404.01

Determining Replacement Reserve

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 established by the Lender and funded by deposits from the Borrower over the term of the Mortgage Loan to fund the replacement of capital items at the Property. 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 amounts due and owing under 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. ; or
  • 12 years after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. .

In order to determine the minimum amount of the Replacement ReserveReplacement ReserveCustodial Account established by the Lender and funded by deposits from the Borrower over the term of the Mortgage Loan to fund the replacement of capital items at the Property. , you must:

  • Obtain a PCA (Form 4099).
  • Complete the schedule of items to be included in the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () 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 maintenance; terms…
    • using the cost estimates in the PCAPCAAssessment of the current physical condition and historical operation of the Property. , and
    • taking into account any items not already 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 ….