Section 407
A Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. is generally not permitted unless it complies with Fannie Mae’s requirements. Approval of any Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. is not delegated to the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). and must be approved in advance by Fannie Mae. Additionally:
- with respect to any Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property., the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must abide by the terms and conditions of the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae., the GuideGuideMultifamily Selling and Servicing Guide and Delegated Underwriting and Servicing Guide, including any exhibits, appendices, or other referenced forms, as updated, amended, restated, modified, or supplemented by any lender memo; provided, however, if a topic is covered in the Multifamily Selling and…, and any Disclosure DocumentsDisclosure DocumentsDocuments for an Investor for a particular Securitized Mortgage Loan, which may include the MBS Trust Agreement, Prospectus, and any related documents., provided that the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. will control in the case of any conflict;
- unless the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. explicitly allow a Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property., the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must not permit the BorrowerBorrowerPerson who is the obligor under the Note., without prior Fannie Mae approval, to incur the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. or allow a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. securing the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. to be placed against 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).;
- if the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. explicitly allow a Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. without the approval of the LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans., the consent of the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). or Fannie Mae is not required; however, notice of the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. and a copy of any documents must be submitted through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, and requested modifications; asset management reports; and data corrections related to loan or property level attributes.;
- the BorrowerBorrowerPerson who is the obligor under the Note. and the subordinate lender must enter into and record the appropriate Subordination Agreement (Form 6414 or Form 6456); and
- the proceeds of the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. must benefit 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). (i.e., cash-out financing is not permitted).
The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must immediately notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] in writing upon learning of any unauthorized additional unsecured debt or indebtedness secured by a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on 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). or of any pledge of ownership interests that is not permitted by the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae., and send the BorrowerBorrowerPerson who is the obligor under the Note. a Reservation of Rights Letter (Form 4804) with a copy submitted through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, and requested modifications; asset management reports; and data corrections related to loan or property level attributes.. Fannie Mae will determine whether to approve the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property., or exercise its remedies.
Part III, Chapter 14: Supplemental Mortgage Loans, contains the requirements for Supplemental Mortgage LoansSupplemental Mortgage LoansMortgage Loan purchased by Fannie Mae that is subordinated to, and has a Mortgage Loan Origination Date after, the Senior Mortgage Loan that is also owned by Fannie Mae., and Part III, Chapter 7: Multifamily Affordable Housing Properties contains additional requirements for subordinate financing with respect to a Multifamily Affordable Housing PropertyMultifamily Affordable Housing 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 ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must ensure adherence to all applicable requirements.
The BorrowerBorrowerPerson who is the obligor under the Note. must pay the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). a $2,500 review fee. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may increase or decrease its fee at its discretion. No Fannie Mae review fees are due. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may also seek reimbursement from the BorrowerBorrowerPerson who is the obligor under the Note. for all reasonable out-of-pocket costs, including reasonable legal fees incurred by ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer).’s counsel.
If Fannie Mae outside counsel is engaged, the BorrowerBorrowerPerson who is the obligor under the Note. must pay its fee, estimated at $2,500 for Subordinate Financing requests. The actual legal fee may be higher or lower, depending on the ultimate scope of the request and the time necessary to resolve. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). will receive a summary invoice directly from Fannie Mae outside counsel and must arrange for payment. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). will be apprised of any likely increases in the estimated review fee. The estimated legal fee must be collected from the BorrowerBorrowerPerson who is the obligor under the Note. before engaging Fannie Mae outside counsel.
Any BorrowerBorrowerPerson who is the obligor under the Note. request for approval of a Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. must be reviewed by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer).. If acceptable, the request must be submitted for approval through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, and requested modifications; asset management reports; and data corrections related to loan or property level attributes. in accordance with the following:
- the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must submit the request to Fannie Mae at least 30 days before the projected closing date of the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property.; and
- the submission must contain:
- an AppraisalAppraisalWritten statement independently and impartially prepared by a qualified appraiser stating an opinion as to the market value of the Property as of a specific date, supported by the presentation and analysis of relevant market information. (obtained at the BorrowerBorrowerPerson who is the obligor under the Note.’s cost), dated no earlier than 90 days prior to the date of the BorrowerBorrowerPerson who is the obligor under the Note. request for approval of the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property., that complies with Part II, Chapter 2: Valuation and Income, Section 201: Market and Valuation;
- ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer).’s underwriting spreadsheet showing the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property.’s effect on 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).’s income, expenses, 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)., 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., and LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage. ;
- a copy of the final, unsigned loan documents evidencing the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property., with the loan amount, interest rate, payment schedules, and all other transaction related information completed;
- the MBAMBAMortgage Bankers Association Master Inspection Form documenting a physical inspection of 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)., performed at BorrowerBorrowerPerson who is the obligor under the Note.’s expense, occurring no earlier than 90 days before the date of the BorrowerBorrowerPerson who is the obligor under the Note. request for the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property.; provided that, if the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer).’s inspection of 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). reveals that 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). is not being properly maintained, the BorrowerBorrowerPerson who is the obligor under the Note. request will not be approved by Fannie Mae unless:
- a Replacement ReserveReplacement ReserveCustodial Account established by the Lender and funded by deposits from the Borrower over the term of the Mortgage Loan to fund the replacement of capital items at the Property. is sufficiently funded; and
- the BorrowerBorrowerPerson who is the obligor under the Note. makes any immediate repairs identified by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). prior to the closing date of the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property.; and
- a title policy endorsement for 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). showing no unauthorized LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. or encumbrances of any nature against 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)..
For a Cooperative PropertyCooperative PropertyMultifamily residential property owned by a Cooperative Organization., the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. is unacceptable if the potential increase in the Cooperative Maintenance FeeCooperative Maintenance FeePeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property. necessary to cover P&IP&IPrincipal and interest on the Subordinate LoanSubordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. exceeds 10% of the current Cooperative Maintenance FeeCooperative Maintenance FeePeriodic fee assessed each shareholder or owner of a Cooperative Organization to fund costs and expenses associated with ongoing operations of the Cooperative Property..
Fannie Mae will provide the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). with a written decision regarding the BorrowerBorrowerPerson who is the obligor under the Note. request, after which the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must notify the BorrowerBorrowerPerson who is the obligor under the Note. in writing and retain the notice in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender..
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The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must:
- not permit any changes to the form Subordination Agreement (Form 6414 or Form 6456) without the prior written consent of Fannie Mae;
- obtain a satisfactory title policy endorsement effective as of the date of recordation of the subordinate security instrument that:
- insures the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. as senior to the LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the subordinate security instrument; and
- reflects the recordation of the Subordination Agreement;
- submit a copy of the recorded Subordination Agreement through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, and requested modifications; asset management reports; and data corrections related to loan or property level attributes.; and
- retain a copy of the recorded Subordination Agreement and the title policy endorsement in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender..