Section 702

MAH Property Eligibility

702.01

Eligibility Characteristics

Requirements

You must ensure an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. is subject to:

  • either a:
  • at least 1 Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. that:
    • is imposed by a Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or …;
    • is recorded against the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
    • complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702.02: Minimum Set Asides and Other Criteria;
    • for an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. , has a minimum remaining term of 3 years; and
    • for a LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). :
      • has a minimum remaining term of 3 years; and
      • for which the BorrowerBorrowerPerson who is the obligor per the Note. must sign the Modifications to Multifamily Loan and Security Agreement (Tax Credit Properties) (Form 6219) agreeing not to pursue a Qualified Contract Process available under the
        • Internal Revenue Code, and 
        • if applicable, Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. .

If any Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. has 3 or more years remaining but will expire before the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must document in the Transaction Approval Memo your analysis of the following factors to support underwriting to the applicable MAHMAHProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. standards in Form 4660:

  • restricted rents below market rate rents;
  • history 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). operating as an MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. ;
  • the Sponsor’sSponsor’sPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). history and experience owning and operating multifamily properties subject to affordability restrictions;
  • the Borrower’sBorrower’sPerson who is the obligor per the Note. intention to renew that Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ;
  • how much 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. term will remain after that Affordable Regulatory AgreementAffordable Regulatory AgreementRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. expires;
  • market strength; and
  • how the MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. 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 MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. to market rate rents, and
    • no rent advantage exists.

Guidance

An MAH PropertyMAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. may also:

  • be subject to:
  • 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. ; 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 per the National Housing Act
      • Section 202, or
      • Section 236.
702.02

Minimum Set Asides and Other Criteria

Requirements

You must ensure the:

You must use existing tenant files, lease sampling, and rent roll testing, to verify the required occupancy by eligible tenants per:

However, you may rely on

  • BorrowerBorrowerPerson who is the obligor per the Note. certifications,
  • compliance reports, and
  • documentation of exceptions.

You may treat an over-income tenant as an income eligible tenant if allowed by the applicable Public EntityPublic EntityA federal, state, or local government entity, or an entity that: is created by state statute, or one or more governmental entities acting pursuant to applicable statutory authority; has a governing body that is elected by voters in the applicable jurisdiction, or … program requirements, with the exception documented in your Transaction Approval Memo.

702.03

Affordability Types
702.03A

LIHTC

Requirements

You must verify that by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , restricted units:

  • are occupied by income eligible tenants per the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. program requirements; and
  • meet at least 1 of the following:
    • 20% @ 50%:  at least 20% of all units are restricted to occupancy by households earning no more than 50% of AMI as adjusted for family size with rents not exceeding 30% of the income limit, as adjusted for family size;
    • 40% @ 60%:  at least 40% of all units are restricted to occupancy by households earning no more than 60% of AMI as adjusted for family size with rents not exceeding 30% of the income limit, as adjusted for family size;
    • Average Income:  at least 40% (or 25% for New York City only) of all units are restricted to occupancy by households earning not more than the income limitation designated for that unit.  The average of the income limits must not be more than 60% of AMI as adjusted for family size with rents not exceeding 30% of the designated income limit.  The income limit can only be 20%, 30%, 40%, 50%, 60%, 70% or 80% of AMI.  This option is only available for LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. projects that made this set-aside election after March 23, 2018, using Internal Revenue Service Form 8609; or
    • 25% @ 60% in New York City:  at least 25% of all units are restricted to occupancy by households earning no more than 60% of AMI as adjusted for family size with rents not exceeding 30% of the income limit, as adjusted for family size.
702.03B

HAP Contract

Requirements

You must ensure that, by the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , at least 20% of all units are:

  • subject to a HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). ; and
  • restricted by the HAP ContractHAP ContractAn agreement providing a HUD Section 8 rental subsidy for the Property in the form of a: project-based voucher contract (PBV), or project-based rental assistance contract (PBRA). to households earning no more than 80% of AMI.
702.03C

Properties with Both Rent Restrictions and Income Restrictions

Requirements

By the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must verify the restricted units are occupied by households that qualify for 1 of the following rent and income restrictions:

  • 20% @ 50%:  at least 20% of all units are restricted:
    • to occupancy by households earning no more than 50% of AMI, as adjusted for family size; and
    • with rents not exceeding 30% of 50% of AMI, as adjusted for family size; or
  • 40% @ 60%:  at least 40% of all units are restricted:
    • to occupancy by households earning no more than 60% of AMI, as adjusted for family size; and
    • with rents not exceeding 30% of 60% of AMI, as adjusted for family size.
702.03D

Properties with Either Rent Restrictions or Income Restrictions

Requirements

By the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , you must confirm the following.

For Properties with... You must confirm...
Rent restrictions (but no income restrictions) The rent roll reflects the restricted rents are implemented.
Income restrictions (but no rent restrictions) The restricted units are occupied by income eligible tenants.

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:

  • 20% @ 50%:  at least 20% of all units restricted:
    • to occupancy by households earning no more than 50% of AMI, as adjusted for family size; or
    • with rents not exceeding 30% of 50% of AMI, as adjusted for family size; or
  • 40% @ 60%:  at least 40% of all units restricted:
    • to occupancy by households earning no more than 60% of AMI, as adjusted for family size; or
    • with rents not exceeding 30% of 60% of AMI, as adjusted for family size.
702.03E

Special Public Purpose

Requirements

You must have verified, on or before the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , that at least:

  • 20% of all units are restricted to occupancy by households earning no more than 80% of AMI, as adjusted for family size, and the restricted units are occupied by income eligible households; and/or
  • 20% of all units have rents not exceeding 30% of 80% of AMI, as adjusted for family size.

Operating Procedures

For general information, as well as information for how to register, obtain a CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. , 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 Special Public Purpose Mortgage Loan, refer to Multifamily Affordable Housing Property Definition – Special Public Purpose FAQs.

702.03F

Sponsor-Initiated Affordability

Requirements

You must ensure the BorrowerBorrowerPerson who is the obligor per the Note. voluntarily self-imposes affordability restrictions preserving or creating multifamily affordable housing by requiring 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 affordability restrictions meeting all of the following:

  • 20% @ 80%:  at least 20% of all units are restricted to occupancy by households earning no more than 80% of AMI, as adjusted for family size, with rents not exceeding 30% of the income limit;
  • are recorded 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);
  • are 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
  • are 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).

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 Affordability, the BorrowerBorrowerPerson who is the obligor per the Note. must execute the:

  • Sponsor-Initiated Affordability Agreement (Form 6490); and
  • Modifications to Multifamily Loan and Security Agreement (Sponsor-Initiated Affordability Restrictions) (Form 6271).

For general information, as well as information for how to register, obtain a CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. 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 Sponsor-Initiated Affordability Mortgage Loan, refer to the Sponsor-Initiated Affordability FAQs.