Fees
        • 2003.02 A Good Faith Deposit
        • 2003.02 B Fees
      • 2003.03 Forward Commitment Underwriting
        • 2003.03 A Generally
        • 2003.03 B Construction and Feasibility Review
        • 2003.03 C Third-Party Reports
      • 2003.04 Commitment
      • 2003.05 Construction Period
        • 2003.05 A Monitoring
        • 2003.05 B Reporting
        • 2003.05 C Forward Commitment Extensions
      • 2003.06 Construction Completion
      • 2003.07 Permanent Loan Final Underwriting
        • 2003.07 A Generally
        • 2003.07 B Stabilized NCF
        • 2003.07 C Final Permanent Mortgage Loan Amount
        • 2003.07 D Third-Party Reports
      • 2003.08 Conversion
        • 2003.08 A Eligibility
        • 2003.08 B Timeline
      • 2003.09 MBS Issuance
      • 2003.10 Forward Commitment Termination
Part IV
Committing and Delivery
  • Chapter 1
    Pricing, Fees, and Prepayment Premiums
    • Section 101
      Pricing
    • Section 102
      Fees
    • Section 103
      Prepayment Premiums
  • Chapter 2
    Rate Lock and Committing
    • Section 201
      Pre-Commitment
      • 201.01 Borrower Commitment
      • 201.02 Trading Agreements
      • 201.03 Trading Practices
    • Section 202
      Obtaining a Rate Lock
      • 202.01 Rate Lock Period
      • 202.02 Rate Lock Amount
      • 202.03 Locking the Rate
    • Section 203
      Good Faith Deposits
      • 203.01 Borrower Deposit
      • 203.02 Minimum Good Faith Deposit
      • 203.03 Good Faith Deposit and Breakage Fees
    • Section 204
      Commitments
      • 204.01 Submission
      • 204.02 Confirmation
      • 204.03 Modifications
        • 204.03 A Change Requests
        • 204.03 B Rate Lock Extensions
        • 204.03 C Commitment Extensions
    • Section 205
      ASAP Options
  • Chapter 3
    Streamlined Rate Lock
    • Section 301
      Description
      • 301.01 Eligibility
      • 301.02 Timing
    • Section 302
      Preliminary Underwriting
    • Section 303
      Rate Lock
    • Section 304
      Commitment
    • Section 305
      Rate Lock and Commitment Extensions
    • Section 306
      Full Underwriting
      • 306.01 Rate Lock or Commitment Amount Changes
      • 306.02 Mortgage Loan Delivery Package
      • 306.03 Post-Underwriting Scenarios
    • Section 307
      Dual Commitment Option
      • 307.01 Description
      • 307.02 Additional Proceeds
  • Chapter 4
    Delivery
    • Section 401
      Delivery Deadline
    • Section 402
      Submission
      • 402.01 Data and Documents
      • 402.02 Participation Interests
    • Section 403
      Warehouse Lender
    • Section 404
      Wiring
      • 404.01 Wiring Instructions
      • 404.02 Wiring Payee Codes
    • Section 405
      Delivery
      • 405.01 Acceptability and Delivery Tolerance
      • 405.02 Data Changes
    • Section 406
      MBS Delivery Options
    • Section 407
      Delivery Problems and Changes
      • 407.01 Delivery Problems
      • 407.02 Changing the Book-Entry Date
    • Section 408
      Delivery Failure
  • Chapter 5
    Purchase
    • Section 501
      Generally
      • 501.01 Cash and MBS
      • 501.02 Delivery and Purchase
      • 501.03 C&D Purchase Notification
      • 501.04 Fannie Mae Loan Number
    • Section 502
      Purchase Amount
    • Section 503
      Third Party MBS Investor Delivery Scenarios
    • Section 504
      MBS Mortgage Loan Disclosure
      • 504.01 Multifamily MBS Prospectus
      • 504.02 Additional Disclosure
      • 504.03 Disclosure Obligations
    • Section 505
      ASAP
  • Chapter 6
    Structured Transactions
    • Section 601
      Registration
    • Section 602
      Approval
      • 602.01 Approval Documents
      • 602.02 Expiration Dates
      • 602.03 Fees
      • 602.04 Rate Lock
      • 602.05 Loan Documents
    • Section 603
      Commitment
      • 603.01 MBS Mortgage Loans
      • 603.02 Cash Mortgage Loans
    • Section 604
      Delivery
      • 604.01 Delivery Process
      • 604.02 MSFMS Data Errors
    • Section 605
      MBS Disclosure
    • Section 606
      Features and Activities
      • 606.01 Process
      • 606.02 Asset Management Activities
  • Chapter 7
    Variable Rate Conversions and Renewals
    • Section 701
      Conversion Process
    • Section 702
      ARM Loan and SARM Loan Conversions
      • 702.01 Governing Documents
      • 702.02 Minimum Conversion Debt Service Ratio
      • 702.03 Conversion Criteria
      • 702.04 Guaranty Fee and Servicing Fee
      • 702.05 Interest-Only
      • 702.06 Fixed Rate Amortization
      • 702.07 Fixed Rate Debt Service Payments
      • 702.08 Fixed Rate MBS Trade Premium
      • 702.09 New Property Condition Assessment (PCA)
    • Section 703
      Commitment and Delivery
      • 703.01 Rate Lock and Commitment
      • 703.02 Conversion Delivery
        • 703.02 A Deliver Loan Document Amendments
        • 703.02 B Deliver Mortgage Loan Delivery Package
      • 703.03 Conversion Activities
      • 703.04 Pay Off
    • Section 704
      ARM 5/5 Optional 5-Year Adjustable Rate Term Renewal
      • 704.01 Eligibility
      • 704.02 Underwriting
      • 704.03 Prepayment Terms
  • Chapter 8
    Bond Transactions and Credit Enhancement Mortgage Loans
    • Section 801
      Credit Enhancement Mortgage Loan Committing and Delivery
      • 801.01 Pre-Commitment
      • 801.02 Preliminary Official Statement
      • 801.03 Good Faith Deposit
      • 801.04 Rate Lock
      • 801.05 Commitment
    • Section 802
      Data and Document Delivery
      • 802.01 Credit Enhancement Mortgage Loans
      • 802.02 Interest Rate Cap
Part V
Servicing and Asset Management
  • Chapter 1
    Servicing
    • Section 101
      Generally
      • 101.01 Relationship
      • 101.02 Standard
      • 101.03 Servicing File
      • 101.04 Loan Document Compliance
    • Section 102
      Uniform Commercial Code (UCC) Financing Statements
      • 102.01 Filing Documents
      • 102.02 UCC Continuations, Amendments, and Terminations
    • Section 103
      Letters of Credit
      • 103.01 Servicing File
      • 103.02 Certification
      • 103.03 Monitoring Expiration Dates
      • 103.04 Replacement Letter of Credit
      • 103.05 Verifying Issuer Ratings
        • 103.05 A Monitoring
        • 103.05 B Rating Noncompliance
      • 103.06 Managing Draws and Releases
        • 103.06 A Letter of Credit Draws
        • 103.06 B Releasing/Reducing Letters of Credit or Other Collateral
    • Section 104
      Bond Transactions and Credit Enhancement Mortgage Loans
      • 104.01 Borrower Obligations
        • 104.01 A Payments
        • 104.01 B Principal Reserve Fund
      • 104.02 Cash Collateral Agreements
      • 104.03 UCC Filings
      • 104.04 Remarketing Agent Changes
  • Chapter 2
    Reporting and Remitting
    • Section 201
      Generally
    • Section 202
      Collection, Tracking and Reporting of Monthly P&I Payments and T&I Amounts
    • Section 203
      Reporting Loan Activity and Security Balance
      • 203.01 Use of Fannie Mae eServicing System
      • 203.02 Reporting Specific Transactions
      • 203.03 Monthly Activity Reporting
        • 203.03 A When to Begin Reporting
        • 203.03 B Cutoff Dates for Loan Activity Reporting
      • 203.04 Monthly Securitized Mortgage Loan Security Balance Reporting
        • 203.04 A Reporting Security Balances
        • 203.04 B Same Month Pooling – Security Balance for First Reporting Cycle
        • 203.04 C Security Balances Due by Second Business Day
        • 203.04 D Failure to Meet Reporting Deadline
      • 203.05 Due Dates for Reports
        • 203.05 A Removal Transactions
        • 203.05 B All Other Transactions
      • 203.06 Mortgage Loan Activity Record
        • 203.06 A Payment Collection
        • 203.06 B Fee Collection
        • 203.06 C Mortgage Loan Status
      • 203.07 Fannie Mae-Generated Monthly Reports
        • 203.07 A MBS Mortgage Loan P&I Draft Report
        • 203.07 B Cash Mortgage Loan P&I Draft Reports
        • 203.07 C Month-End Report
      • 203.08 Monthly MBS Mortgage Loan Reconciliations - Pool-to-Security Balance Reconciliations (Not Applicable to PFP MBS)
        • 203.08 A Reconciliation Required
        • 203.08 B Rounding Adjustment
        • 203.08 C Required Annual Adjustment to Correct Principal Balance vs. Security Balance Difference
        • 203.08 D Pool-to-Security Reconciliation Certification
    • Section 204
      Calculation of Interest Due
      • 204.01 Generally
      • 204.02 Calculating Interest Due
        • 204.02 A Actual/360 Interest Calculation Method
        • 204.02 B 30/360 Interest Calculation Method
    • Section 205
      ARM Loan Interest Rate and Monthly Payment Changes
      • 205.01 Adjustable Rate Mortgage Loan Interest Rate Changes and Required Monthly Payments
        • 205.01 A The Adjustable Rate Mortgage Loan Index
        • 205.01 B Determining the New Monthly Payment
      • 205.02 Monthly Reporting for ARM Loan Payment/Rate Changes
      • 205.03 Structured ARM Loans
    • Section 206
      Application of Monthly Payments
      • 206.01 Fannie Mae Form Loan Documents
      • 206.02 Non-Fannie Mae Form Loan Documents
    • Section 207
      Payment Shortages
    • Section 208
      Delinquency and Servicing Advances
      • 208.01 Generally
        • 208.01 A Applicability
        • 208.01 B Delinquency Advances on a Mortgage Loan other than a Credit Enhancement Mortgage Loan
        • 208.01 C Delinquency Advances on a Credit Enhancement Mortgage Loan
        • 208.01 D Servicing Advances on a Mortgage Loan other than a Credit Enhancement Mortgage Loan
        • 208.01 E Servicing Advances on a Credit Enhancement Mortgage Loan
      • 208.02 Duration of Payment of Delinquency Advances or Servicing Advances
        • 208.02 A Obligation to Make Delinquency Advances
        • 208.02 B Obligation to Make Servicing Advances
        • 208.02 C Reimbursement for Delinquency and Servicing Advances
      • 208.03 Repayment of Servicing Advances from Borrower
      • 208.04 No Capitalization of Servicing Advances for Securitized Mortgage Loans
      • 208.05 Entitlement to Default Interest
    • Section 209
      Remittance Procedures
      • 209.01 Definitions
        • 209.01 A Interest Distribution Amount
        • 209.01 B Principal Distribution Amount
        • 209.01 C Monthly Remittance
      • 209.02 Monthly P&I Remittance Due Dates for Cash and MBS Transactions
      • 209.03 Cash Remittance System
        • 209.03 A Drafting Account Use
        • 209.03 B Drafting Account Setup
        • 209.03 C Remittance Transaction Codes
      • 209.04 Additional Requirements for Monthly Remittance for Security Transactions
        • 209.04 A Amount of Security Monthly Remittance
        • 209.04 B Security Interest Distribution Amount
      • 209.05 Securitized Mortgage Loans – Remitting Fees to Fannie Mae
        • 209.05 A Guaranty Fee Due on 7th Calendar Day of Month
        • 209.05 B Guaranty Fee Remittance
        • 209.05 C Same Month Pooling – Interest and Guaranty Fee Remittance for First Reporting Cycle
      • 209.06 Notification to Fannie Mae if Unable to Have Funds Available on any Remittance Date
    • Section 210
      Full Prepayments
      • 210.01 Review of Applicable Loan Documents Required
      • 210.02 Notification of Prepayment; Timing of Prepayment
        • 210.02 A Notice and Timing Consistent with Loan Documents
        • 210.02 B Borrower Notice Must Contain Date of Intended Prepayment and Comply with Notice Requirements of the Loan Documents
        • 210.02 C Loan Document Requirements for Payoff and Lockout Dates
        • 210.02 D Notice to Fannie Mae of Proposed Payoff; Use of Fannie Mae Payoff Calculator
      • 210.03 Timing of Confirmation of the Full Prepayment Payoff Amount
      • 210.04 Full Prepayment for Cash Transactions and PFP MBS
        • 210.04 A Confirming the Full Prepayment Payoff Amount
        • 210.04 B Reporting Full Prepayment Payoff Amount
        • 210.04 C Remitting Full Prepayment Payoff Amount
      • 210.05 Full Prepayment for Securitized Transactions (Not Applicable to PFP MBS)
        • 210.05 A Confirming the Full Prepayment Payoff Amount
        • 210.05 B Reporting Full Prepayment Payoff Amount
        • 210.05 C Remitting Full Prepayment Payoff Amount
    • Section 211
      Partial Prepayments Not From Insurance or Condemnation Proceeds
      • 211.01 Partial Prepayments Generally Prohibited
      • 211.02 Partial Prepayment Procedures
        • 211.02 A Servicer’s Analysis of Loan Documents
        • 211.02 B Fannie Mae Approval Required for Partial Prepayments
        • 211.02 C Prepayment Premium Due on Partial Prepayment
        • 211.02 D Reporting and Remitting Partial Prepayments When Not Permitted in Loan Documents
        • 211.02 E Reporting and Remitting Partial Prepayments When Permitted in Loan Documents
    • Section 212
      Prepayments (Full or Partial) Involving Insurance Proceeds or Condemnation Awards
      • 212.01 Partial Prepayments Generally Permitted
      • 212.02 No Prepayment Premium Required
      • 212.03 Reporting and Remitting Partial Prepayments
    • Section 213
      Prepayment Premium Sharing
      • 213.01 General
      • 213.02 Yield Maintenance Prepayment Premiums – Prepayment Occurs Before the Yield Maintenance Period End Date
        • 213.02 A Calculation of Total Prepayment Premium
        • 213.02 B Calculation of Investor’s Share of Total Prepayment Premium for a Securitized Mortgage Loan
        • 213.02 C Calculation of Fannie Mae’s Share of Total Prepayment Premium
        • 213.02 D Calculation of Servicer’s Share of Total Prepayment Premium
      • 213.03 Yield Maintenance Prepayment Premiums – Prepayment Occurs On or After the Yield Maintenance Period End Date
        • 213.03 A Prepayment On or After Yield Maintenance Period End Date
        • 213.03 B Prepayment During Open Period
      • 213.04 Fixed Rate Mortgage Loans with Graduated Prepayment Premiums
      • 213.05 Prepayment Premiums for ARM Loans and Structured ARM Loans
      • 213.06 Prepayment Premium Waivers; Servicer’s Share of Prepayment Premium
    • Section 214
      Maturing Mortgage Loans/Payoffs
      • 214.01 Balloon Mortgage Loans
      • 214.02 Servicer Notification of Payoff Amount to Borrower
      • 214.03 Calculating and Obtaining Confirmation of Payoff Amount
        • 214.03 A Calculating the Full Payoff Amount
        • 214.03 B Fannie Mae Will Not Confirm Nor Is Responsible for Amounts Owing to Servicer
        • 214.03 C Fannie Mae Confirmation of Full Payoff Amount
        • 214.03 D No Quote to Borrower Until Fannie Mae Confirmation
      • 214.04 Reporting the Payoff and Remitting the Payoff Funds
        • 214.04 A Reporting Full Payoff Amount Through the eServicing System Due By 2nd Business Day of Month
        • 214.04 B Remitting Full Payoff Amount
    • Section 215
      Post-Payoff Actions
      • 215.01 Servicer Required Actions
        • 215.01 A General
        • 215.01 B Individual Mortgage Loan Releases
      • 215.02 Post Payoff Document Retention Requirements
    • Section 216
      DUS Bond Credit Enhancement Transactions – Reporting and Remitting Requirements
      • 216.01 Monthly Bond Credit Enhancement Reporting
      • 216.02 Monthly Remittance Procedures
        • 216.02 A Monthly Remittances of Scheduled Payments to Bond Trustee
        • 216.02 B Replenishment of Withdrawals from the PRF
        • 216.02 C Collection and Remittance of Borrower Reimbursement Obligations for Fannie Mae Advances
        • 216.02 D Monthly Remittance of Fees to Fannie Mae
        • 216.02 E Notice and Collection of Other Fees and Expenses
      • 216.03 Prepayments – General Introduction
        • 216.03 A Bond Redemption Premiums Payable to Bondholders
        • 216.03 B Termination Fee or Prepayment Premium Payable to Fannie Mae
        • 216.03 C Termination When No Prepayment Occurs; Weekly Variable Rate Transactions
      • 216.04 Prepayments – Processing
        • 216.04 A General
        • 216.04 B Prompt Notice of Intended Prepayment
        • 216.04 C Critical Path Due Dates
        • 216.04 D Fannie Mae’s Confirmation Required
      • 216.05 Prepayments: Prepayment Reporting
      • 216.06 Prepayments: Remittances
      • 216.07 Reporting on Delinquency Status
    • Section 217
      Mezzanine Loan Reporting and Remitting
      • 217.01 Remitting DUS Plus Mezzanine Loans
      • 217.02 Payoffs
    • Section 218
      Defeasance
      • 218.01 Mortgage Loan Documents Must Permit Defeasance
      • 218.02 Borrower’s Election to Defease
      • 218.03 Defeasance Option Procedures
        • 218.03 A Defeasance Documents
        • 218.03 B Defeasance Notice
        • 218.03 C Defeasance Commitment Fee
        • 218.03 D Verification of the Defeasance Notice
        • 218.03 E Substitute Collateral
        • 218.03 F Assignment and Assumption
        • 218.03 G Closing Documents
        • 218.03 H Amounts Payable by Borrower
        • 218.03 I Defeasance Deposit
        • 218.03 J Release
        • 218.03 K Fannie Mae Security Liquidated Damages
        • 218.03 L Third-Party Costs
        • 218.03 M Post Defeasance Closing Date
    • Section 219
      Delinquency Reporting and Certification
    • Section 220
      Reporting Collateral Balances in Custodial Accounts
      • 220.01 P&I Custodial Accounts
      • 220.02 Letters of Credit as Collateral
      • 220.03 Report on Fair Value Basis
      • 220.04 What to Report
      • 220.05 When to Report
    • Section 221
      Internal Revenue Service Reporting Requirements
      • 221.01 What to Report
      • 221.02 Filing IRS Form 1099 MISC
      • 221.03 Notifying the Internal Revenue Service about Abandonments or Acquisitions (IRS Form 1099-A)
        • 221.03 A When Required
        • 221.03 B Preparing IRS Form 1099-A
      • 221.04 Notifying the Internal Revenue Service about Cancellations of Indebtedness (IRS Form 1099-C)
        • 221.04 A When Required
        • 221.04 B Determining When a Debt Is Cancelled
        • 221.04 C Preparing IRS Form 1099-C
        • 221.04 D Exceptions to IRS Form 1099-C Reporting
        • 221.04 E Coordination with Reporting Abandonments or Acquisitions
      • 221.05 Reporting via Magnetic Media
  • Chapter 3
    Custodial Accounts
    • Section 301
      Generally
      • 301.01 Maintenance
      • 301.02 Fannie Mae's Rights
      • 301.03 Eligible Depositories and Ratings
        • 301.03 A Eligible Depository
        • 301.03 B Verifying Depository Ratings
      • 301.04 Investments and Interest
      • 301.05 Clearing Accounts
      • 301.06 Liability
        • 301.06 A Losses
        • 301.06 B Overdrafts
    • Section 302
      Administration
      • 302.01 Notifications
      • 302.02 Titling
      • 302.03 Deposits
    • Section 303
      P&I Custodial Accounts
      • 303.01 Accounts and Deposits
      • 303.02 Withdrawals
    • Section 304
      T&I Custodial Accounts
      • 304.01 Deposits
      • 304.02 T&I Impositions
      • 304.03 Shortfalls
      • 304.04 Prohibited Uses
      • 304.05 No Financing for T&I Impositions
    • Section 305
      Collateral Agreement Custodial Accounts
      • 305.01 Deposits
      • 305.02 Full Disbursement
    • Section 306
      Clearing Accounts
    • Section 307
      Drafting Accounts
      • 307.01 Establishing Drafting Accounts
      • 307.02 Consolidated Custodial Accounts
    • Section 308
      Recordkeeping and Reconciliations
      • 308.01 Account Analysis and Reconciliation
      • 308.02 Records
      • 308.03 For T&I Custodial Accounts
      • 308.04 Borrower's T&I Impositions and Custodial Accounts
        • 308.04 A Analysis Timing
        • 308.04 B Insufficient Funds
        • 308.04 C Surplus
      • 308.05 Annual Statements
  • Chapter 4
    Asset Management: Loan Document Administration
    • Section 401
      Servicing Requirements
      • 401.01 General
      • 401.02 Monitoring Compliance with Loan Documents
    • Section 402
      Delegation of Decision-Making Authority; Retention of Outside Legal Counsel
      • 402.01 Delegation of Decision-Making Authority
      • 402.02 Retention of Outside Legal Counsel
    • Section 403
      Execution of Documents by Servicer – Limited Power of Attorney
    • Section 404
      Execution of Documents by Fannie Mae
      • 404.01 Submission of Documents to Fannie Mae
      • 404.02 Servicer Certification When Fannie Mae Approval Is Not Required
      • 404.03 Servicer Certification When Fannie Mae Approval Is Required
    • Section 405
      Fees Due to Fannie Mae
    • Section 406
      Follow-Up Actions by the Servicer
    • Section 407
      Subordinate Financing
      • 407.01 Non-Fannie Mae Subordinate Financing
      • 407.02 Prerequisite for Subordinate Financing
      • 407.03 Fees for Subordinate Financing
      • 407.04 Submitting the Request for Subordinate Financing
      • 407.05 Fannie Mae Approval and Execution
      • 407.06 Subsequent Servicer Actions
    • Section 408
      Administration of Collateral Agreements
      • 408.01 General Administrative Requirements
        • 408.01 A Administration of Funds
        • 408.01 B Funds to be Held in a Custodial Account
        • 408.01 C Use of Funds
        • 408.01 D Funds as Additional Security for Mortgage Loan
        • 408.01 E Servicer’s Fees and Costs
        • 408.01 F Waiver or Modification of Terms of Collateral Agreement
      • 408.02 Achievement Agreement or Other Agreement for Additional Collateral
        • 408.02 A General
        • 408.02 B Releases or Reductions in Collateral
        • 408.02 C Draws on Letters of Credit or Application of Other Collateral
        • 408.02 D Releasing Additional Escrows for Principal and Interest, Taxes and Insurance, and Replacement Reserves
      • 408.03 Completion/Repairs
        • 408.03 A General
        • 408.03 B Extensions for Completion/Repairs
        • 408.03 C Completion/Repair Loan Document Amendments
        • 408.03 D Servicer’s Administrative Requirements
        • 408.03 E Processing Borrower Requisitions
        • 408.03 F Inspections
        • 408.03 G Fees
        • 408.03 H Completion/Repair Defaults
        • 408.03 I Green Rewards Efficiency Measure Verification
      • 408.04 Replacement Reserve
        • 408.04 A General
        • 408.04 B Replacement Reserve Loan Document Amendments
        • 408.04 C Servicer’s Administrative Requirements
        • 408.04 D Modifications to Replacement Reserve Deposits
        • 408.04 E New Property Condition Assessments
        • 408.04 F When Replacement Reserve Funding Was Partially or Fully Waived
        • 408.04 G Interest on Replacement Reserve Funds
        • 408.04 H Items Eligible for Funding from the Replacement Reserve
        • 408.04 I Items Not Eligible for Funding from the Replacement Reserve
        • 408.04 J Processing Borrower Requisitions
        • 408.04 K Inspections
        • 408.04 L Fees
        • 408.04 M Replacement Reserve Defaults
        • 408.04 N Return of Replacement Reserve Funds to Borrower
        • 408.04 O Alternative Funding of Replacement Reserves for Portfolio Mortgage Loans
    • Section 409
      Interest Rate Hedge Requirements
      • 409.01 General
      • 409.02 Interest Rate Hedge Coverage
        • 409.02 A Bond Credit Enhancement Transactions
        • 409.02 B Structured Transactions
        • 409.02 C All Hedges
      • 409.03 Interest Rate Hedge Term
      • 409.04 Lien Filings and Collateral
      • 409.05 Borrower Payments
        • 409.05 A Interest Rate Caps
        • 409.05 B Interest Rate Swaps
      • 409.06 Provider Ratings
      • 409.07 Replacement Interest Rate Hedge and Notification
      • 409.08 Replacement Interest Rate Hedge Documents and Follow Up
    • Section 410
      Ground Leases
    • Section 411
      Notice of Lien or Noncompliance with Applicable Laws, Ordinances and Regulations
    • Section 412
      Property Forfeitures and Seizures
    • Section 413
      Property and Liability Insurance
      • 413.01 Property and Liability Insurance
      • 413.02 No Financing for Property and Liability Insurance Premiums
      • 413.03 Flood Map Changes; Obtaining Flood Insurance
      • 413.04 Lender Placed Insurance
        • 413.04 A Property and Liability Insurance
        • 413.04 B Flood Insurance
        • 413.04 C Servicer’s Administrative Costs and Expenses
    • Section 414
      Casualty Losses – Performing Mortgage Loans
      • 414.01 Notice
      • 414.02 Filing Proof of Loss
      • 414.03 Casualty Loss Assessment
      • 414.04 Required Casualty Loss Property Inspection
      • 414.05 Documentation for Required Casualty Loss Property Inspections
      • 414.06 Endorsement of Insurance Loss Draft or Check When Payable to Fannie Mae
      • 414.07 Endorsement of Insurance Loss Draft or Check When Not Payable to Fannie Mae
      • 414.08 Insurance Loss Draft or Check Not Payable to Either Fannie Mae or Servicer
      • 414.09 Application of Insurance Loss Proceeds
        • 414.09 A Fannie Mae Determination Required
        • 414.09 B Disposition of Insurance Loss Proceeds
      • 414.10 Property Restoration Requirements
      • 414.11 Commencement of Repair/Restoration Work
      • 414.12 Disbursements
        • 414.12 A Prerequisites for Disbursement of Funds
        • 414.12 B Disbursing Funds
        • 414.12 C Content of Disbursement Request
        • 414.12 D Disbursement Amount
        • 414.12 E Final Disbursement; Notice to Fannie Mae
        • 414.12 F Documentation in Servicing File
      • 414.13 Borrower’s Failure to Diligently Pursue Repair
      • 414.14 Reimbursement of Administrative Costs
    • Section 415
      Casualty Losses – Non-Performing Mortgage Loans
    • Section 416
      Credit Facilities and Bulk Deliveries
      • 416.01 General
      • 416.02 Delegation of Decisions
        • 416.02 A Decisions and Actions Not Delegated
        • 416.02 B Decisions Delegated by the Delegated Transaction Form 4636 series
        • 416.02 C Other Delegated Decisions
      • 416.03 Approval Requests
      • 416.04 Release and Substitution Requests
      • 416.05 Borrow-Up (Future Advance) Requests
      • 416.06 Facility Revaluations
      • 416.07 Supplemental Mortgage Loans Not Permitted
      • 416.08 Additional Information
    • Section 417
      Seniors Housing Properties
      • 417.01 General
      • 417.02 Decisions and Actions Delegated and Not Delegated
      • 417.03 Approval Requests
      • 417.04 Seniors Housing Expansion/Conversion Requests
        • 417.04 A Permitted Purpose
        • 417.04 B Submission Requirements
        • 417.04 C Requirements and Monitoring
        • 417.04 D Construction Completion Requirements
        • 417.04 E Request Changes in Unit Count/Mix in the MAMP
    • Section 418
      Credit Enhancement Mortgage Loans and Multifamily Affordable Housing Properties
      • 418.01 Bond Transactions and Credit Enhancement Mortgage Loans
      • 418.02 Compliance Issues Relative to Bond Credit Enhancement Transactions
      • 418.03 Monitoring Compliance; Notification of Noncompliance
        • 418.03 A Affordable Regulatory Agreement
        • 418.03 B Default Notice for Failure to Comply with the Bond Documents
      • 418.04 Multifamily Affordable Housing (MAH) Properties
      • 418.05 Low-Income Housing Tax Credits
      • 418.06 Enhanced Resident Services
      • 418.07 Expanded Housing Choice
      • 418.08 HAP Contract Approval and Releasing Restabilization Reserve
    • Section 419
      MH Communities with Tenant Site Lease Protections
    • Section 420
      Single Asset Entity Conversion
    • Section 421
      Loan Document Amendments
    • Section 422
      Maturing Mortgage Loans
      • 422.01 Written Policy
      • 422.02 Refinance Eligibility
      • 422.03 Borrower Communications
      • 422.04 Fannie Mae Communications
  • Chapter 5
    Surveillance
    • Section 501
      Generally
    • Section 502
      Property Inspections
      • 502.01 Forms
      • 502.02 Property Condition Concerns
      • 502.03 Property Inspection Protocol
      • 502.04 Scheduling and Submissions
        • 502.04 A Scheduling
        • 502.04 B Submissions
      • 502.05 Property Inspectors
        • 502.05 A Qualifications
        • 502.05 B Third Parties
      • 502.06 Content
        • 502.06 A Unit Selection
        • 502.06 B Photos
        • 502.06 C Interviews
        • 502.06 D Market Analysis
        • 502.06 E Collateral Analysis
        • 502.06 F Life Safety Issues
      • 502.07 Quality Control
        • 502.07 A Program
        • 502.07 B Inspection Form Retention
        • 502.07 C Additional Inspections and Fees
    • Section 503
      Financial Analysis of Operations
      • 503.01 Reporting
      • 503.02 Quarterly Financial Analysis of Operations
      • 503.03 Annual Financial Analysis of Operations
        • 503.03 A Reporting Period
        • 503.03 B Submission
        • 503.03 C Annual Review
      • 503.04 Waiver Request
    • Section 504
      Loan Agreement Compliance
      • 504.01 Generally
      • 504.02 Financial Reports and Information
        • 504.02 A Borrower and Guarantor Notices
        • 504.02 B Borrower Fails to Provide Guarantor Financial Reports
        • 504.02 C Review Financial Reporting
        • 504.02 D Records
    • Section 505
      OFAC Compliance
  • Chapter 6
    Watchlist Management
    • Section 601
      Servicer Watchlist
      • 601.01 Submission
      • 601.02 Actions
    • Section 602
      Fannie Mae's Watchlist
    • Section 603
      Action Plans
      • 603.01 Primary Risk Mortgage Loans
      • 603.02 Secondary Risk Mortgage Loans
      • 603.03 Defaulted Mortgage Loans
    • Section 604
      Servicer Fees
    • Section 605
      Fannie Mae Contractors
  • Chapter 7
    Non-Performing Mortgage Loans
    • Section 701
      Generally
    • Section 702
      Secondary Risk Mortgage Loans and Primary Risk Mortgage Loans
      • 702.01 Generally
      • 702.02 Secondary Risk Mortgage Loans
        • 702.02 A Definition
        • 702.02 B Lender is Special Servicer
        • 702.02 C Deemed Exhaustion of Recourse Obligation
      • 702.03 Primary Risk Mortgage Loans Defined
        • 702.03 A Definition
        • 702.03 B Fannie Mae is Special Servicer
    • Section 703
      Mortgage Loan Defaults
      • 703.01 Anticipatory Defaults
      • 703.02 Performance Defaults
        • 703.02 A Failure of Borrower to Perform
        • 703.02 B Service of Process
        • 703.02 C Lender Tenders for Minor or Immaterial Defaults
      • 703.03 Monetary or Payment Defaults
      • 703.04 Date of Default
        • 703.04 A Definition of Date of Default
        • 703.04 B Definition of Non-Performing Mortgage Loan
        • 703.04 C Partial Payments by Borrower Do Not Change Date of Default
      • 703.05 Late Charges and Default Interest
        • 703.05 A Timing for Imposition of Late Charges and Default Interest
        • 703.05 B Late Charges and Default Interest
        • 703.05 C No Deduction for Late Charges or Default Interest
        • 703.05 D Enforceability of Late Charges and Default Interest
    • Section 704
      Notice of Default; Reservation of Rights
      • 704.01 Notice of Default
        • 704.01 A Notice to Fannie Mae of Payment Default
        • 704.01 B Notice to Fannie Mae of Performance Default
        • 704.01 C Types of Performance Defaults
        • 704.01 D Contact with Borrower
        • 704.01 E Pre-Negotiation Letter
      • 704.02 Partial Payments; Late Payments
        • 704.02 A Partial Payments
        • 704.02 B Late Partial Payment
        • 704.02 C Full Payment After Expiration of Period Before Assessing Late Charges
        • 704.02 D Application of Partial Payments
        • 704.02 E Failure to Make Any Payment
        • 704.02 F Copies of Letters Sent to Borrower; Correspondence with Borrower
    • Section 705
      Capital Repairs and Protection of Property and Property Income
      • 705.01 Funding Capital Repairs During Default Resolution
        • 705.01 A Generally
        • 705.01 B Health and Safety Repairs
      • 705.02 Protection of Property Income
      • 705.03 Property Management Changes
        • 705.03 A Primary Risk Mortgage Loans
        • 705.03 B Secondary Risk Mortgage Loans
        • 705.03 C Approval Decision Criteria and Timing
        • 705.03 D Documenting the Property Management Change
    • Section 706
      Reinstatement; Calculation of Payoff Amount
      • 706.01 Reinstatement
        • 706.01 A Primary Risk Mortgage Loans
        • 706.01 B Secondary Risk Mortgage Loans
      • 706.02 Calculation of Payoff Amount
    • Section 707
      Non-Performing Primary Risk Mortgage Loans – Transfers to Fannie Mae Special Asset Management
      • 707.01 Transfer to Special Servicing
      • 707.02 Asset Review
    • Section 708
      Non-Performing Secondary Risk Mortgage Loans – Special Servicing
      • 708.01 Servicer Performs Loss Mitigation Actions
      • 708.02 Servicer Workout Action Template (“SWAT”)
        • 708.02 A Delivery of SWAT
        • 708.02 B Purpose of SWAT
        • 708.02 C Contents of SWAT
        • 708.02 D Fannie Mae Approves SWAT
        • 708.02 E Fannie Mae does not Approve SWAT
        • 708.02 F Updating SWAT
        • 708.02 G Failure to Timely Deliver SWAT
        • 708.02 H No Credit Against Recourse
    • Section 709
      Special Servicing of Primary Risk Mortgage Loans
      • 709.01 Fannie Mae Performs Loss Mitigation Actions
      • 709.02 Servicing Transfer Memo
    • Section 710
      Engagement of Legal Counsel
      • 710.01 Fannie Mae Retains Legal Counsel
      • 710.02 Primary Risk Mortgage Loans
      • 710.03 Secondary Risk Mortgage Loans
      • 710.04 Payment of Legal Counsel Fees
        • 710.04 A Primary Risk Mortgage Loans
        • 710.04 B Secondary Risk Mortgage Loans
    • Section 711
      Courses of Action
      • 711.01 Election and Implementation of a Course of Action
      • 711.02 Course of Action – Lender Purchase of Mortgage Loan
        • 711.02 A Primary Risk Mortgage Loans
        • 711.02 B Secondary Risk Mortgage Loans
        • 711.02 C Purchase Price for Mortgage Loans
        • 711.02 D No Fannie Mae Approval Required
        • 711.02 E Implementation of Course of Action
      • 711.03 Course of Action – Lender Workout Election
        • 711.03 A Lender Workout Defined
        • 711.03 B Documentation and Terms of Lender Workout
        • 711.03 C Lender Workout Has No Impact on Loss Sharing or Recourse Obligation
        • 711.03 D No Fannie Mae Approval Required
        • 711.03 E Servicer Makes Delinquency Advances But Fails to Report Mortgage Loan Delinquent
        • 711.03 F Foreclosure Process Continues Unless Otherwise Agreed to by Fannie Mae
      • 711.04 Course of Action – A Joint Workout
        • 711.04 A Joint Workout Defined
        • 711.04 B Delinquency Advances Must Be Made During Negotiation of Joint Workout
        • 711.04 C Joint Workout Process
        • 711.04 D Modification, Extension, and Forbearance Fees
        • 711.04 E Triggering Modification Fees; Other Fees
        • 711.04 F Foreclosure Process Continues Unless Otherwise Agreed to by Fannie Mae
      • 711.05 Course of Action - Foreclosure
        • 711.05 A Primary Risk Mortgage Loans
        • 711.05 B Secondary Risk Mortgage Loans
        • 711.05 C Deed-in-Lieu of Foreclosure
        • 711.05 D Management of Property Post Title Vesting in Fannie Mae
        • 711.05 E Deficiency Suits
      • 711.06 Course of Action – Note Sale Election or Discounted Loan Payoff
        • 711.06 A Note Sale and Discounted Loan Payoff Defined
        • 711.06 B Lender Ability to Bid
        • 711.06 C Any Note Sale or Discounted Payoff Gives Rise to Loss Sharing Event
        • 711.06 D Note Sale – Secondary Risk Mortgage Loans
        • 711.06 E Discounted Loan Payoff - Secondary Risk Mortgage Loans
    • Section 712
      Dual Track Approach
      • 712.01 Dual Track Approach Generally
      • 712.02 Waiver of Dual Track Approach
      • 712.03 Track One: Dialogue with the Borrower
        • 712.03 A Purpose of Track One
        • 712.03 B First 30 Calendar Days after a Default
        • 712.03 C Calendar Days 31 through 60 after a Payment Default or Performance Default
        • 712.03 D Cessation of Dialogue with the Borrower
      • 712.04 Track Two: Foreclosure Process
        • 712.04 A The Foreclosure Process
        • 712.04 B REO Management
      • 712.05 Description of Contractual Relationships
        • 712.05 A Two Contractual Relationships
        • 712.05 B No Disclosure of Lender’s Contract Terms to Borrower; Borrower Not a Third-Party Beneficiary of Lender Contract
        • 712.05 C Primary Risk Mortgage Loans
        • 712.05 D Secondary Risk Mortgage Loans
      • 712.06 Asset Audits for Secondary Risk Mortgage Loans
        • 712.06 A Purpose of Asset Audits
        • 712.06 B Personnel Performing Asset Audits
        • 712.06 C Timing of Asset Audits
        • 712.06 D Content of Asset Audits
        • 712.06 E Pre-Negotiation Letter
        • 712.06 F Special Requirements for the Environmental Assessment
      • 712.07 Dual Track Timeline
    • Section 713
      Loss Sharing and the Appraisal Process in connection with a Foreclosure Event
      • 713.01 General
        • 713.01 A Appraisal Required; Defined Terms
        • 713.01 B Compliance with Loss Sharing Addendum
        • 713.01 C Approved Appraisers
        • 713.01 D Appraisal Requirements
        • 713.01 E Appraisal Notice and Election of Appraisal Methodology
      • 713.02 Single Appraisal Approach
        • 713.02 A Single Appraisal Approach Timeline
        • 713.02 B Draft Appraisal Review
        • 713.02 C Acceptable Draft Appraisal
        • 713.02 D Non-Acceptable Draft Approach
      • 713.03 Dual Appraisal Approach
        • 713.03 A Dual Appraisal Approach Timeline
        • 713.03 B Average of Appraised Values
        • 713.03 C Third Appraisal
  • Chapter 8
    In Place Loans
    • Section 801
      Eligibility
    • Section 802
      Representations
Appendix
Glossary
Chapter 7

Multifamily Affordable Housing Properties

Section 701

Generally

701.01

Description

Requirements

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

Eligible Lenders

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

MAH Property Eligibility

702.01

Eligible Characteristics and Underwriting

Requirements

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

  • 20% @ 50%:  at least 20% of all units have rent or income restrictions in place making them affordable to households earning no more than 50% of AMI as adjusted for family size.
  • 40% @ 60%:  at least 40% of all units have rent or income restrictions in place making them affordable to households earning no more than 60% of AMI as adjusted for family size (except for New York City, where at least 25% of all units have rent or income restrictions in place, making them affordable to households earning no more than 60% of AMI as adjusted for family size).
  • 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).

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);
  • Modifications to Multifamily Loan and Security Agreement (Sponsor-Initiated Affordability Restrictions) (Form 6271); and
  • Payment Guaranty (Pricing Incentive Recapture) (Form 6020.PIR).

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:

  • Multifamily Affordable Housing Property Definition – Special Public Purpose FAQs; and
  • Sponsor-Initiated Affordability FAQs.
702.02

Ineligible Characteristics and Underwriting

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

Property Income and Underwriting

703.01

Underwritten NCF

Requirements

You must use the following table to calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. .

REQUIRED UNDERWRITTEN NCF
(MULTIFAMILY AFFORDABLE PROPERTY)

Item

Function

Description

CALCULATION OF NET RENTAL INCOME

1

 

GROSS RENTAL INCOME – the least of:

 

  • rents permitted under any federal, state, or local subsidy program applicable to the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , as adjusted for AMI, family size, and number of bedrooms in a unit, and reductions for the applicable utility allowances1;
  • rents permitted under any restrictive covenants, subordinate financing requirements, or an Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… recorded on the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; or
  •  based on a current rent roll,
    • actual rents in place for occupied units, plus
    • for vacant units, the lowest of: 
      • actual rents in place for comparable occupied units;
      • market rents; and
      • permitted rents, described above (multiplied by 12).2

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.

2

PLUS

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

 

EQUALS

GROSS POTENTIAL RENT (GPR)1

3

MINUS

Physical vacancy – applicable actual rents for vacant units and MAHMAHProperty 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 resulting 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:  include any adjustments to other income for bad debt.3

 

EQUALS

NET RENTAL INCOME (NRI)2, 3, 4

1 For Properties with HAP contracts, you

 

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

 

2 You may underwrite HAP contract rents up to:

 

  • 5% above market rents if the MAH Property is located in an Eligible MSA; or
  • 10% above market rents if the MAH Property is located in a Strong Market, provided the Property's
    • HAP contract expires after the Maturity Date, and
    • current and average 3-year physical occupancy is greater than or equal to 95%.

 

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

 

  • the GPR including any permitted HAP contract rent increases multiplied by the percentage difference between
    • the trailing 3-month net rental collections (annualized), and
    • trailing GPR excluding any HAP contract rent increases not in effect before the Mortgage Loan Origination Date; and
  • either
    • 5% of GPR, including any permitted HAP contract rent increases, or
    • 3% of GPR, including any permitted HAP contract rent increases, if:
      • the Property is located in a Strong or Nationwide Market per Form 4660;
      • for a Property without a HAP contract, the actual rents for restricted units are at least 10% below comparable market rents; and
      • the economic vacancy (i.e., the total of Items 3, 4, and 5) is supported by current and 3 years of historical economic vacancy data.

4 You must assess the NRI, including any declines, and make adjustments per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis.

CALCULATION OF OTHER INCOME5

6

PLUS

Actual other income (except premiums and corporate premiums) generated through ongoing operations. The income must:

 

  • be stable;
  • be common in the market;
  • exclude one-time extraordinary non-recurring items; and
  • be supported by prior years.

You must assess the individual month other income within the prior full-year operating statement or, at a minimum, an operating statement covering at least the trailing 6 months (annualized).

 

If there are fluctuations, you may use other income that exceeds the trailing 3-month other income (annualized), as long as it does not exceed the highest 1-month other income used in the trailing 3-month other income calculation.

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.

CALCULATION OF COMMERCIAL INCOME

7

PLUS

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

8

MINUS

10% of the actual commercial income.6

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

9

PLUS

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

 

EQUALS

EFFECTIVE GROSS INCOME (EGI)

CALCULATION OF OPERATING EXPENSES

10

MINUS

Line-by-line stabilized operating expenses.  Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential 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 lease-ups, rehabilitation, or other short-term positive or negative factors.  Non-recurring, extraordinary operating expenses must not be included.

 

You must assess:

 

  • the past operating history;
  • the appraiser’s expense analysis;
  • all information available to you (including PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). contracts, utility bills, real estate tax assessments, insurance policies, and comparable assets); and
  • the BorrowerBorrowerPerson who is the obligor per the Note. ’s budget (in the case of an acquisition).

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

11

MINUS

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

 

  • 4% of EGIEGIOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and features in Part III. 7;
  • actual property management fee (exclude any portion of a non-arm’s-length property management fee that is subordinated to the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. ); or
  • market property management fee.

7 Minimum management fee may be 3.5% of EGI (rather than 4% of EGI) if the:

 

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

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

 

  • 2.5%,
  • $300 per unit,
  • the actual management fee, or
  • market management fees for similarly sized MAH properties.

12

MINUS

Real estate taxes based on the greatest of:

 

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

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

12

continued

MINUS

If the PropertyPropertyMultifamily residential 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 payments in lieu of taxes (PILOTsPILOTsPayment In Lieu Of Taxes. ), you may use a reduced real estate tax payment if they will:

 

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

12

continued

MINUS

If governed under the Florida affordable housing property exemption (per Sections 196.1978(1) and (2) of the Florida Statutes),

 

  • for a refinance, the BorrowerBorrowerPerson who is the obligor per the Note. must initially be in compliance, and remain in compliance, with the Florida affordable housing property exemption; or
  • for an acquisition or a Transfer/AssumptionTransfer/AssumptionTransaction resulting in a change in the ownership of the Borrower or Property. , you must:
    • confirm the BorrowerBorrowerPerson who is the obligor per the Note. applies to the county taxing authority within 60 days after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
    • escrow full taxes until you confirm the Florida affordable housing property exemption is approved and 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). ; and
    • after confirmation, refund the escrowed taxes to the BorrowerBorrowerPerson who is the obligor per the Note. .

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, or deferrals that will not survive a Foreclosure EventForeclosure EventAny of the following: Foreclosure under the Security Instrument; any other exercise by the Lender of rights and remedies (whether under the Security Instrument or under applicable law, including Insolvency Laws) as holder of the Mortgage Loan and/or the Security Instrument, as a result of…, then you may use a reduced real estate tax payment only if:

 

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

12

continued

MINUS

If the timeframe for the real estate tax abatement, exemption, or deferral is shorter than the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. term, you must consider

 

  • a Bifurcated Mortgage LoanBifurcated Mortgage LoanSingle Senior Mortgage Loan that is evidenced by 2 Notes with the same payment and collateral priority. structure (i.e., 2 notes secured by a single first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. ),
  • an amortization schedule that accommodates the elimination of the abatement, or
  • providing clear justification and support in the refinance analysis.

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.

13

MINUS

Insurance equal to:

 

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

14

MINUS

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

 

EQUALS

UNDERWRITTEN NET OPERATING INCOME (UNDERWRITTEN NOI)

15

MINUS

Replacement ReserveReplacement ReserveCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. expense perPart II, Chapter 2: Valuation and Income, Section 202.01: Underwritten Net Cash Flow (Underwritten NCF).

 

EQUALS

UNDERWRITTEN NCF

703.02

Underwriting

703.02A

Appraised Value and Underwriting Value

Requirements

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

  • Include 2 separate opinions of the Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. based on:
    • 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 PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ’s 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 PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ’s income and expenses without the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… (e.g., market rents, occupancy, and operating expenses), using
      • comparable multifamily market rate rental properties,
      • 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). ’s submarket, and
      • full taxes if rental income restrictions are required by a tax abatement or exemption.
  • Ensure that each Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. is based on a market cap rate without any upward or downward adjustment for:
    • special financing (other than adjusted cap rates for Credit Enhancement Mortgage LoansCredit Enhancement Mortgage LoansMortgage Loan 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 market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. for the Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, 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

Market Study

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 amounts due and owing per the Mortgage Loan become fully due and payable per the Loan Documents. , you must include a market study (which can be part of the AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. ) that:

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

Affordable Regulatory Agreement Restrictions

Guidance

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

Requirements

When the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… restrictions have 3 or more years remaining but will expire before the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. Maturity DateMaturity DateDate all amounts due and owing per the Mortgage Loan become fully due and payable per the Loan Documents. , you must provide support to underwrite to the MAHMAHProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. PreservationPreservationRenewal or continuation of rent, income and/or occupancy restrictions on multifamily rental housing eligible as an MAH Property, but is potentially at risk of being lost from the affordable housing inventory through conversion to market-rate housing, and is not receiving new LIHTCs. standards in the Form 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. , taking into account factors such as:

  • restricted rents below market rate rents;
  • the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ’s history of operating as an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. ;
  • the BorrowerBorrowerPerson who is the obligor per the Note. ’s history and experience owning and operating MAHMAHProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
  • the BorrowerBorrowerPerson who is the obligor per the Note. ’s intention to renew the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…;
  • the amount of time between the Maturity DateMaturity DateDate all amounts due and owing per the Mortgage Loan become fully due and payable per the Loan Documents. and when the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… restrictions expire;
  • market strength; and
  • how the PropertyPropertyMultifamily residential 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

35-Year Amortization

Requirements

If you use a 35-year amortization term, the:

  • PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). must have LIHTCsLIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. with at least 8 years remaining in the initial 15-year compliance period; and
  • 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

LIHTC Income Averaging

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

Initial LIHTC Equity

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

Developer Fees

Guidance

You should analyze the development budget, including the

  • developer fee due the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). or any AffiliateAffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key…, and
  • any deferred developer fee (i.e., the portion of the developer fee shown as a source in the sources and uses statement).

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

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

Rent-Stabilized Units

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

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 amounts due and owing per the Mortgage Loan become fully due and payable per the Loan Documents. of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. 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 amounts due and owing per the Mortgage Loan 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 obligations under the Loan Documents. 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 obligations under the Loan Documents. .
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 202: 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 202: 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 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

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.

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 obligations under the Loan Documents. 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 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
  • 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 obligations under the Loan Documents. 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 obligations under the Loan Documents. ;
  • 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 obligations under the Loan Documents. 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

706.01

Generally

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 4660Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the minimum underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ; and
    • will undergo repairs, replacements, or improvements costing $10,000 per unit or more (based on the total number of residential units at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ), or qualifies as a Moderate Rehabilitation PropertyModerate Rehabilitation PropertyProperty that will undergo at least $8,000 per unit of Rehabilitation Work. .
706.02

Timing

Requirements

Within 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

General Underwriting

Guidance

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

  • the reasonableness of the estimated cost of the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. and the completion schedule;
  • whether the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. can be completed and the Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. achieved within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
  • the BorrowerBorrowerPerson who is the obligor per the Note. ’s experience in developing or rehabilitating properties similar to the ROAR Property;
  • the tenant relocation plan, including budget and schedule;
  • the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. budget, including monthly sources and uses during the rehabilitation period;
  • any construction risks;
  • the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investors’ financial strength, experience, and reputation; and
  • the projected rent levels relative to market rents.
706.04

Additional Underwriting and Loan Documents

Requirements

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

Topic Description

Underwritten NCF

GPRGPROn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, 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 market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. must include an opinion of the value of the PropertyPropertyMultifamily residential 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

 

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

Rehabilitation Reserve Agreement

Required.

Key Principal Guaranties

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

 

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

Letter of Credit

Any Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:

 

  • comply with Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit; and
  • equal at least 125% of the difference between the maximum Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. amount based on
    • the “as completed” value, and
    • the “as is” value.

Additional Credit Support

May be required.

Underwriting Fee

You must:

 

  • charge the BorrowerBorrowerPerson who is the obligor per the Note. an underwriting fee equal 3 basis points of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. amount; and
  • pay that amount to Fannie Mae.
Section 707

HAP Contract Properties

707.01

Properties with Both HAP Contracts and LIHTC Units

Requirements

For a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. secured by an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. or a Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan 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 amounts due and owing per the Mortgage Loan 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

 

  • 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

Restabilization Reserve

Requirements

For all TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 and TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , you must establish a Restabilization Reserve for an