Section 406
Requirements
You must ensure that the BorrowerBorrowerPerson who is the obligor per the Note. has sufficient reserves to cover anticipated capital replacement and major maintenance costs. The total amount in the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. should equal or exceed the anticipated costs (adjusted for inflation) of all necessary capital item replacements and major maintenance needs and repairs for the period from the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. to whichever is sooner:
- 2 years after the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. ; or
- 12 years after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .
To determine the minimum amount of the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. , you must:
- obtain a PCAPCAAssessment of the Property's physical condition and historical operation. (Form 4099); and
- complete the schedule of items to be included in the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the:
Borrower’s agreement to replace identified capital items and perform required…
- using the cost estimates in the PCAPCAAssessment of the Property's physical condition and historical operation. , and
- taking into account any items not already included on the Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement, or other Fannie Mae-approved agreement, evidencing: the Borrower’s agreement to fund the Completion/Repair Escrow, and perform Completion….
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Requirements
You must ensure that the costs of all items included in the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required… have been fully funded for
- any TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 2 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 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.
, regardless of TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660).
, that requires Completion/RepairsCompletion/RepairsRepairs or capital item replacements and deferred maintenance:
identified per the Property Condition Assessment; and
required per the
Completion/Repair Schedule, or
Completion/Repair Agreement.
costing more than
- 4% 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). Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation. for refinances, or
- 6% 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). Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 202: Appraisal and Valuation. for AcquisitionsAcquisitionsAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. .
If you choose to modify the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. to not fund a Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. for a TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 or TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 4 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 use the appropriate Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required….
Guidance
You may choose not to fund a Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. for any TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 3 or TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). 4 Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. if
- the required Completion/RepairsCompletion/RepairsRepairs or capital item replacements and deferred maintenance: identified per the Property Condition Assessment; and required per the Completion/Repair Schedule, or Completion/Repair Agreement. do not exceed the levels specified in this Section, and
- you determine that the BorrowerBorrowerPerson who is the obligor per the Note. has the financial capacity to fully address future capital expenditures as outlined in the PCAPCAAssessment of the Property's physical condition and historical operation. .
Guidance
Instead of full funding, you may choose this alternative method for funding the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. .
Requirements
If you choose this alternative funding, you must have the BorrowerBorrowerPerson who is the obligor per the Note. deposit the following amounts on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. :
- Monthly deposits for at least 2 years.
- For any significant capital item replacement or major maintenance need that you deem appropriate, an amount sufficient to cover anticipated costs for the period from the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower.
to whichever is sooner:
- 2 years after the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. ; or
- 12 years after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .
You must hold these amounts in the Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. for the entire 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. , and may not make them available for refund to the BorrowerBorrowerPerson who is the obligor per the Note. until the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. has been paid in full.