Section 417

Seniors Housing Properties

417.01

General

The requirements in this Section may not apply to every Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. 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. .  The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must refer to the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. for specific requirements.

417.02

Decisions and Actions Delegated and Not Delegated

Decisions and actions covered by the Delegated Transaction Form (Form 4636 series) are delegated to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. as set forth in the applicable Form 4636 series or the GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. .  For these requests, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must submit the completed applicable Form 4636 series through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .  Decisions and actions for Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. 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. regarding the following are not delegated to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. :

  • Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. expansions/conversions, including constructing additional units, substantial alterations, Seniors Housing Major RenovationsSeniors Housing Major RenovationsPhysical improvement at a Seniors Housing Property costing more than $20,000/unit, or $3 million in total project costs. , and Seniors Housing Minor RenovationsSeniors Housing Minor RenovationsPhysical improvement at a Seniors Housing Property that is not a Seniors Housing Major Renovation, but which increases the number of units, or converts one type of unit (e.g., Independent Living, Assisted Living, or Alzheimer’s/Dementia Care) into another, unless expressly permitted by the Loan…;
  • changes in the Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. operator;
  • changes in PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). management or management agreements;
  • changes in licensing (Note:  All licensing changes require an Opinion of Borrower’s Counsel on Origination of Mortgage Loan (Seniors Housing Licensing) (Form 6450.SRS) confirming that all licensing requirements have been met);
  • Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. operator LeasesLeasesWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent. ; and
  • master leases.

 If the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. has any questions regarding the need for Fannie Mae approval, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must contact Multifamily Seniors Housing Property Asset ManagementMultifamily Seniors Housing Property Asset ManagementTeam that can be contacted at [email protected]. before proceeding.

417.03

Approval Requests

The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must refer to the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. and this Section to determine whether Fannie Mae approval is required for a particular request.  If Fannie Mae approval is required, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must submit a request through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .  Any approval request must include the Servicer’sServicer’sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. recommendation, any supporting documentation (including references to the relevant sections of the governing documents), and the Servicer’sServicer’sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. analysis supporting its recommendation.

417.04

Seniors Housing Expansion/Conversion Requests

Unless expressly permitted by the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , requests by the BorrowerBorrowerPerson who is the obligor per the Note. for the construction of additional units, renovation, or expansion of a Seniors Housing PropertySeniors Housing PropertyMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. , or a change in the overall percentage of one Seniors HousingSeniors HousingMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. type of unit (e.g., Independent LivingIndependent LivingSeniors Housing providing limited programs of assistance for domestic activities (e.g. meals, housekeeping, activities, transportation, etc.), and typically resembles market rate units. , Assisted LivingAssisted LivingSeniors Housing Property offering services limited to non-medical personal care, including ADL assistance, which are typically licensed and regulated by a state or local governmental authority.  , or Alzheimer’s/Dementia CareAlzheimer’s/Dementia CareSeniors Housing Property with units and beds for residents with significant cognitive impairment resulting from Alzheimer’s disease or other dementia, which are typically licensed and regulated by a state or local government authority.  ) into another are not delegated to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. .  The BorrowerBorrowerPerson who is the obligor per the Note. must request approval from the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. and Fannie Mae before proceeding, and Fannie Mae will consider these requests under the following parameters, conditions, and requirements:

417.04A

Permitted Purpose

To allow for the construction of additional units on existing land, or the renovation and/or repositioning of existing units:

  • a “Seniors Housing Major RenovationSeniors Housing Major RenovationPhysical improvement at a Seniors Housing Property costing more than $20,000/unit, or $3 million in total project costs. ” is any physical improvement costing in excess of (i) $20,000/unit, or (ii) $3 million in total project costs; and
  • a “Seniors Housing Minor RenovationSeniors Housing Minor RenovationPhysical improvement at a Seniors Housing Property that is not a Seniors Housing Major Renovation, but which increases the number of units, or converts one type of unit (e.g., Independent Living, Assisted Living, or Alzheimer’s/Dementia Care) into another, unless expressly permitted by the Loan…” is any physical improvement that is not a Seniors Housing Major RenovationSeniors Housing Major RenovationPhysical improvement at a Seniors Housing Property costing more than $20,000/unit, or $3 million in total project costs. , but which increases the number of units, or converts one type of unit into another, unless expressly permitted by the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
417.04B

Submission Requirements

Upon receipt of a Borrower Seniors Housing Expansion/Conversion Request, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must submit a written request through the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. , and include the following:

  • SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). name and experience in operating seniors housing properties;
  • 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. performance;
  • financial performance (including NCFNCFOn an annual basis or any specified period, the total Net Operating Income, minus the full amount underwritten for Replacement Reserve expense, regardless of whether deposits will be made (per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and… and UPBUPBUnpaid Principal Balance history, and DSCRDSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of:  principal, interest, and required Mezzanine Financing or Hard Preferred Equity payments. and LTVLTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  trends);
  • pro forma financial statements;
  • sources/uses of funds statement;
  • project budget, scope, and plans;
  • market study;
  • construction contract and timeline;
  • Servicer’sServicer’sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. monitoring plan;
  • licensure issues;
  • insurance; and
  • general contractor and major subcontractors.

Fannie Mae will review the completed request, and approve or decline the request in its sole discretion. 

417.04C

Requirements and Monitoring

For a Seniors Housing Expansion/Conversion Request approved by Fannie Mae, the following requirements will apply:

  • Escrow:
    • the BorrowerBorrowerPerson who is the obligor per the Note. must escrow 25% of the estimated construction costs with the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. , who will administer the funds through a standard construction draw process; and
    • the BorrowerBorrowerPerson who is the obligor per the Note. must demonstrate to the Servicer’sServicer’sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. satisfaction that it has sufficient liquid assets to complete the construction;
  • Minimum DSCRDSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of:  principal, interest, and required Mezzanine Financing or Hard Preferred Equity payments.  during the expansion/conversion period cannot fall below 1.15x;
  • Completion of construction must occur no later than 18 months from the date of commencement;
  • Construction monitoring requirements will be set forth in the approval letter;
  • Fannie Mae will charge a construction monitoring fee which does not cover the expenses associated with third-party inspections;
  • Completion Guaranty (Form 6018, Form 6632, or Form 6633) and, if determined applicable by Fannie Mae, an Agreement and Assignment Regarding General Contractor’s Contract (Form 6473), and an Omnibus Assignment of Contracts, Plans, Permits, and Approvals (Form 6473), will be required;
  • Fannie Mae will charge a change in use fee, and the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. may charge additional fees at its discretion, subject to approval by Fannie Mae;
  • The BorrowerBorrowerPerson who is the obligor per the Note. must reimburse all legal costs incurred by Fannie Mae; and
  • A fixed-price general construction contract provided by a general contractor, together with a payment and performance bond issued by an acceptable surety, will be required.
417.04D

Construction Completion Requirements

Within 60 days of completing any Seniors Housing Major RenovationSeniors Housing Major RenovationPhysical improvement at a Seniors Housing Property costing more than $20,000/unit, or $3 million in total project costs. or Seniors Housing Minor RenovationSeniors Housing Minor RenovationPhysical improvement at a Seniors Housing Property that is not a Seniors Housing Major Renovation, but which increases the number of units, or converts one type of unit (e.g., Independent Living, Assisted Living, or Alzheimer’s/Dementia Care) into another, unless expressly permitted by the Loan…, the BorrowerBorrowerPerson who is the obligor per the Note. must deliver to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. , and the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must provide to Fannie Mae, the following:

  • title endorsement to the existing mortgagee title policy, confirming that 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 that have not been acceptably bonded over;
  • final lien waivers from all contractors, architects, subcontractors, and material suppliers;
  • copies of updated or newly issued certificates of occupancy;
  • renewed licenses;
  • confirmation in the form of an Opinion of Borrower’s Counsel on Origination of Mortgage Loan (Seniors Housing Licensing) (Form 6450.SRS) that all licensing requirements have been met;
  • certificate from the BorrowerBorrowerPerson who is the obligor per the Note. , architect, and contractor certifying to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. , for the benefit of Fannie Mae, that the improvements:
    • are completed in accordance with the plans and specifications approved by Fannie Mae; and
    • meet the local zoning and planning restrictions, and all other governmental requirements;
  • final inspection of completed ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). ;
  • updated certified operating statement and rent roll for the Seniors Housing PropertySeniors Housing PropertyMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. ; and
  • a survey showing any new ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). on the Seniors Housing PropertySeniors Housing PropertyMultifamily residential rental property with any combination of Independent Living, Assisted Living, Alzheimer’s/Dementia Care, or Skilled Nursing units. .
417.04E

Request Changes in Unit Count/Mix in the MAMP

Within 60 days of completion of any Seniors Housing Major RenovationSeniors Housing Major RenovationPhysical improvement at a Seniors Housing Property costing more than $20,000/unit, or $3 million in total project costs. or Seniors Housing Minor RenovationSeniors Housing Minor RenovationPhysical improvement at a Seniors Housing Property that is not a Seniors Housing Major Renovation, but which increases the number of units, or converts one type of unit (e.g., Independent Living, Assisted Living, or Alzheimer’s/Dementia Care) into another, unless expressly permitted by the Loan…, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must request any applicable change in unit count and/or unit mix (ILILSeniors Housing providing limited programs of assistance for domestic activities (e.g. meals, housekeeping, activities, transportation, etc.), and typically resembles market rate units. , ALALSeniors Housing Property offering services limited to non-medical personal care, including ADL assistance, which are typically licensed and regulated by a state or local governmental authority.  , ALZALZSeniors Housing Property with units and beds for residents with significant cognitive impairment resulting from Alzheimer’s disease or other dementia, which are typically licensed and regulated by a state or local government authority.  ) in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. resulting from the renovation.