Section 418

Credit Enhancement Mortgage Loans and Multifamily Affordable Housing Properties

418.01	Bond Transactions and Credit Enhancement Mortgage Loans

For any Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. where Fannie Mae is providing credit enhancement for tax-exempt multifamily housing BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. , the BorrowerBorrowerPerson who is the obligor per the Note. must provide the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). with a copy of the compliance monitoring statement required under the Bond Documents. If the BorrowerBorrowerPerson who is the obligor per the Note. ’s statement reflects noncompliance with the low- and moderate-income tenant occupancy requirements set forth in the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…, or if the BorrowerBorrowerPerson who is the obligor per the Note. fails to provide the statement to 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 notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] , and retain the compliance monitoring statement in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

418.02	Compliance Issues Relative to Bond Credit Enhancement Transactions

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must monitor the Interest Reserve Requirement, if any, under the Bond Trust Indenture with respect to each Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. .

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must monitor the rating of the institution in which the accounts under any Cash Management, Security, Pledge, and Assignment Agreement are held, and must require the BorrowerBorrowerPerson who is the obligor per the Note. to move the accounts if the rating no longer meets Fannie Mae’s requirements as provided in Part V, Chapter 3: Custodial Accounts.

418.03	Monitoring Compliance; Notification of Noncompliance

418.03A	Affordable Regulatory Agreement

At least once in each calendar year (and more often if directed 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 obtain a BorrowerBorrowerPerson who is the obligor per the Note. certification that the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). is in full compliance with:

the rules qualifying the interest on the BondsBondsTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. for exclusion from gross income for federal income tax purposes pursuant to the Internal Revenue Code; and
the requirements of the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower….

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must review the BorrowerBorrowerPerson who is the obligor per the Note. certificate, and 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). does not comply with all applicable regulatory requirements, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must immediately notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] . Neither Fannie Mae nor the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is responsible for determining or ensuring the BorrowerBorrowerPerson who is the obligor per the Note. ’s compliance under the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower….

418.03B	Default Notice for Failure to Comply with the Bond Documents

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] , the BorrowerBorrowerPerson who is the obligor per the Note. , the Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. , and 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. in writing of any default by a BorrowerBorrowerPerson who is the obligor per the Note. with any provision of any Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , Reimbursement Agreement, Security Agreement, the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower…, or other Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. , Credit Enhancement Document, or Bond Document.

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must promptly forward to Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] copies of any notices received from a BorrowerBorrowerPerson who is the obligor per the Note. , Bond TrusteeBond TrusteeTrustee for a Credit Enhancement Instrument. , 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 any other party regarding any default by a BorrowerBorrowerPerson who is the obligor per the Note. , and shall maintain ongoing contact with Fannie Mae regarding the status of the Credit Enhancement Mortgage LoanCredit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. by submitting 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. .

418.04	Multifamily Affordable Housing (MAH) Properties

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must collect annual compliance documentation in the form of:

for an MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. with Sponsor-Initiated AffordabilitySponsor-Initiated AffordabilityVoluntary rent and income restrictions recorded against the Property by the Borrower to preserve or create multifamily affordable housing. , certifications from the BorrowerBorrowerPerson who is the obligor per the Note. and Administering AgentAdministering AgentThird-party compliance monitoring company. of compliance with the Sponsor-Initiated AffordabilitySponsor-Initiated AffordabilityVoluntary rent and income restrictions recorded against the Property by the Borrower to preserve or create multifamily affordable housing. Agreement; or
for any other MAH PropertyMAH PropertyProperty encumbered by a regulatory agreement, land use restriction agreement, extended use agreement, or similar restriction that limits rents that can be charged to tenants, or imposes income limits on tenants. , the annual recertification 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 compliance with the Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower… from the agency or entity that imposed any applicable rent or occupancy restrictions or, if not available, an explanation of why it is not available.

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. to notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected] if this documentation reveals any event of default or noncompliance with the applicable:

Sponsor-Initiated AffordabilitySponsor-Initiated AffordabilityVoluntary rent and income restrictions recorded against the Property by the Borrower to preserve or create multifamily affordable housing. Agreement; or
Affordable Regulatory AgreementAffordable Regulatory AgreementRegulatory, land use, extended use, or similar agreement or recorded restriction limiting rents, imposing maximum income restrictions on tenants, or placing other affordability restrictions on the use or occupancy of the Property (whether imposed by a government entity or self-imposed by a Borrower….

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must retain the annual compliance documentation in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. .

418.05	Low-Income Housing Tax Credits

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). is subject to a Low-Income Housing Tax CreditLow-Income Housing Tax CreditFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. allocation, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must obtain, at least once in each calendar year (and more often if directed by Fannie Mae):

copies of the tax and other compliance forms specified in Part III, Chapter 7: Multifamily Affordable Housing Properties; and
BorrowerBorrowerPerson who is the obligor per the Note. certifications 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 compliance with the requirements of the Internal Revenue Code regarding Low-Income Housing Tax CreditsLow-Income Housing Tax CreditsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. ; and
if the Low-Income Housing Tax CreditsLow-Income Housing Tax CreditsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. have not yet been syndicated, monthly reports from the BorrowerBorrowerPerson who is the obligor per the Note. detailing the BorrowerBorrowerPerson who is the obligor per the Note. ’s progress in syndicating the tax credit allocation until the syndication is completed.

If the BorrowerBorrowerPerson who is the obligor per the Note. indicated that the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). does not comply with all applicable regulatory requirements, 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 BorrowerBorrowerPerson who is the obligor per the Note. 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. . Neither Fannie Mae nor the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). is responsible for determining or ensuring the BorrowerBorrowerPerson who is the obligor per the Note. ’s compliance with Low-Income Housing Tax CreditLow-Income Housing Tax CreditFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. requirements. The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). also must comply with the information requirements of Part III, Chapter 7: Multifamily Affordable Housing Properties.

418.06	Enhanced Resident Services

The BorrowerBorrowerPerson who is the obligor per the Note. must annually recertify 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 submit each recertification to the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). within 75 days following the end of each 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. . The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must collect the initial certification and each recertification in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. . For any recertification failure, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must promptly notify 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. , or such other method indicated by Fannie Mae. Additionally, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must 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. 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). later achieves recertification. After recertification, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must then resume annual compliance monitoring at the end of each subsequent 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. .

418.07	Expanded Housing Choice

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 an Expanded Housing Choice pricing incentive requires additional monitoring. Per 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:

receive from the BorrowerBorrowerPerson who is the obligor per the Note. a Supplemental Annual Loan Agreement Certification (Expanded Housing Choice) (Form 6620.Supplemental.Expanded Housing Choice), including:
- a rent schedule or rent roll identifying all units where rent is paid using Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. ;
- a report for all rental applications seeking to use Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. , including:
  - the number of rental applications;
  - the current status; and
  - an explanation for all denied applications; and
- for the first annual Certification, complete lease files for at least 25% of the tenants paying rent using Housing Choice VouchersHousing Choice VouchersAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. ;
review Form 6620.Supplemental.Expanded Housing Choice and the rent roll for reasonableness and completeness, and notify Fannie Mae via a 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. of any Certification issues, including non-delivery;
within 30 days after receiving the first Form 6620.Supplemental.Expanded Housing Choice, compare the Housing Choice VoucherHousing Choice VoucherAny rental assistance payment or voucher to an eligible tenant under Section 8 of the United States Housing Act of 1938, 42 U.S.C. § 1437f, as amended. lease files to the rent roll and notify Fannie Mae via a 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. of any discrepancies;
ensure the BorrowerBorrowerPerson who is the obligor per the Note. conducts any Fair Housing training required by Fannie Mae for its employees;
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 Fair Housing training is not completed within the required timeframe;
notify the BorrowerBorrowerPerson who is the obligor per the Note. in writing of 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. and any required recapture of the pricing incentive;
submit a copy of any BorrowerBorrowerPerson who is the obligor per the Note. notice for recapturing the pricing incentive via 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. ; and
retain in its Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. , copies of:
- Form 6620.Supplemental.Expanded Housing Choice and the rent roll;
- the results of the rent roll and lease file review submitted with the first Form 6620.Supplemental.Expanded Housing Choice; and
- any BorrowerBorrowerPerson who is the obligor per the Note. notices required for:
  - Fair Housing training;
  - Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. default; or
  - pricing incentive recapture.

Fannie Mae:

may conduct Fair Housing testing 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. delivered with an Expanded Housing Choice pricing incentive;
will notify the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). if the Fair Housing testing or any other information reveals the BorrowerBorrowerPerson who is the obligor per the Note. is not complying with Part II, Chapter 1: Attributes and Characteristics, Section 101.02: Expanded Housing Choice; and
for any noncompliance, may:
- require the Borrower'sBorrower'sPerson who is the obligor per the Note. employees to complete Fair Housing training; and/or
- notify the BorrowerBorrowerPerson who is the obligor per the Note. it is in default and require the BorrowerBorrowerPerson who is the obligor per the Note. to repay the pricing incentive per the Multifamily Loan Agreement and Payment Guaranty (Pricing Incentive Recapture) (Form 6020.PIR).

418.08	HAP Contract Approval and Releasing Restabilization Reserve

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:

approve renewal of the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. during 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. term; and
waive any Loan DocumentLoan DocumentAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. provision requiring the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. to be fully funded by HUDHUDU.S. Department of Housing and Urban Development through 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. Maturity DateMaturity DateDate all amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. .

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must submit 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. a copy of the renewed HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. , and retain a copy in the Servicing FileServicing FileFile for each Mortgage Loan serviced by the Lender. , together with any BorrowerBorrowerPerson who is the obligor per the Note. request for release of the Restabilitzation Reserve.

Most disbursements from a Restabilization Reserve require Fannie Mae’s approval. 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 approve, without Fannie Mae’s consent, a BorrowerBorrowerPerson who is the obligor per the Note. request for a final disbursement, provided:

the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). has received written evidence that the HAPHAPHUD project-based Section 8 rental subsidy in the form of a Housing Assistance Payment contract. contract has been extended by HUDHUDU.S. Department of Housing and Urban Development through the Maturity DateMaturity DateDate all amounts due and owing under the Mortgage Loan become fully due and payable per the Loan Documents. with no material changes to its terms;
no default has occurred and is continuing under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. ; and
the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. explicitly allow a final disbursement under these conditions.