Soft Financing

Requirements

To be considered Soft Financing, subordinate debt must have all of the following:

• P&IP&IPrincipal and interest payments made only from the surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). remaining after all other payments (due and owing) are made on Pre-Existing Mortgage LoansPre-Existing Mortgage LoansMultifamily residential real estate loan secured by Liens against the Property having higher priority than the Lien securing the Subordinate Loan purchased by Fannie Mae. ;
• unpaid interest that either
  • does not accrue, or
  • accrues, but can only be satisfied from the surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). ;
• agreement from the subordinate LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. to execute a Subordination Agreement with any future first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. that refinances any UPBUPBUnpaid Principal Balance 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. secured by 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. ;
• the BorrowerBorrowerPerson who is the obligor per the Note. ’s failure to make an interest or principal payment due to a lack of surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). is not considered a default under the Soft Financing subordinate debt; and
• the BorrowerBorrowerPerson who is the obligor per the Note. retains a minimum 25% equity share in the surplus NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II: Property, Section 202 and the applicable products and features in Part III). unless
  • the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). has LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. ,
  • the Soft Financing Note is payable to the developer, and
  • the developer (or entities related to the developer) owns or controls more than 50% of the general partner (or equivalent managing) interest of the BorrowerBorrowerPerson who is the obligor per the Note. .