Section 203

Income Analysis

203.01	Underwritten Net Cash Flow (Underwritten NCF)

Guidance

When calculating the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. , you should:

use objective measures to determine the revenue generated and the expenses incurred;
use the best information available, including
- historical performance, and
- anticipated operations;
use best efforts to obtain operating statements for the prior 3 years;
obtain the prior full-year operating statement or, at a minimum, one covering the trailing 6 months (annualized);
request trailing 3-month physical and economic vacancy history if not included on the operating statement provided;
use best efforts to obtain a current aged receivables report, listing rent delinquencies at day
- 30,
- 60, and
- 90;
review operating statement and rent roll updates, ensuring no inexplicable variances compared to previously provided statements;
if variances are identified compared to previously provided statements, they should be
- investigated,
- reconciled, and
- documented in the Transaction Approval Memo; and
consider if the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). can achieve the Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. within 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , absent
- unexpected market conditions, or
- other unforeseen events.

You may, for:

acquisitions only, rely on the Borrower'sBorrower'sPerson who is the obligor per the Note. budgeted operating statements; and
all 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. , calculate the Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. more conservatively, if warranted by specific PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). circumstances.

Requirements

You must:

determine the reasonableness of the Property’sProperty’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). current income and expenses based on historical data from external real estate data aggregator services; and
use the following table to calculate Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. for all 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. unless another table is provided in the applicable Part III chapter based on the specific product.

REQUIRED UNDERWRITTEN NCF (CONVENTIONAL LOANS)
Item	Function	Description
CALCULATION OF NET RENTAL INCOME
1		GROSS RENTAL INCOME – actual rents in place for occupied units, plus market rents for vacant units based on a current rent roll (multiplied by 12). The PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). must have Stabilized Residential OccupancyStabilized Residential OccupancyPercentage of Property units physically occupied by Qualified Occupants, per Part II, Chapter 1: Attributes and Characteristics, Section 105.02: Qualified Occupants as adjusted for the applicable Part III products and features. by Qualified TenantsQualified TenantsParty occupying a dwelling unit in a Property in full compliance with a lease. . If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is located in New York City and subject to the J-51 Tax Incentive Program where the BorrowerBorrowerPerson who is the obligor per the Note. has decontrolled rent-stabilized units (a Decontrol EventDecontrol EventFor Properties located in New York City, an event that causes a property or unit to be removed from rent control but subject to rent-stabilization pursuant to New York City rent stabilization laws. ), you must adjust the current rents to reflect no rent decontrol benefits: Calculate the base rent as the rent amount per unit prior to the Decontrol EventDecontrol EventFor Properties located in New York City, an event that causes a property or unit to be removed from rent control but subject to rent-stabilization pursuant to New York City rent stabilization laws. date. Use the base rent for each applicable unit to determine the Gross Rental Income. Increase the base rent by the appropriate percentage allowed per New York City Rent Stabilization laws per annum through the present rent roll date.
2	PLUS	To the extent deducted as an operating expense, rents for other non-revenue units (e.g., model units deducted in the “model apartment” operating expense in the “general and administrative” category, or actual rent from employee units deducted in the “employee” operating expense in the “payroll and benefits” category).
	EQUALS	GROSS POTENTIAL RENT (GPR)
3	MINUS	Premiums (e.g., identifiable additional income from furnished units or short term leases) and/or corporate premiums (e.g., identifiable additional income from corporate units, housekeeping services, etc.).
4	MINUS	Physical vacancy – market rents for vacant units based on a current rent roll (multiplied by 12).¹
5	MINUS	Concessions - the aggregate amount of forgone residential rental income from incentives granted to tenants for signing leases, such as free rent for 1 or more months, move-in allowance, etc.¹
6	MINUS	Bad debt - the aggregate amount of unpaid rental income determined to be uncollectable, including any adjustments to other income for bad debt.¹
	EQUALS	NET RENTAL INCOME (NRI)²
1 The total of Items 4, 5, and 6 must equal the greater of the difference between the trailing 3-month net rental collections (annualized) and GPR, or 5% of GPR. 2 NRI must reflect projected operations for the underwriting period. a. You must assess the NRI using these parameters and fully support any changes: Assess the individual month NRI within the prior full-year operating statement or, at a minimum, an operating statement covering at least the trailing 6 months (annualized). If rents and collections are stable or increasing, and any negative fluctuation can be reconciled and adequately explained, you may use an NRI that exceeds the trailing 3-month NRI, provided the NRI does not exceed the highest 1-month NRI used in the trailing 3-month NRI calculation. b. You must assess declines in NRI using these parameters: Assess if any decline occurred in NRI for the trailing 3-month period compared to the trailing 6-month period and the trailing 12-month period. If the decline in NRI for the trailing 3-month period is greater than 2% compared to either the trailing 6-month period or the trailing 12-month period, you must adjust the NRI downward to an amount that is 2% less than the lowest NRI for the trailing 1-month, 3-month, 6-month, or 12-month period. You must make a minimum 2% adjustment to NRI; however, you are expected to make additional downward adjustments as appropriate to reflect current market conditions not reflected in historical operations.
CALCULATION OF OTHER INCOME
7	PLUS	Actual other income (except premiums and corporate premiums) generated through ongoing operations. The income must: be stable; be common in the market; exclude one-time extraordinary non-recurring items; and be supported by prior years. You must assess the individual month's other income within the prior full-year operating statement or, at a minimum, an operating statement covering at least the trailing 6 months (annualized). If there are fluctuations, you may use other income that exceeds the trailing 3-month other income (annualized), provided it does not exceed the highest 1-month other income used in the trailing 3-month other income calculation. When determining the other income, you must adjust Items 8 through 12, and include specific income for Items 13 through 15 when applicable.
CALCULATION OF COMMERCIAL INCOME
8	PLUS	Actual income from leased and occupied commercial space per Part II, Chapter 1: Attributes and Characteristics, Section 109: Commercial Leases.
9	PLUS	Actual income from STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… units.
10	MINUS	10% of the actual commercial space income (total of Items 8 plus 9).³
11	PLUS	Commercial parking income (e.g., public parking) that does not exceed actual trailing 12-month collections.³
3 If net commercial income is greater than 20% of EGI, then reduce to 20% of EGI.
12	PLUS	Premiums, provided that the income must: be stable or increasing; be typical (in type and amount) in the market; be supported by prior years; and not exceed the income generated over the most recent year or trailing 12-month period.
13	PLUS	Corporate premiums, provided that this income must: not be included for more than 10% of the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). units; be stable or increasing; be typical (in type and amount) in the market; be supported by prior years; and not exceed the income generated over the most recent year or trailing 12-month period.
14	PLUS	Laundry and vending.
15	PLUS	Parking - income from residential parking/garage spaces.
16	PLUS	All other income, including the following: application fees; cable; club house rental; fees charged tenants for returned checks due to insufficient funds (NSF); forfeited security deposits; late fees; miscellaneous; non-refundable fees; pet fees; reimbursements; storage; temporary tenants; utility; and other. The following must not be included: corporate tax and refunds; delinquency; Financial Accounting Standards Board 13 straight-line lease income; gain on sale; insurance proceeds; interest income; interest on security deposits; mobile home sales; partnership funds received; sales tax collected; security deposits collected; security deposits returned; straight-line lease income; and tax reimbursement from real estate taxes.
	EQUALS	EFFECTIVE GROSS INCOME (EGI)
CALCULATION OF OPERATING EXPENSES
17	MINUS	Line-by-line stabilized operating expenses. Stabilized operating expenses are the expenses during normal ongoing PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). operations, not affected by a lease-up, rehabilitation, or other short-term positive or negative factors. Non-recurring, extraordinary expenses must not be included. You must access: past operating history; the Appraiser'sAppraiser'sPerson engaged to estimate a Property’s market value per USPAP. expense analysis; all information available to you (including PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). contracts, utility bills, real estate tax assessments, insurance policies, and comparable assets); and the Borrower'sBorrower'sPerson who is the obligor per the Note. budget (in the case of an acquisition). You must: analyze historical operations at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ; and apply an appropriate increase over the prior year's operations in determining an estimate; and include all STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…-related expenses in their respective expense line items, including cleaning, furnishing, and repairs.
17(a)	MINUS	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 fee equal to the greatest of: 3% of EGIEGIOn 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 203: Income Analysis and the applicable products and features in Part III. ⁴; actual property management fee, provided you exclude any portion of a non-arm's length property management fee that is subordinated to 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. , and include any known contractual fee increases occurring over the next 24 months; or Appraiser'sAppraiser'sPerson engaged to estimate a Property’s market value per USPAP. concluded market property management fee.
4 Minimum property management fee may be 2.5% of EGI (rather than 3% of EGI) provided that the: underwritten management fee is at least $300 per unit; actual third-party management fee is equal to or less than the underwritten management fee; Mortgage Loan has an original principal amount greater than $3 million; and market management fees support the underwritten management fee for similarly sized properties.
17(b)	MINUS	Real estate taxes based on the greatest of: actual future tax bill(s) covering a full calendar year; prior full year's taxes multiplied by 103%; or in California, the sum of: any special assessments; plus the millage rate multiplied by the greater 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. amount, or assessed value. You must, for: any tax abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. expiring within 36 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , include fully assessed real estate taxes; any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). whose sale would trigger an automatic reassessment, include any expected increase; any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). with an annual or scheduled reassessment within 12 months after the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , include any expected increase; all PropertiesPropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). : use the most recently available assessed value (even if preliminary); and do not use expected results from a protest, unless the protest is legally binding on the BorrowerBorrowerPerson who is the obligor per the Note. and taxing authority. If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has real estate tax abatements, exemptions, deferrals, or PILOTsPILOTsPayment In Lieu Of Taxes. , they must: be in effect at closing, per written documentation from the state or local tax assessor; and survive a foreclosure on 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. such that Fannie Mae or a subsequent owner will retain the abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. (i.e., it is tied to the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and not the owner).
17 (b) continued	MINUS	If the timeframe for the real estate tax abatement, exemption, deferral, or PILOTPILOTPayment In Lieu Of Taxes. is shorter than 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, or begins phasing out or expires within 5 years after the Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. , you must consider: a Bifurcated Mortgage LoanBifurcated Mortgage LoanSingle Senior Mortgage Loan that is evidenced by 2 Notes with the same payment and collateral priority. structure (i.e., 2 notes secured by a single first LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. ); an amortization schedule that accommodates the elimination of the abatement; or providing clear justification and support in the refinance analysis.
17(c)	MINUS	Insurance equal to: the quoted expense, for insurance policies with a bona fide written quote from a reputable broker for a new 12-month policy; or for insurance policies with a remaining term of: less than 6 months, 110% of the current expense; or 6 to 12 months, 105% of the current expense. For an acquisition: only underwrite premiums from the purchaser's carrier; and disregard the seller's current insurance premiums, or estimates. If the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). area is prone to Catastrophic EventsCatastrophic EventsNatural or man-made hazard resulting in an event of substantial extent causing significant physical damage or destruction, loss of life, or drastic change to the natural environment, such as earthquake, flood, terrorist attack, or windstorm. , ensure the expense aligns with the market.
17(d)	MINUS	Utilities, including the following: building lights; dumpster rental; electricity; fuel oil; heat; natural gas; non-common area electric; parking lot electric; parking lot lights; septic; trash removal (including contract); utilities; vacant unit utilities; and other.
17(e)	MINUS	Water and sewer.
17(f)	MINUS	Repairs and maintenance, including the following: appliances; building; carpet; cleaning; common area maintenance; decorating; electrical; elevator; equipment repairs; exterminating services; floor covering replacement; HVAC; janitorial; landscaping (exterior); landscaping (interior/plants); lawn and grounds; lock/keys; maid service; make ready; mechanical; painting; parking lot; parking lot lighting repair; pest control; plumbing; pool; rubbish removal; scavenger; snow removal; supplies; supplies (cleaning); turnover; vacancy preparation; water irrigation; water treatment; window covering repair/replacement (minor); and other.
17(g)	MINUS	Payroll and benefits, including the following: 401k; bonuses; contract labor (carpet cleaning); contract labor (make ready); contract work; custodian salary; employee benefits; employee expense; employee insurance; FICA; health benefits; labor plumbing; manager salaries; payroll and benefits; payroll and processing; payroll taxes; salaries; salaries maintenance; security personnel's salary; subcontracted labor; temporary help; unemployment insurance; worker's compensation; and other.
17(h)	MINUS	Advertising and marketing, including the following: apartment finder/guide; banners; brochures; building signage; finder's fee; media commissions; newspaper ads; promotions; resident relations; signage; supplies (marketing); tenant relations; Yellow Pages; and other.
17(i)	MINUS	Professional fees, including the following: accounting or tax preparation fees; architectural fees; attorney fees; bookkeeping fees; engineering fees; legal fees/expense; professional fees; and other.
17(j)	MINUS	General and administrative, including the following: ad valorem tax; administrative fee; alarm system; answering service; auto leasing; auto repairs; bank charges; broker commission/fees; business license; cable; cell phone/pager; commissions; computer repairs; courtesy patrol; credit check; donations; education; entertainment; equipment lease/rental; eviction expense; fire extinguisher; freight and shipping; leased equipment; leasing commissions; leasing office expense; licenses; life safety;
17 (j) continued	MINUS	mileage; miscellaneous general and administrative expenses; model apartment; moving expense; office supplies; office unit (non-revenue unit); permits; personal property taxes; postage; printing; public relations; rental commissions; rental expense; security; security vehicle and maintenance vehicle; space designs and drawings; subscription dues; telephone; travel; truck repairs; uniform service; utility vehicle; vehicle lease; vehicle repair and expense; and other.
17(k)	MINUS	Other expenses, including the following: ancillary expense; franchise taxes and fees; general building; miscellaneous; ongoing costs associated with any Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. ; other expenses/costs; and for STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer…: taxes, fees, etc. imposed by the governing jurisdiction; and if applicable, the difference in actual lease STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… income and an equivalent market rate apartment rent (as if leased as an apartment unit). For example, if actual lease STRSTRProperty permitting leases or master leases (including subleases, licenses, and other possessory interests, whether oral or written) of an individual dwelling unit where the intended occupancy of the unit is for less than 30 days, regardless of the stated lease term, such as through a peer-to-peer… income for a unit is $1,000 and market rate residential rent for that unit is $900, then deduct $1,200 ($1,000 - $900 = $100 x 12 months) as an "other" expense. Do not include the following: amortization; depreciation; entity (i.e., filing, license, etc.); financing fees; initial or upfront costs associated with any Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. ; interest; legal fees associated with securing 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. ; life insurance; owner's draw; partnership fees; principal payments on any loan; sales tax paid; and trust account fees.
18	MINUS	For a CondominiumCondominiumStatutorily established Property ownership regime where Condominium Documents designate: individual units for separate ownership; and common areas for shared use and joint ownership by the unit owners. PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). or a Shared Use PropertyShared Use PropertyProperty subject to Shared Use Documents: benefiting the Property by granting the right to use Essential Elements on common areas created by, or other properties subject to, the Shared Use Documents, and/or burdening the Property by: subjecting it to: property-use or other…: annual assessment fees, including any expected assessment fee escalation; and any known special assessments.
19	MINUS	Ground rent for any Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. or any master lease. Ground LeaseGround LeaseContract for the rental of land, usually on a long term basis. bonus rent and/or escalations during 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. must be considered when calculating Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. and analyzing refinance risk.
	EQUALS	UNDERWRITTEN NOI
20	MINUS	Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense, including a minimum annual amount of $200 per unit, or greater amount if required in Part II, Chapter 4: Inspections and Reserves, Section 405: Replacement Reserve. Replacement ReserveReplacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense must be included whether the escrow is funded or not.
	EQUALS	UNDERWRITTEN NCF

203.02	Underwritten DSCR

Requirements

You must calculate Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and… per the following table.

Item	Function	Description
1		Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. per Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF).
2	DIVIDED BY	Annual debt service 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. amount. You must base debt service on a level debt service payment, including amortization, and the greater of the actual note rate, or required Underwriting Interest Rate Floor per Form 4660.

Item

Function

Description

per Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF).

DIVIDED BY

Annual debt service 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. amount.

You must base debt service on a level debt service payment, including amortization, and the greater of the

actual note rate, or
required Underwriting Interest Rate Floor per Form 4660.

When calculating Underwritten DSCRUnderwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and… 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 an interest-only period, you must use the same level debt service payment, including amortization, regardless of the length of the interest-only period.

The Underwriting Interest Rate Floor, if applicable, is the lowest interest rate you may use to determine 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. amount.

If the Gross Note RateGross Note RateInterest rate stated in the Loan Documents. is below the required Underwriting Interest Rate Floor, per Form 4660, you must use the Underwriting Interest Rate Floor to establish the permitted 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. amount.

All underwriting TierTierTier 1, Tier 2, Tier 3, or Tier 4 per the Multifamily Underwriting Standards (Form 4660). requirements must be based on the Underwritten NCFUnderwritten NCFNet Cash Flow as adjusted by the Lender per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. .