Section 706
| 706.01 | |
|
|
|
Requirements
You must ensure any ROAR LoanROAR LoanReduced Occupancy Affordable Rehabilitation Loan :
- is a 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 Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. using a Credit Enhancement InstrumentCredit Enhancement InstrumentAgreement between Fannie Mae and a Bond Trustee where Fannie Mae provides credit enhancement of a Credit Enhancement Mortgage Loan, Bonds issued to finance a Credit Enhancement Mortgage Loan, or an Interest Rate Hedge Agreement; and if applicable, a Bond liquidity facility. ;
- has a fixed rate;
- has a minimum 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 of $5 million; and
- is secured by an 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.
that:
- currently has Stabilized Residential OccupancyStabilized Residential OccupancyPercentage of Property units physically occupied by Qualified Occupants, per Part II, Chapter 1: Attributes and Characteristics, Section 105.02: Qualified Occupants as adjusted for the applicable Part III products and features. , but will likely experience tenant displacement significant enough to lower the Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and…, calculated using the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. , below the required DSCRDSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of: principal, interest, and required Mezzanine Financing or Hard Preferred Equity payments. set forth in Form 4660; and
- will undergo repairs, replacements, or improvements costing $10,000 per unit or more (based on the total number of residential units 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). ), or qualifies as a Moderate Rehabilitation PropertyModerate Rehabilitation PropertyProperty that will undergo at least $8,000 per unit of Rehabilitation Work. .
| 706.02 | |
|
|
|
Requirements
Within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower.
- the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. must be completed, and
- Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. must be achieved.
| 706.03 | |
|
|
|
Guidance
In addition to complying with Part III, Chapter 3: Moderate Rehabilitation Mortgage Loans, you should also review and evaluate:
- the reasonableness of the estimated cost of the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. and the completion schedule;
- whether the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. can be completed and the Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. achieved within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. ;
- the Borrower’sBorrower’sPerson who is the obligor per the Note. experience in developing or rehabilitating properties similar to the ROAR Property;
- the tenant relocation plan, including budget and schedule;
- the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. budget, including monthly sources and uses during the rehabilitation period;
- any construction risks;
- the LIHTCLIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investors’ financial strength, experience, and reputation; and
- the projected rent levels relative to market rents.
Requirements
You must underwrite the ROAR LoanROAR LoanReduced Occupancy Affordable Rehabilitation Loan per the following table.
| Topic | Description |
|---|---|
|
Underwritten NCF |
GPRGPROn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. must comply with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.01: Underwritten NCF; Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. can be based on the Restabilized Residential OccupancyRestabilized Residential OccupancyAchievement of Underwritten NCF for 3 consecutive months after completion of the ROAR Work. and normalized operating expenses achievable within 18 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. . |
|
Appraisal |
The AppraisalAppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. must include an opinion of the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). market value on both an “as is” and an “as completed” basis that incorporates the ROAR WorkROAR WorkAggregate repairs, replacements, or improvements being performed at the ROAR Property. to be completed after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. . |
|
Occupancy During ROAR Work |
Physical Occupancy: minimum of 50%; and Economic Occupancy: minimum of 50%. |
|
Minimum DSCR During ROAR Work |
Using the ROAR Stressed NCFROAR Stressed NCFMinimum Underwritten NCF projected to occur during the ROAR Work period at a ROAR Property. , actual fixed interest rate, and maximum loan amount based on the “as completed” value
|
|
Rehabilitation Reserve Agreement |
Required. |
|
Key Principal Guaranties |
The Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. must execute a
|
|
Letter of Credit |
Any Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:
|
|
Additional Credit Support |
May be required. |
|
Underwriting Fee |
You must:
|