Section 408

Administration of Collateral Agreements

408.01	General Administrative Requirements

408.01A	Administration of Funds

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must:

administer and manage funds or collateral under all Collateral AgreementsCollateral AgreementsAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. ; and
ensure that any disbursements of funds, or other collateral releases or reductions, are:
- approved only for valid reasons;
- appropriately documented; and
- consistent with the provisions of the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. and this Section.

408.01B	Funds to be Held in a Custodial Account

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must deposit funds held under a Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. in a Custodial AccountCustodial AccountAccounts established by the Servicer for depositing P&I payments, T&I funds, Collateral Agreement deposits, and other similar funds. that meets the requirements of Part V, Chapter 3: Custodial Account Requirements.

408.01C	Use of Funds

Funds must be used only for the purposes stated in the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , and must not supplement a partial P&IP&IPrincipal and interest payment or cover any other BorrowerBorrowerPerson who is the obligor per the Note. obligation unrelated to the primary purposes of the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. .

408.01D	Funds as Additional Security for Mortgage Loan

All funds or other collateral held under a Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. constitute additional security for the BorrowerBorrowerPerson who is the obligor per the Note. ’s obligations under the NoteNoteInstrument evidencing a Mortgage Loan obligation, including Form 6010 (series), any other note approved by Fannie Mae, and all applicable addenda, schedules, and exhibits. and the other Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. . In the event of a default under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , Fannie Mae reserves the right to apply (or direct the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). to apply) the funds or other collateral held under any Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. in any manner allowed under the terms of such Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. . Following a default, unless instructed by Fannie Mae, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must not:

release any funds or other collateral held under a Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. ;
apply any funds or collateral to the repayment 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
reimburse itself from such funds or collateral for any expenses or losses incurred by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). .

408.01E	Servicer’s Fees and Costs

If the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. contemplates the payment of fees or costs by the BorrowerBorrowerPerson who is the obligor per the Note. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may collect and retain such fees or costs for its own account, adhering to any specific billing provisions of the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. . Any fees or costs retained by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must be reasonable in relation to the nature and scope of the services provided by or on behalf of the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). . The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must not use any of the funds or other collateral held under the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. to cover such fees or costs. However, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may deduct such fees or costs from any disbursement of funds to the BorrowerBorrowerPerson who is the obligor per the Note. , provided such disbursements, fees, and costs are permitted under the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , or if the BorrowerBorrowerPerson who is the obligor per the Note. otherwise agrees in writing.

408.01F	Waiver or Modification of Terms of Collateral Agreement

Except as noted in this Chapter, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must not waive or modify the terms of any Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. .

408.02	Achievement Agreement or Other Agreement for Additional Collateral

408.02A	General

The provisions of this Section govern Achievement AgreementsAchievement AgreementsAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. and all Collateral AgreementsCollateral AgreementsAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , other than:

Multifamily Loan AgreementsMultifamily Loan AgreementsAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. , including the Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement () 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 improvements; terms for… and Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms…;
Security InstrumentsSecurity InstrumentsInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. ;
Replacement Reserve AgreementsReplacement Reserve AgreementsThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and…; and
Completion/Repair AgreementsCompletion/Repair AgreementsThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and ….

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must maintain an effective system for monitoring the expiration date of any Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , and ensure that all actions required to be taken pursuant to any such agreement have been timely performed and, if not timely performed, immediately notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] .

408.02B	Releases or Reductions in Collateral

Any request for a release or reduction of collateral must be processed in accordance with this Section, unless these instructions conflict with the terms and conditions of the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. .

1. General

If the BorrowerBorrowerPerson who is the obligor per the Note. has not satisfied the requirements for a release or reduction of collateral contained in the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must not approve the BorrowerBorrowerPerson who is the obligor per the Note. request, and may decline the BorrowerBorrowerPerson who is the obligor per the Note. request without notice to Fannie Mae. If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). determines that the BorrowerBorrowerPerson who is the obligor per the Note. has satisfied the requirements of the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must recommend the release or reduction of collateral 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. , accompanied by the supporting documentation listed below. Upon receipt and review of all pertinent information, Fannie Mae will approve or deny the request and notify the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). of its decision.

2. Supporting Documentation and Analysis

The following documentation 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. , and maintained in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. , in connection with each request for a release or reduction of collateral

(a) Income and Expense Statements; Current Rent Roll

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). income and expense statements and a current rent roll must be obtained from, and certified by, the BorrowerBorrowerPerson who is the obligor per the Note. . The statements must cover the applicable period required by the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. . Based on the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , Parts I - III, the certified income and expense statements, and the current rent roll, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must develop a Net Cash FlowNet Cash FlowOn 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). estimate to determine whether the release or reduction provisions of the applicable Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. are satisfied. The income, vacancy, collection loss, and concession information should support the Effective Gross IncomeEffective Gross IncomeOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II: Property, Section 202 and the applicable products and features in Part III. that the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is relying on in assessing whether a release or reduction is warranted.

In deriving its estimate of Effective Gross IncomeEffective Gross IncomeOn an annual basis or any specified period, the total of Net Rental Income plus other income per Part II: Property, Section 202 and the applicable products and features in Part III. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must adjust for:

income that was not allowed or recognized in the original underwriting;
the effect of a partial year’s performance when the shorter period reflects the short-term, positive impact from seasonal variations that do not reflect 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 year-round performance; and
non-monetary concessions, requiring the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). to deduct the pro-rata value of the concession from the monthly rent for the applicable unit.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must ensure that all appropriate types of expenses, including underwritten 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. deposits, are included, and that any inappropriate expenses (e.g., capital improvement costs, repair costs covered by funds set aside under a Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and …, partnership costs, etc.) are excluded. To avoid unwarranted releases or reductions of collateral, the expense figures must reflect stabilized operating conditions, and must not be understated due to efficiencies or savings that could not be replicated by a different owner or manager, or that would not be recognized for underwriting purposes.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must perform a line-by-line expense analysis, including a comparison of the original underwriting estimates with the actual expenses shown on the BorrowerBorrowerPerson who is the obligor per the Note. ’s income and expense statements. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must use the greater of the underwritten or the actual expense figure shown for each item on the BorrowerBorrowerPerson who is the obligor per the Note. ’s statement.

(b) Servicer’s Analysis

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must provide an analysis and recommendation regarding the release or reduction of collateral, including any calculations required under the terms of the applicable Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. .

(c) Correspondence

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must provide any correspondence with the BorrowerBorrowerPerson who is the obligor per the Note. that pertains to the release or reduction request.

3. Property Inspection

Before approving any request for a release or reduction of collateral, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must perform 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). to verify that:

no deferred maintenance exists;
necessary capital improvements have been made; and
the general management and operations are acceptable and characteristic of a stabilized project.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ’s inspection must occur no more than 90 days prior to the date of the submission to Fannie Mae of the release or reduction request. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must document the results of its inspection by completing the MBAMBAMortgage Bankers Association Standard Inspection Form.

408.02C	Draws on Letters of Credit or Application of Other Collateral

1. Draws Triggered by Adverse Events

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must promptly notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] when any of the following events occur, which could result in a draw on a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. issued for an Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. :

a default under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , including the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. ;
the failure to renew or replace an expiring Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. at least 30 days prior to its expiration date, or other deadline specified in the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. ; or
the failure to replace a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. by the replacement deadline when the IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. is no longer acceptably rated.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ’s notice to Fannie Mae must include a recommended course of action, and be accompanied by a copy of the executed Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. .

2. Draw Resulting from Noncompliance with Issuer Rating Requirements or Expiration of Letter of Credit

If a draw on the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. occurs due to noncompliance with the rating requirements for the IssuerIssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. or because of an imminent expiration of the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , Fannie Mae will hold the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. proceeds in its designated account until the earliest of the following:

the BorrowerBorrowerPerson who is the obligor per the Note. presents a replacement Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. and Fannie Mae agrees, in its sole discretion, to accept the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ;
(NOTE: Any agreement by Fannie Mae to accept a replacement Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. will be conditioned upon the BorrowerBorrowerPerson who is the obligor per the Note. ’s payment of all administrative and legal costs incurred by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). and Fannie Mae in connection with the replacement of the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .)
the release or reduction provisions of the applicable Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. are satisfied; or
the BorrowerBorrowerPerson who is the obligor per the Note. pays all amounts due and payable under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , including any required Prepayment PremiumPrepayment PremiumFor a Mortgage Loan prepayment, amount the Borrower must pay in addition to the prepaid principal and accrued interest per the Loan Documents. , and Fannie Mae releases 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. .

3. Draws Occasioned by Borrower Request

If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). receives a request from the BorrowerBorrowerPerson who is the obligor per the Note. to draw on the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. and have the proceeds applied as a partial prepayment against the UPBUPBUnpaid Principal Balance , and the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. allow partial prepayments, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must immediately forward the request, along with an analysis and recommendation, including an estimate of the applicable Prepayment PremiumPrepayment PremiumFor a Mortgage Loan prepayment, amount the Borrower must pay in addition to the prepaid principal and accrued interest per the Loan Documents. , to Fannie Mae. If the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. do not allow partial prepayments, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must deny the BorrowerBorrowerPerson who is the obligor per the Note. request.

Fannie Mae will assess the BorrowerBorrowerPerson who is the obligor per the Note. request and determine if the proposed use of the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. proceeds or other collateral would be in the best interest of Fannie Mae and/or the InvestorInvestorMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. in any Securitized Mortgage LoanSecuritized Mortgage LoanMortgage Loan backing an MBS, PFP MBS, or REMIC. . Any decision to apply Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. proceeds or apply other collateral to a partial prepayment will be made by Fannie Mae in its sole discretion. Fannie Mae will notify the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). of its determination and will provide appropriate follow-up instructions.

4. No Interest on Proceeds Held by Fannie Mae

Fannie Mae will not pay interest on the cash proceeds it holds resulting from a draw on a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .

408.02D	Releasing Additional Escrows for Principal and Interest, Taxes and Insurance, and Replacement Reserves

Notwithstanding anything contained in this Chapter, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is delegated to approve all disbursement requests, including the final disbursement request, from Additional Escrows for P&IP&IPrincipal and interest , T&IT&ITaxes or assessments that may become a Lien on the Property and insurance premiums. , and Replacement ReservesReplacement ReservesCustodial 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. provided the disbursement meets all the requirements of:

Form 6268 – Modifications to Multifamily Loan and Security Agreement (Additional Reserve Escrows);
Form 6640 – Amendment to Multifamily Loan and Security Agreement (Additional P&I Escrow Agreement); or
Form 6641 – Additional P&I Escrow Agreement (4000 series Loan Documents).

ServicersServicersPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must document all disbursement requests, including any supporting documentation and analysis, in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

408.03	Completion/Repairs

408.03A	General

The Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for administering Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). are:

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. documented with the 6000 series Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , the Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. , plus the:
- Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement () 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 improvements; terms for…;
- Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. and Modifications to Multifamily Loan and Security Agreement (Rehabilitation Reserve - Moderate Rehabilitation/Substantial Rehabilitation); or
- another approved Modifications to Multifamily Loan and Security Agreement; and
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. documented with the 4000 series Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , the Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and ….

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must administer the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. to ensure the timely implementation of all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). . Once the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). are completed and comply with 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; however, for any topic in the Multifamily Selling and Servicing Guide, that Guide shall…, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must enter the final completion dates and close out the work items 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. in the Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). module in 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. . Additional information may be required for any 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. assigned to Loss Mitigation. If 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. does not have work items in 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. , no further action in 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. is required.

408.03B	Extensions for Completion/Repairs

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is delegated the authority to extend the time limits for making Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). if:

the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). subject to the extension request do not involve life safety issues; and
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. does not have a Fannie Mae risk rating of Substandard or Doubtful.

Notwithstanding the above, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is delegated the authority to grant a one-time extension of 30 days for a life safety issue if the BorrowerBorrowerPerson who is the obligor per the Note. is diligently pursuing completion of the related Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

The duration of any permitted non-life safety extension may not exceed:

1 year past the original completion date specified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for that Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , for 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. without loss sharing; and
2 years past the original completion date specified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for that Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , for any 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. with loss sharing.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must submit a Non-Monetary Default Borrower Request in 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. if the required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). are not completed with this timeframe.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is delegated the authority to grant a one-time extension of up to 90 days past the original completion date for any Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). that are Efficiency MeasuresEfficiency MeasuresEnergy- and water-efficiency measures that the Borrower agrees to implement, and which project a reduction in the Property’s annual energy or water consumption. which the BorrowerBorrowerPerson who is the obligor per the Note. agreed to implement to qualify as a Green Rewards Mortgage LoanGreen Rewards Mortgage LoanMortgage Loan secured by a Property where the Borrower agrees to undertake 1 or more Energy- and Water-Efficiency Measures that comply with Part III: Products and Features, Section 403. . The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is not delegated the authority to extend the time limit beyond 90 days.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is delegated the authority to:

determine whether the extension requires an amendment to the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. ; and
document a required amendment in any form the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). determines to be legally enforceable.

408.03C	Completion/Repair Loan Document Amendments

ServicersServicersPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). are delegated the authority to move required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). from the Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement () 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 improvements; terms for… to the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms…, or from the Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and … to the Replacement Reserve AgreementReplacement Reserve AgreementThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and…, and the associated deposit from the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. into the 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. , provided:

the Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). does not involve life safety issues;
delaying the Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). will not materially negatively impact 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). ; and
the total amount of Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). being transferred does not exceed the lesser of (i) 25% of the original Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. , or (ii) $75,000.

Notwithstanding the above, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is not delegated the authority to move required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). to the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms… for any Efficiency MeasuresEfficiency MeasuresEnergy- and water-efficiency measures that the Borrower agrees to implement, and which project a reduction in the Property’s annual energy or water consumption. that the BorrowerBorrowerPerson who is the obligor per the Note. agreed to implement in order to qualify as a Green Rewards Mortgage LoanGreen Rewards Mortgage LoanMortgage Loan secured by a Property where the Borrower agrees to undertake 1 or more Energy- and Water-Efficiency Measures that comply with Part III: Products and Features, Section 403. or a Green Preservation Plus Mortgage Loan.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must:

send the executed Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. amendment to Multifamily Certification and CustodyMultifamily Certification and CustodyTeam responsible for taking custody of and certifying Mortgage Loans that can be contacted at [email protected], (800) 940-4646, or for submissions: Fannie Mae (Multifamily) New Loan Submission 13150 Worldgate Drive Mail Stop: 5H-2W/01 Herndon, VA 22070. within 15 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, a day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. ;
submit a copy of the Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. amendment 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. for any 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. with a Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). work item in 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 in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

408.03D	Servicer’s Administrative Requirements

For all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must:

retain a copy of the executed Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. and Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement () 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 improvements; terms for… or Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and … in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. ;
hold all Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. funds in an account that meets the Custodial AccountCustodial AccountAccounts established by the Servicer for depositing P&I payments, T&I funds, Collateral Agreement deposits, and other similar funds. requirements of Part V, Chapter 3: Custodial Account Requirements;
ensure that all necessary permits are obtained, and that all required work is satisfactorily completed in a good and workmanlike manner by the completion dates stipulated in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. ;
process BorrowerBorrowerPerson who is the obligor per the Note. requisitions for funds in accordance with 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. ;
perform required inspections of completed work and, if appropriate, work in progress and, if necessary, arrange inspections by qualified professionals;
ensure that the Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). work does not result in any mechanics’ LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , materialmen’s LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , or other LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. that have not been acceptably bonded over;
promptly submit a Non-Monetary Default Borrower Request in 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. for any Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. default;
take appropriate steps to remedy or address any default under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). ; and
perform all other administrative duties required by the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

408.03E	Processing Borrower Requisitions

1. General

Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. funds are available to reimburse the BorrowerBorrowerPerson who is the obligor per the Note. for costs incurred for Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). that are specifically identified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. . The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may authorize the release of funds to cover the costs of other reasonable and necessary repairs, replacements, or improvements that are not specified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. only if the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. permit the disbursements, and all conditions are fully satisfied.

2. Required Documentation for Disbursement

To obtain reimbursement, the BorrowerBorrowerPerson who is the obligor per the Note. must submit a written requisition specifying the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). for which reimbursement is being sought, including:

the specific Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). completed;
the quantity and price of all materials (grouped by type or category) or specific replacement items (e.g., appliances) purchased in connection with the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). ; and
the cost of all contracted labor or other services involved in completing the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

The BorrowerBorrowerPerson who is the obligor per the Note. requisition for the specified Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). for which reimbursement is being sought must be accompanied by:

a BorrowerBorrowerPerson who is the obligor per the Note. certification that the specific Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). have been completed:
- in a good and workmanlike manner;
- in accordance with any plans and specifications previously approved by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ; and
- in compliance with all applicable laws, ordinances, rules, and regulations of any governmental authority, agency, or instrumentality having jurisdiction over 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). ;
copies of invoices and evidence of payment for all items and materials purchased and all labor and services provided, the cost of which exceeds the lesser of $25,000 or 1% of the UPBUPBUnpaid Principal Balance ; and
a release of LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. from each contractor, subcontractor, or materialman providing services or materials, the cost of which exceeds the lesser of $25,000 or 1% of the UPBUPBUnpaid Principal Balance .

3. Disbursement of Funds (Excluding Final Disbursement)

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may disburse funds to the BorrowerBorrowerPerson who is the obligor per the Note. only if it has received all required documentation and determined that all applicable conditions for disbursement have been met, including (but not limited to) the following:

all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). covered by the requisition have been completed in a good and workmanlike manner, as evidenced by the BorrowerBorrowerPerson who is the obligor per the Note. ’s submission and, if appropriate, an inspection of the completed work (see guidance on inspections below);
all related invoices for items and services covered by the requisition have been paid, unless the BorrowerBorrowerPerson who is the obligor per the Note. has satisfied any applicable conditions of the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for issuance of a joint check(s), made payable to the BorrowerBorrowerPerson who is the obligor per the Note. and the 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). owed funds under such invoices;
no mechanics’ LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , materialmen’s LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , or other LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. exist, unless acceptably bonded over; and
no default exists under any Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

The amount disbursed to the BorrowerBorrowerPerson who is the obligor per the Note. for any requisition, other than the final requisition, may not exceed the actual cost of the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , and may be less than the actual cost if, after disbursement, the amount of funds remaining in the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. would be less than the anticipated cost of completing all remaining Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). plus any holdback specified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

Notwithstanding the above, once 75% of the total dollar amount of Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). is disbursed, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may release funds in the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. , provided:

funds are only released for Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). that have been fully completed;
the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). has complied with all other disbursement requirements;
the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). completes an analysis showing that the remaining amount in the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. is sufficient to complete all remaining Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). ;
the BorrowerBorrowerPerson who is the obligor per the Note. affirms in writing its obligation to complete the remaining Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). by the required completion dates; and
the Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). is not an Efficiency MeasureEfficiency MeasureEnergy- and water-efficiency measures that the Borrower agrees to implement, and which project a reduction in the Property’s annual energy or water consumption. the BorrowerBorrowerPerson who is the obligor per the Note. agreed to implement in order to qualify as a Green Rewards Mortgage LoanGreen Rewards Mortgage LoanMortgage Loan secured by a Property where the Borrower agrees to undertake 1 or more Energy- and Water-Efficiency Measures that comply with Part III: Products and Features, Section 403. , as the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is not delegated the authority to release any Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. related to any Efficiency MeasuresEfficiency MeasuresEnergy- and water-efficiency measures that the Borrower agrees to implement, and which project a reduction in the Property’s annual energy or water consumption. .

4. Final Disbursement of Funds

Before making the final disbursement of funds from the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must confirm and document the absence of any mechanics’ and materialmen’s LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. by requiring the BorrowerBorrowerPerson who is the obligor per the Note. to obtain an updated title report or a title policy endorsement showing that no such LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. exist. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may waive the updated title report or endorsement for Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. when the total scope of work is less than $75,000. If the BorrowerBorrowerPerson who is the obligor per the Note. fails to provide the required title documentation, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must obtain a title report or title policy endorsement, and may charge the BorrowerBorrowerPerson who is the obligor per the Note. for the cost.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may make a final disbursement of all remaining funds upon satisfactory completion of all required Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , and satisfaction of all other applicable release conditions contained in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). .

5. Maintenance of Servicing File

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must document the action taken with respect to each BorrowerBorrowerPerson who is the obligor per the Note. requisition for funds from the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account established by the Lender and initially funded by an escrow deposit from the Borrower on the Mortgage Loan Origination Date to complete Completion/Repairs or other capital improvements at the Property. in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

408.03F	Inspections

1. Use of Third Party

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may inspect 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 have a qualified independent third party inspect 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). , to confirm that the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). covered by the requisition have been satisfactorily completed. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is responsible for monitoring the third-party’s performance.

2. When Periodic Inspections Are Required

Periodic inspections must be performed as the work progresses if the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). :

exceed in the aggregate the lesser of:
- $500,000, or 20% of the UPBUPBUnpaid Principal Balance for any 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. with loss sharing; or
- $250,000, or 10% of the UPBUPBUnpaid Principal Balance for any 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. without loss sharing; and
are likely to require more than 6 months to complete.

Inspections must occur at least every 6 months, or more frequently at the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ’s discretion.

3. When a Final Inspection Is Required

An inspection must be performed to ensure that all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). have been satisfactorily completed before approving and disbursing the final requisition when the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). exceed the lesser of:

$500,000, or 20% of the UPBUPBUnpaid Principal Balance for any 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. with loss sharing; or
$250,000, or 10% of the UPBUPBUnpaid Principal Balance for any 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. without loss sharing.

4. Confirming Completion/Repairs if Inspection Is Not Required

Even if an inspection is not required by this Section, the BorrowerBorrowerPerson who is the obligor per the Note. must provide evidence to the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). that all Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). covered by the requisition have been satisfactorily completed. If not inspected sooner, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must confirm the satisfactory completion of the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). during the next regularly scheduled 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). inspection.

5. Documenting the Servicing File

In all instances, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must document in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. whether all work was satisfactorily completed.

408.03G	Fees

reasonable fees to cover the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ’s costs of administering the Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). ; and
additional fees to cover any reasonable inspection costs that are not adequately covered by general administrative fees collected from the BorrowerBorrowerPerson who is the obligor per the Note. .

408.03H	Completion/Repair Defaults

1. Notification of Default to Fannie Mae

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must immediately submit a Non-Monetary Default Borrower Request in 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. for any Completion/RepairCompletion/RepairImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Agreement (or a Certificate of Borrower, if applicable). Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. default.

2. No Release of Funds to Borrower

No funds may be released to the BorrowerBorrowerPerson who is the obligor per the Note. while the BorrowerBorrowerPerson who is the obligor per the Note. is in default under any of the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

408.04	Replacement Reserve

408.04A	General

The Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for administering Replacement ReservesReplacement ReservesCustodial 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. are:

Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. and Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms…, 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. documented with the 6000 series Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. ; and
Replacement Reserve AgreementReplacement Reserve AgreementThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and…, 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. documented with the 4000 series Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

The 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. funds must be held by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). in a Custodial AccountCustodial AccountAccounts established by the Servicer for depositing P&I payments, T&I funds, Collateral Agreement deposits, and other similar funds. , and are intended to pay for necessary replacements of capital items or major maintenance work to 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). over 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. .

408.04B	Replacement Reserve Loan Document Amendments

If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). 's Limited Power of AttorneyLimited Power of AttorneyLegal document authorizing a Servicer to execute certain Loan Documents related to the asset management of a Mortgage Loan as attorney-in-fact on behalf of Fannie Mae. delegates the authority to amend the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. to revise the terms governing the Replacement ReservesReplacement ReservesCustodial 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. , only the changes expressly permitted by this Section can be made, and the delegation does not expand the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ’s ability to change or modify any other term of the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must send the executed Loan Document Amendment to Multifamily Certification and CustodyMultifamily Certification and CustodyTeam responsible for taking custody of and certifying Mortgage Loans that can be contacted at [email protected], (800) 940-4646, or for submissions: Fannie Mae (Multifamily) New Loan Submission 13150 Worldgate Drive Mail Stop: 5H-2W/01 Herndon, VA 22070. within 15 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, a day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. , and retain a copy in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

408.04C	Servicer’s Administrative Requirements

For all Replacement ReservesReplacement ReservesCustodial 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. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must:

retain a copy of the executed Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. and Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms… or Replacement Reserve AgreementReplacement Reserve AgreementThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and… in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. ;
unless the BorrowerBorrowerPerson who is the obligor per the Note. has requested in writing a non-interest bearing account, hold all funds in an interest-bearing Custodial AccountCustodial AccountAccounts established by the Servicer for depositing P&I payments, T&I funds, Collateral Agreement deposits, and other similar funds. that meets the requirements of Part V, Chapter 3: Custodial Account Requirements and the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. ;
ensure that all required deposits are made to the 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. in accordance with the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. ;
process BorrowerBorrowerPerson who is the obligor per the Note. requisitions for funds in accordance with 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. ;
perform required inspections of completed work and, if appropriate, work in progress, and arrange, if necessary, for inspections by qualified professionals;
ensure that work funded from the 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. does not result in any mechanics’ LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , materialmen’s LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , or other LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. that have not been acceptably bonded over;
promptly submit a Non-Monetary Default Borrower Request in 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. for any 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. Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. default;
take appropriate steps to remedy or address any default under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for Replacements, Repairs, or Restoration; and
reassess the adequacy of the 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. or the schedule of required deposits; and
perform all other administrative duties required by the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for the 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. .

408.04D	Modifications to Replacement Reserve Deposits

Based on the results of a 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). inspection or a new Property Condition AssessmentProperty Condition AssessmentAssessment of the current physical condition and historical operation of the Property. as required below, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may determine that the current level of 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. funding and scheduled deposits will be insufficient to meet all projected capital item or major maintenance needs. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must then:

adjust the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms… or the Replacement Reserve AgreementReplacement Reserve AgreementThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and… and the 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. funding to a sufficient level, if warranted, in accordance with the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. and Part III, by requiring the BorrowerBorrowerPerson who is the obligor per the Note. to:
- deposit a lump sum into the 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. ; and/or
- increase the monthly 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. deposit; and
give the BorrowerBorrowerPerson who is the obligor per the Note. at least 30 days advance written notice prior to implementing any of the foregoing changes.

Based on the results of the new Property Condition AssessmentProperty Condition AssessmentAssessment of the current physical condition and historical operation of the Property. obtained during the underwriting and delivery of a Supplemental Mortgage LoanSupplemental Mortgage LoanMortgage 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. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may:

adjust the 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. funding, scheduled deposits, and Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement () 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 improvements; terms for… of all 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. to match the Supplemental Mortgage LoanSupplemental Mortgage LoanMortgage 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. underwriting; and
amend the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. accordingly.

408.04E	New Property Condition Assessments

1. Timing and Waivers

A new PCAPCAAssessment of the current physical condition and historical operation of the Property. is required for:

all MAHMAHProperty 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. PropertiesPropertiesMultifamily 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). every 5 years; or
for any other 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. with a term greater than 10 years, during the 10th Loan YearLoan YearPeriod beginning on the date of the Note and ending on the last day of the month that is 12 full months after the date of the Note, and each successive 12-month period thereafter. , and every 10 years thereafter, while 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. remains outstanding, or per the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

Notwithstanding the above, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is delegated the authority to waive the new PCAPCAAssessment of the current physical condition and historical operation of the Property. for non-MAHMAHProperty 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. PropertiesPropertiesMultifamily 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). as follows:

Remaining Loan Term	Servicer Delegation
Less than 1 Year	The new PCAPCAAssessment of the current physical condition and historical operation of the Property. may be waived for 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. with a: Pass rating; 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). inspection less than 1 year old; and 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). condition rating of 1, 2, or 3.
1 Year to 5 Years	The new PCAPCAAssessment of the current physical condition and historical operation of the Property. may be waived for 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. with a: Pass rating; 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). inspection report less than 1 year old; and 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). condition rating of 1 or 2.
More than 5 Years	The new PCAPCAAssessment of the current physical condition and historical operation of the Property. may be waived for 5 years for 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. with a: Pass rating; 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). Inspection report less than 1 year old; and 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). condition rating of 1 or 2.

After 5 years, a new PCAPCAAssessment of the current physical condition and historical operation of the Property. is required unless 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. continues to qualify for ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). waiver delegation. A 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). may only receive a PCAPCAAssessment of the current physical condition and historical operation of the Property. waiver twice (i.e., 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. with a 30-year term may obtain a PCAPCAAssessment of the current physical condition and historical operation of the Property. waiver after the 10th loan year and the 15th loan year, but a new PCAPCAAssessment of the current physical condition and historical operation of the Property. is required after the 20th loan year).

All PCAPCAAssessment of the current physical condition and historical operation of the Property. waivers must be documented in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. , and any PCAPCAAssessment of the current physical condition and historical operation of the Property. waiver may be rescinded by Fannie Mae or the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). at any time if 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). condition warrants a new PCAPCAAssessment of the current physical condition and historical operation of the Property. .

2. Streamlined PCA Permitted

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may use Streamlined PCA Guidance (Form 4099.A) if the most recent 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). site inspection:

was performed according to Part II, Chapter 4: Inspections and Reserves, Section 401: Site Inspection;
indicated an overall rating of 1 or 2; and
did not reveal any adverse change in 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). condition (except normal wear and tear) or life safety issues.

3. Delivery and Payment of Property Condition Assessment

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must submit any new PCAPCAAssessment of the current physical condition and historical operation of the Property. to Fannie Mae 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 in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. . Subject to the terms of the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , the cost of the PCAPCAAssessment of the current physical condition and historical operation of the Property. may be paid from funds in the 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. .

408.04F	When Replacement Reserve Funding Was Partially or Fully Waived

If 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. funding was partially or fully waived at the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must monitor the condition 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). to ensure the BorrowerBorrowerPerson who is the obligor per the Note. preserves and maintains 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). as required by the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). or Fannie Mae determines that the BorrowerBorrowerPerson who is the obligor per the Note. is not properly preserving and maintaining 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). , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must require the BorrowerBorrowerPerson who is the obligor per the Note. to begin making monthly deposits to the 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. in accordance with either the funding schedule set forth in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , or an alternative funding schedule determined by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). .

408.04G	Interest on Replacement Reserve Funds

If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). holds the 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. funds in an interest-bearing Custodial AccountCustodial AccountAccounts established by the Servicer for depositing P&I payments, T&I funds, Collateral Agreement deposits, and other similar funds. , none of the interest earned on the 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. funds may be retained by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). . Unless 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. is in default, all interest must be:

added to the balance of the 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. ; or
paid to the BorrowerBorrowerPerson who is the obligor per the Note. if applicable law requires or the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). agrees.

408.04H	Items Eligible for Funding from the Replacement Reserve

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. funds are available to reimburse the BorrowerBorrowerPerson who is the obligor per the Note. for costs incurred to replace capital items or maintain major items specifically identified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

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. funds also may be used for discretionary replacements of capital items or major maintenance items that are not specifically identified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , but which the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). determines are intended to be covered by a Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms…, such as those that would:

correct or forestall a problem that may adversely affect the physical condition, livability, marketability, or value 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). ;
directly contribute to the maintenance or enhancement 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). ’s physical condition, livability, marketability, or value; or
likely be noted in an updated Property Condition AssessmentProperty Condition AssessmentAssessment of the current physical condition and historical operation of the Property. .

If 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. funds are used for purposes not originally contemplated in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must monitor and adjust the monthly reserve deposits to ensure sufficient funds are available to make timely replacements of capital items or major maintenance items in the manner contemplated in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. and/or the PCAPCAAssessment of the current physical condition and historical operation of the Property. .

408.04I	Items Not Eligible for Funding from the Replacement Reserve

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must not use 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. funds to reimburse the BorrowerBorrowerPerson who is the obligor per the Note. for any item specifically identified for reimbursement under a Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and …, or for any routine maintenance item, routine repair, or cosmetic repair that would normally be characterized as an operating expense. 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. funds must never be used for P&IP&IPrincipal and interest , T&IT&ITaxes or assessments that may become a Lien on the Property and insurance premiums. , or any other purpose not specifically permitted by the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , or 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; however, for any topic in the Multifamily Selling and Servicing Guide, that Guide shall….

408.04J	Processing Borrower Requisitions

1. General

The Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. specify the frequency, timing, and size of disbursements from the 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. .

2. Required Documentation

Each BorrowerBorrowerPerson who is the obligor per the Note. requisition must be in writing and specify, at a minimum:

the specific capital item replaced or major maintenance items for which reimbursement is being sought, and if any item is not specifically identified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , an explanation of why the 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. funds should be released for the item;
the quantity and price of each type of capital item replaced (e.g., refrigerators);
the quantity and price of all materials or parts (grouped by type or category) purchased; and
the cost of all contracted labor or other services.

Each BorrowerBorrowerPerson who is the obligor per the Note. requisition submitted to the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must be accompanied by:

a BorrowerBorrowerPerson who is the obligor per the Note. certification that the capital item replacements or major maintenance items covered by the requisition have been completed in compliance with all applicable laws, ordinances, rules, and regulations of any governmental authority, agency, or instrumentality having jurisdiction over 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). ;
copies of invoices and evidence of payment for all capital items and materials purchased and all labor and services provided, the cost of which exceeds the lesser of $25,000 or 1% of the UPBUPBUnpaid Principal Balance ;
a release of LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. from each contractor, subcontractor, or material man providing services or materials, the cost of which exceeds the lesser of $25,000 or 1% of the UPBUPBUnpaid Principal Balance ; and
other relevant documentation required by the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

3. Disbursement of Funds

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may release funds to the BorrowerBorrowerPerson who is the obligor per the Note. only if all required documentation is received, and all applicable release conditions have been met, including, but not limited to:

all capital item replacements or major maintenance items covered by the requisition have been completed in a good and workmanlike manner;
all related invoices for capital items and services have been paid, unless the BorrowerBorrowerPerson who is the obligor per the Note. has satisfied any applicable conditions of the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. for issuance of a joint check, made payable to the BorrowerBorrowerPerson who is the obligor per the Note. and the 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). owed funds;
no mechanics’ LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , materialmen’s LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. , or other LiensLiensLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. are outstanding that have not been acceptably bonded over; and
the BorrowerBorrowerPerson who is the obligor per the Note. is not in default under any Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .

The amount disbursed to the BorrowerBorrowerPerson who is the obligor per the Note. must not exceed the actual cost of the capital item replacements or major maintenance items covered by the BorrowerBorrowerPerson who is the obligor per the Note. ’s requisition.

4. Maintenance of Servicing File

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must ensure that the action taken with respect to each BorrowerBorrowerPerson who is the obligor per the Note. requisition for funds from the 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 appropriately documented in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

408.04K	Inspections

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may use its discretion in deciding whether to conduct an on-site inspection before approving any specific requisition for 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. funds. If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). elects not to perform an on-site inspection when a requisition is submitted, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must inspect all capital item replacements or maintenance items covered by the requisition during its next scheduled 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). inspection and confirm the satisfactory completion.

408.04L	Fees

If the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. permit, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may collect and retain:

a reasonable fee to cover the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ’s routine costs of administering the 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. ; and
additional fees to cover:
- reasonable inspection costs, including the fees of any qualified professional used by the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). ; and
- any other reasonable costs incurred in connection with collecting, holding, investing, or disbursing 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. funds but which are not adequately covered by the general administrative fees collected from the BorrowerBorrowerPerson who is the obligor per the Note. .

Subject to the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may charge the BorrowerBorrowerPerson who is the obligor per the Note. a reasonable fee for any special inspection services provided in connection with 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. requisition; however, no fee may be charged if such inspection is made as part of a regularly scheduled 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). inspection.

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. funds, including any interest, may not be used to cover fees due to the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). unless:

the Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. specifically permits the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). to use 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. funds to pay ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). inspection fees; or
the BorrowerBorrowerPerson who is the obligor per the Note. otherwise agrees in writing.

408.04M	Replacement Reserve Defaults

1. Notification of Default to Fannie Mae

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must immediately submit a Non-Monetary Default Borrower Request in 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. for any 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. Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. default.

2. No Release of Funds to Borrower

No funds may be released to the BorrowerBorrowerPerson who is the obligor per the Note. while 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. is in default.

408.04N	Return of Replacement Reserve Funds to Borrower

No later than 30 days after 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. is paid in full, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must refund to the BorrowerBorrowerPerson who is the obligor per the Note. all remaining 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. funds.

408.04O	Alternative Funding of Replacement Reserves for Portfolio Mortgage Loans

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). may amend existing the Schedule 5 to Multifamily Loan AgreementMultifamily Loan AgreementAgreement evidencing the terms of a Mortgage Loan using the Loan Documents or another form approved by Fannie Mae. - Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms… or Replacement Reserve AgreementReplacement Reserve AgreementThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and… on Fannie Mae’s behalf to match the alternative 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. funding available for newly originated 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. if the BorrowerBorrowerPerson who is the obligor per the Note. has a history of adequate property maintenance, and no other concerns are present (e.g., declining 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). condition, declining rents, declining Net Cash FlowNet Cash FlowOn 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). ). The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must send the executed Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. amendment revising the Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement () and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms… or Replacement Reserve AgreementReplacement Reserve AgreementThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and… to Multifamily Certification and CustodyMultifamily Certification and CustodyTeam responsible for taking custody of and certifying Mortgage Loans that can be contacted at [email protected], (800) 940-4646, or for submission