Section 201

Market and Valuation

201.01

Market Analysis

Requirements

You must:

  • Evaluate 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 area, identifying its strengths and weaknesses.
  • Take these characteristics into account when structuring 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. .
201.02

Appraisal

Requirements

You must obtain an AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. that:

  • is prepared by a qualified, state-licensed or -certified appraiser;
  • conforms to the requirements in the USPAPUSPAPUniform Standards of Professional Appraisal Practice ; and
  • meets any governmental regulations in effect when 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. was originated, including the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
201.02A

Appraiser Role and Qualifications

Requirements

You must:

  • Provide the appraiser all documents needed to accurately assess 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). value.
  • Ensure the appraiser:
    • completely and accurately describes 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 the market;
    • provides 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, supported by
      • market data,
      • logical analysis, and
      • sound professional judgment; and
    • uses an industry standard form of AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. that is appropriate for the size and structure 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. .

When selecting an appraiser, you must document that the appraiser is licensed or certified, as appropriate, per applicable state law.

When using an appraiser, you must ensure the appraiser (whether third-party or in-house):

  • acts independently;
  • does not participate in 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. approval; and
  • is not a member of the loan origination or underwriting staff.
201.02B

Valuation Date

Requirements

You must:

  • update any AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. if the Appraisal DateAppraisal DateEffective date of value in the Appraisal. is more than 6 months before the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. ; and
  • require a new AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. if the Appraisal DateAppraisal DateEffective date of value in the Appraisal. is more than 12 months before the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. .

Guidance

For an AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. dated less than 12 months before the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. , you may obtain an updated AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. that complies with USPAPUSPAPUniform Standards of Professional Appraisal Practice guidelines, dated within 6 months of the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. .

201.02C

Appraised Value

Requirements

You must ensure the appraiser provides an opinion of the market value, on an “as is” basis, of:

  • each separate ProjectProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership.  per Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership; and
  • the aggregate market value of all ProjectsProjectsMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 102.01: Single Borrower Ownership.  .

You may also request the appraiser provide 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 an “as completed” basis, but you must only use an “as completed” AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. for the opinion of Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. if all of the following conditions apply:

  • less than 12 months have passed between the Borrower'sBorrower'sPerson who is the obligor per the Note. acquisition of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. ;
  • for any capital improvements made after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. to be considered in an “as completed” AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion of the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. , they must be:
    • Immediate Repairs listed in the PCAPCAAssessment of the current physical condition and historical operation of the Property. ; or
    • improvements identified by the BorrowerBorrowerPerson who is the obligor per the Note. , if you agree the improvements will add PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value;
  • all capital improvements are included in either the
    • Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae) that evidence the: Borrower’s agreement to perform Completion/Repairs and other identified capital…, or
    • Rehabilitation Reserve AgreementRehabilitation Reserve AgreementBorrower’s agreement to undertake identified Rehabilitation Work, the terms for funding the Rehabilitation Work, and the disbursement of funds from the Rehabilitation Reserve Account (e.g., Form 6222.Mod, or Form 4523). ;
  • sufficient funds to complete all capital improvements are deposited into either the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. or the Rehabilitation Reserve AccountRehabilitation Reserve AccountCustodial Account established by the Lender and funded by deposits from the Borrower per the Rehabilitation Reserve Agreement to fund the Rehabilitation Work. :
    • for capital improvements identified as Immediate Repairs, the funds must cover any higher funding percentage you require; and
    • for capital improvements identified by the BorrowerBorrowerPerson who is the obligor per the Note. , the funds must cover the estimated cost (including an allowance for cost overruns); and
  • all capital improvements are required to be completed in a timely manner:
201.03

Underwriting Value

Requirements

Your Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 201: Market and Valuation. must not exceed the Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. , as reduced by any adjustments you deem necessary accounting for PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). deficiencies that cannot be cured within 6 months after the Appraisal DateAppraisal DateEffective date of value in the Appraisal. .

If less than 12 months have passed between the Borrower'sBorrower'sPerson who is the obligor per the Note. acquisition of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and the Commitment DateCommitment DateDate a Commitment is confirmed by Fannie Mae per Part IV, Chapter 2: Rate Lock and Committing, Section 204: Commitments. , your Underwriting ValueUnderwriting ValueValue of the Property determined by the Lender to size the Mortgage Loan per Part II, Chapter 2: Valuation and Income, Section 201: Market and Valuation. must not exceed the lower of the

  • Appraised ValueAppraised ValueAppraiser’s opinion of the market value of the Property documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted by the Guide. , or
  • sum 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). acquisition price per the title company settlement statement;
    • cost of capital improvements or repairs that increase 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). value, if
      • completed and fully paid, or
      • sufficient funds for completion are deposited in the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. or reserve account; and
    • actual acquisition costs, not exceeding 3% of the acquisition price, including:
      • Origination FeeOrigination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. ;
      • arm's length acquisition fee (generally 1% - 2%) paid to an unrelated PersonPersonLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). if documented in the Settlement Statement;
      • third-party report fees;
      • BorrowerBorrowerPerson who is the obligor per the Note. -paid legal fees incurred on your behalf;
      • title search and title insurance fees;
      • survey fees;
      • real estate and stamp taxes;
      • deed-recording fees; and
      • credit report charges.

Guidance

Actual acquisition costs should exclude any prepaid operating expenses or deposits applied toward future operating expenses or PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). improvements, including:

  • prepaid or escrowed
    • real estate taxes, or
    • insurance premiums;
  • prepaid
    • utilities,
    • 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. interest, including any interest rate buydown expense,
    • rents, or
    • security deposits;
  • funded
    • Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. ,
    • Replacement ReserveReplacement ReserveCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. ,
    • Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. cost,
    • operating or Restabilization Reserve, or
    • BorrowerBorrowerPerson who is the obligor per the Note. -controlled PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operating or capital accounts;
  • fees included in the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. , including any
    • Origination FeeOrigination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. , or
    • broker fee;
  • acquisition fees paid to a BorrowerBorrowerPerson who is the obligor per the Note. -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…; and
  • for 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. , pre-paid BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. -related and compliance monitoring fees.