408.02
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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 Form 6001 series Loan Documents or another form approved by Fannie Mae. , including the Completion/Repair ScheduleCompletion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae) that evidence the: Borrower’s agreement to perform Completion/Repairs and other identified capital… and Replacement Reserve ScheduleReplacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required…;
- 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] .
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, Chapter 2: Valuation and Income, Section 202: Income Analysis and the applicable products and… 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, Chapter 2: Valuation and Income, Section 202: Income Analysis 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, Chapter 2: Valuation and Income, Section 202: Income Analysis 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.
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. .
Notwithstanding anything contained in this Chapter, if no Event of Default has occurred and is continuing 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. (including Forbearance), 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 any Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. requirement prohibiting the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). from immediately approving a partial or final disbursement request of 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. required by:
- 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).
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 waiver requires a Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. amendment; and
- document any 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.
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. .