Underwriting

Income Projections

• Provide support for the income projections used to determine the aggregate amount 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. and Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. .
• Demonstrate that the local economics are sufficient and sustainable to support both loans.

Underwritten NCF

Use the same 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. to determine the loan amount for

• 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. , and
• the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. .

Refinance Analysis

Prepare a refinance analysis that:

• incorporates the terms of both 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. and the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. ;
• demonstrates that the BorrowerBorrowerPerson who is the obligor per the Note. will
  • maintain a positive equity position in the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). throughout the term of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , or
  • have some other incentive (e.g., continuing cash flow) to remain committed 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 its successful operation; and
• concludes that there will be sufficient cash flow, 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, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and… growth, and residual value to pay off 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. and the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. at maturity (as fully extended, if applicable).

Experience

Ensure that the SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). and each 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. have sufficient net worth, liquidity, and experience with 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). type and market to justify the origination 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. and the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. .

If upgrades or rehabilitation are being financed by the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. , then ensure that the BorrowerBorrowerPerson who is the obligor per the Note. , each 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. , and the mezzanine borrower also have

• sufficient experience managing the scope of the proposed rehabilitation, and
• strong property management experience in the local market.

Mezzanine Borrower Structure

Ensure the mezzanine borrower is

• a newly-formed, special purpose, bankruptcy-remote limited liability company or limited partnership,
• the sole owner of the BorrowerBorrowerPerson who is the obligor per the Note. , and
• wholly-owned by the PrincipalsPrincipalsPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. of the BorrowerBorrowerPerson who is the obligor per the Note. .

Appraisal

If the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. is funding rehabilitation, ensure 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. states 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). “as is” and “as completed” values.

Third-Party Reports

For Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. with DLA Mezzanine FinancingDLA Mezzanine FinancingMezzanine Financing provided by an approved mezzanine lending affiliate of a DUS Lender. , include in the underwriting submission, on behalf of your DLDLLender approved to Deliver loans under the Delegated Underwriting and Servicing program. Mezzanine 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… any:

• internal or third-party inspection reports;
• PCAsPCAsAssessment of the Property's physical condition and historical operation. ; and
• architect’s or engineer’s reports (or other similar reports) related to the Mezzanine FinancingMezzanine FinancingSubordinate debt financing provided to a direct or indirect owner of a Borrower that is secured by a pledge of the direct or indirect equity interest in the Borrower held by the owner, and not by a Lien on the Property. .