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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
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

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