Section 403

Completion/Repairs

403.01

Property Evaluation

Requirements

You must determine whether the BorrowerBorrowerPerson who is the obligor per the Note. will need to fund the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. by evaluating

  • the physical condition of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). ,
  • the financial condition of the BorrowerBorrowerPerson who is the obligor per the Note. , and
  • all necessary life safety Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

You must include the estimated expense of all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). with the cost of all other Rehabilitation WorkRehabilitation WorkAggregate repairs, replacements, or improvements (including all Completion/Repairs) required to be performed and completed within a specified time period after the Mortgage Loan Origination Date for a Moderate Rehabilitation Property. to determine whether you need to follow the requirements of Part III, Chapter 3: Moderate Rehabilitation Mortgage Loans for a Moderate Rehabilitation PropertyModerate Rehabilitation PropertyProperty that will undergo at least $8,000 per unit of Rehabilitation Work. .

Guidance

The Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the:  Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and … should include:

  • property needs identified as Immediate Repairs in the PCAPCAAssessment of the current physical condition and historical operation of the Property. , including:
    • life safety repairs;
    • critical repairs;
    • deferred maintenance; and
    • short-term replacement of capital items; and
  • any capital improvements not recommended by the PCA ConsultantPCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. that
    • the BorrowerBorrowerPerson who is the obligor per the Note. will make after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , and
    • you want the appraiser to include in its opinion of the market value of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). on an “as completed” basis.

You should ensure that the BorrowerBorrowerPerson who is the obligor per the Note. completes the repairs and improvements identified on the Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the:  Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and … as outlined below.

Type of item…

Complete as follows…

For items identified as life safety repairs in the PCA

Comply with Part II, Chapter 4: Inspections and Reserves, Section 403.03: Life Safety Issues.

For items identified as critical repairs in the PCA

Within 6 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , or sooner if recommended by the PCA ConsultantPCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. .

For items identified as deferred maintenance or items of note in the PCA

Within 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , or sooner if recommended by the PCA ConsultantPCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. .

For items identified as short term replacement of capital items in the PCA

By the specific date recommended by the PCA ConsultantPCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. , but may be longer than 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

For capital improvements that are

 

  • to be made by the Borrower in addition to those included on the PCA, and
  • are included in the Appraisal opinion of the market value of the Property on an “as completed” basis

Comply with Part II, Chapter 2: Valuation and Income, Section 201.02C: Appraised Value.

For items identified as a Completion/ Repair by the PCA when the estimated expense requires you to comply with Part III, Chapter 3 for a Moderate Rehabilitation Property

Comply with Part III, Chapter 3: Moderate Rehabilitation Mortgage Loans.

For all other Rehabilitation Work that was not identified as a Completion/Repair by the PCA

Comply with Part III, Chapter 3: Moderate Rehabilitation Mortgage Loans.
403.02

Completion/Repairs Funding

Requirements

When full or partial funding of the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. is required, you must use a Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the:  Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and ….

Guidance

The amount funded into the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. should be at least 125% of the estimated cost of the required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

You may choose not to fund the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. entirely if you determine the BorrowerBorrowerPerson who is the obligor per the Note. has the financial capacity to fully address all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). in the PCAPCAAssessment of the current physical condition and historical operation of the Property. .

Requirements

If you choose not to fund the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. entirely, you must obtain written assurances from the BorrowerBorrowerPerson who is the obligor per the Note. in the Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the  Loan Documents or another form approved by Fannie Mae. that all necessary Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). will be completed within a stated period of time following the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

403.03

Life Safety Issues

Requirements

You must ensure that all life safety repairs and remediation work for code violations are included in the Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the:  Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and ….

All life safety repairs must be completed

  • for an acquisition, within 60 days after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , or
  • in all other cases, before delivering 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. to Fannie Mae.

Guidance

You should consider requiring an escrow deposit (for at least 125% of estimated costs) to cover these required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

403.04

Verifying Completion/Repairs

Requirements

You must verify that the BorrowerBorrowerPerson who is the obligor per the Note. has made all required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable).

  • whether the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. was funded or not, and
  • during your PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). inspections before the required completion date.