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Part I
Mortgage Loan
  • Chapter 1
    Overview
    • Section 101
      Using the Guide
      • 101.01 Organization
      • 101.02 References
    • Section 102
      Delegation and Underwriting
    • Section 103
      Transaction Approval Memo
    • Section 104
      Representations
  • Chapter 2
    Mortgage Loan
    • Section 201
      Registration and Multifamily Affordability Estimator
    • Section 202
      Delegated Mortgage Loans
    • Section 203
      Pre-Review Mortgage Loans
    • Section 204
      Letters of Credit
      • 204.01 Generally
      • 204.02 Issuers and Ratings
      • 204.03 Verifying Issuer Ratings
      • 204.04 Restrictions on Issuer Collateral
      • 204.05 Drawing on Letter of Credit
  • Chapter 3
    Borrower, Guarantor, Key Principals, and Principals
    • Section 301
      Generally
    • Section 302
      Borrower Organizational Structure
      • 302.01 Single-Asset Entity
      • 302.02 Co-Tenant Borrowers
        • 302.02 A Tenancy-in-Common Agreement
        • 302.02 B Key Principal Execution of Guaranty
      • 302.03 Joint and Several Borrowers with Multiple Properties
    • Section 303
      Key Principals, Principals, and Guarantors
      • 303.01 Generally
      • 303.02 Entity Review
      • 303.03 Fund Review
    • Section 304
      Limited Experience Owner
    • Section 305
      Financial Statements
    • Section 306
      Schedule of Real Estate Owned (SREO)
    • Section 307
      Certifications
      • 307.01 Multifamily Underwriting Certificate (Form 6460)
      • 307.02 Brokered Transaction Certifications
    • Section 308
      Fraudulent Conveyance
    • Section 309
      Applicant Experience Check
    • Section 310
      Compliance
    • Section 311
      Execution of Non-Recourse Guaranty
    • Section 312
      Conflict Mortgage Loans
      • 312.01 Description
      • 312.02 Restrictions
        • 312.02 A Underwriting
        • 312.02 B Servicing
        • 312.02 C No First Right of Refusal
        • 312.02 D Additional Disclosure
        • 312.02 E Notifications
Part II
Property
  • Chapter 1
    Attributes and Characteristics
    • Section 101
      Eligible Properties
    • Section 102
      Multiple Properties
      • 102.01 Single Borrower Ownership
      • 102.02 Joint and Several Borrower Ownership
    • Section 103
      Property Ownership; Leasehold
    • Section 104
      Ground Leased Properties
      • 104.01 Generally
      • 104.02 Ground Lease Rents
      • 104.03 Ground Lease Estoppel Certificate
      • 104.04 Ground Lease Review
    • Section 105
      Minimum Occupancy
      • 105.01 Residential Occupancy
      • 105.02 Qualified Occupants
    • Section 106
      Certificates of Occupancy
    • Section 107
      Phased Properties
    • Section 108
      Shared Use Properties
      • 108.01 Eligibility
      • 108.02 Documents
        • 108.02 A Loan Documents
        • 108.02 B Shared Use Documents
    • Section 109
      Commercial Leases
      • 109.01 Material Commercial Leases
        • 109.01 A Lease Review
        • 109.01 B Lease Approval
        • 109.01 C Lease Modifications
        • 109.01 D Tenant Estoppel Certificate
        • 109.01 E Subordination, Non-Disturbance and Attornment
      • 109.02 Non-Material Commercial Leases
        • 109.02 A Tenant Estoppel Certificate; Lease Modification
        • 109.02 B Non-Material Commercial Lease Types
      • 109.03 Short Term Rentals
    • Section 110
      Renewable Energy Generation Systems
      • 110.01 Acceptable Renewable Energy Generation Systems
      • 110.02 Solar Photovoltaic Systems
      • 110.03 Solar PV System Module
      • 110.04 Underwritten NCF
    • Section 111
      Oil/Gas Wells and Mineral Exploration
      • 111.01 Active Oil and Gas Wells
      • 111.02 Inactive Oil and Gas Wells
    • Section 112
      Property Management and Agreement
      • 112.01 Property Management
      • 112.02 Property Management Agreement
  • Chapter 2
    Valuation and Income
    • Section 201
      Market Analysis
    • Section 202
      Appraisal and Valuation
      • 202.01 Lender Appraisal Function
      • 202.02 Appraisals
        • 202.02 A Appraiser Selection
        • 202.02 B Permissible Appraiser Communications
        • 202.02 C Appraiser Independence
        • 202.02 D Valuation Date
        • 202.02 E Appraisals Ordered by Another Lender
        • 202.02 F Lender Appraisal Review
        • 202.02 G Subsequent Appraisals
        • 202.02 H Appraiser Discontinuance or Misconduct
      • 202.03 Valuation
        • 202.03 A Appraised Value
        • 202.03 B Property's Sale History
        • 202.03 C Underwriting Value
    • Section 203
      Income Analysis
      • 203.01 Underwritten Net Cash Flow (Underwritten NCF)
      • 203.02 Underwritten DSCR
    • Section 204
      Refinance Risk Analysis
      • 204.01 Base Assumptions
      • 204.02 Alternative Assumptions
    • Section 205
      Cash Out Analysis
    • Section 206
      Borrower Business Plan
    • Section 207
      Rent-Stabilized Properties
  • Chapter 3
    Legal Compliance
    • Section 301
      Zoning and Legally Non-Conforming Status
      • 301.01 Zoning
      • 301.02 Legal Non-Conforming Use
      • 301.03 Legal Non-Conforming Characteristics
    • Section 302
      Easements
    • Section 303
      Liens and Encumbrances
      • 303.01 Generally
      • 303.02 Property Previously Secured Bond Financing
    • Section 304
      Title Insurance
    • Section 305
      Survey
      • 305.01 Decision to Obtain a Survey
      • 305.02 Survey
      • 305.03 Decision Not to Obtain a Survey
      • 305.04 Location of Improvements
    • Section 306
      Security Interests in Personal Property
      • 306.01 Uniform Commercial Code (UCC) Financing Statements
      • 306.02 Creating and Perfecting the Security Interest
  • Chapter 4
    Lease Audits, Inspections, and Reserves
    • Section 401
      Lease Audit
      • 401.01 Generally
      • 401.02 Lease Audit Notification
      • 401.03 Validating Rent Collections, Bad Debt, and Secondary Income
    • Section 402
      Site Inspections
      • 402.01 Physical Inspections
        • 402.01 A Generally
        • 402.01 B Selecting Units
        • 402.01 C Inspection Notification
      • 402.02 Capital Item Replacements
    • Section 403
      Brokered Transactions
    • Section 404
      Property Condition Assessment (PCA)
      • 404.01 When to Perform a PCA
      • 404.02 Date of PCA Report and PCA Site Visit
      • 404.03 Conducting the PCA
    • Section 405
      Completion/Repairs
      • 405.01 Property Evaluation
      • 405.02 Completion/Repairs Funding
      • 405.03 Life Safety Issues
      • 405.04 Verifying Completion/Repairs
    • Section 406
      Replacement Reserve
      • 406.01 Determining Replacement Reserve
      • 406.02 Replacement Reserve Funding
      • 406.03 Alternative Replacement Reserve Funding
    • Section 407
      Escrow Requirements for Taxes and Insurance
      • 407.01 Escrows
      • 407.02 Real Estate Tax Escrow Funding
      • 407.03 Insurance Escrow Funding
  • Chapter 5
    Property and Liability Insurance
    • Section 501
      Property and Liability Insurance
      • 501.01 General Insurance – Applies to All Policies
        • 501.01 A Generally
        • 501.01 B Blanket and Other Policies Covering Multiple Properties
        • 501.01 C Risk Retention Groups and Captive Insurance
        • 501.01 D Insurance Carrier Rating
        • 501.01 E Term
        • 501.01 F Payment of Premium
        • 501.01 G Evidence of Insurance
        • 501.01 H Insurance Exceptions
      • 501.02 Property Insurance
        • 501.02 A Minimum Coverage Amounts
        • 501.02 B Aggregate Deductibles
        • 501.02 C Business Income (including Rental Value) Insurance
        • 501.02 D Ordinance or Law Insurance
        • 501.02 E Boiler and Machinery / Equipment / Mechanical Breakdown Insurance
        • 501.02 F Builder’s Risk Insurance
        • 501.02 G Fidelity Bond / Crime Insurance
        • 501.02 H Regional Perils Insurance
      • 501.03 Catastrophic Risk Insurance
        • 501.03 A Generally
        • 501.03 B Windstorm Insurance
        • 501.03 C Flood Insurance
        • 501.03 D Earthquake Insurance
        • 501.03 E Terrorism Insurance
      • 501.04 Liability Insurance
        • 501.04 A Commercial General Liability Insurance
        • 501.04 B Professional Liability Insurance
        • 501.04 C Workers’ Compensation Insurance
        • 501.04 D Directors’ and Officers’ Liability Insurance
        • 501.04 E Commercial Auto Liability Insurance
    • Section 502
      Environmental Matters
      • 502.01 Environmental Site Assessments
      • 502.02 Lender’s Responsibilities
      • 502.03 Environmental Indemnity Agreement
    • Section 503
      Seismic Risk
      • 503.01 Seismic Hazard and Risk Factors
      • 503.02 Seismic Risk Assessment (SRA)
      • 503.03 Acceptable Levels of Seismic Risk
      • 503.04 Seismic Retrofit Ordinances
      • 503.05 Seismic Risk Mitigants
Part III
Products and Features
  • Chapter 1
    Student Housing Properties
    • Section 101
      Description
      • 101.01 Student Housing Property
      • 101.02 Dedicated Student Housing Property
    • Section 102
      Generally
    • Section 103
      Dedicated Student Housing Property
      • 103.01 Eligible Property Characteristics
      • 103.02 Ineligible Property Characteristics
      • 103.03 Residential Leases
      • 103.04 Properties on College/University Land
      • 103.05 Additional Underwriting Documentation
    • Section 104
      Underwritten NCF
    • Section 105
      Replacement Reserve
      • 105.01 Determining Replacement Reserve
      • 105.02 Replacement Reserve Funding
  • Chapter 2
    Military Housing Properties
    • Section 201
      Description
    • Section 202
      Ineligible Property Types
    • Section 203
      Generally
  • Chapter 3
    Moderate Rehabilitation Mortgage Loans
    • Section 301
      Description
    • Section 302
      Underwriting
    • Section 303
      Rehabilitation Work Costing More than $20,000 Per Unit
      • 303.01 Rehabilitation Work Evaluation Report
      • 303.02 Rehabilitation Reserve Agreement
    • Section 304
      Supplemental Mortgage Loans
  • Chapter 4
    Green Mortgage Loans
    • Section 401
      Generally
      • 401.01 Description
      • 401.02 High Performance Building Module
      • 401.03 Technical Solar Report
      • 401.04 Green MBS
      • 401.05 Committing and Delivery
    • Section 402
      Green Building Certification
    • Section 403
      Green Rewards Mortgage Loans
      • 403.01 Eligibility
        • 403.01 A Generally
        • 403.01 B HPB Module, HPB Report, and Technical Solar Report Scoring
        • 403.01 C HPB Module, HPB Report, and Technical Solar Report Approval
        • 403.01 D Non-Contiguous Parcels
      • 403.02 Implementing Efficiency Measures
        • 403.02 A Generally
        • 403.02 B Solar PV System
      • 403.03 Underwritten NCF
      • 403.04 Maximum Amount
      • 403.05 Supplemental Mortgage Loans
    • Section 404
      Annual Energy Reporting
  • Chapter 5
    Seniors Housing Properties
    • Section 501
      Generally
      • 501.01 Description
      • 501.02 Eligible Lenders
      • 501.03 Key Principal/Sponsor Experience
    • Section 502
      Eligible Properties
      • 502.01 Eligible Properties
      • 502.02 Ineligible Properties
    • Section 503
      Continuing Care Retirement Communities (CCRCs)
    • Section 504
      Seniors Housing Property Income
      • 504.01 Underwritten NCF
      • 504.02 Skilled Nursing NCF Test
      • 504.03 Operating Lease Ratios
      • 504.04 Operating Lease Analysis
    • Section 505
      Replacement Reserve
    • Section 506
      Medicaid Funds
      • 506.01 Dependency and Medicaid Transition Reserve
      • 506.02 State Medicaid
    • Section 507
      Consultant Reports
      • 507.01 Management, Operations, and Regulatory Compliance
      • 507.02 Management and Operations Reports
      • 507.03 Regulatory Compliance Report
  • Chapter 6
    Manufactured Housing Communities
    • Section 601
      Description
    • Section 602
      Lender Eligibility
    • Section 603
      Legal and Property Compliance
      • 603.01 Borrower and the MH Community
        • 603.01 A Borrower Ownership
        • 603.01 B Collateral; Tenant-Occupied and Affiliate-Owned Homes
        • 603.01 C MH Community
      • 603.02 MH Community Score
      • 603.03 Code Standards
      • 603.04 Flood Zone
        • 603.04 A Rising Water
        • 603.04 B Moving Water
      • 603.05 Lease Terms
        • 603.05 A Master Leases
        • 603.05 B MH Site Leases
        • 603.05 C Loan Document Modification
    • Section 604
      Property Insurance
    • Section 605
      Survey
      • 605.01 Public Roadways, Private Interior Roadways, and Drives
      • 605.02 Setbacks
      • 605.03 Encroachments
    • Section 606
      Property Income and Underwritten NCF
    • Section 607
      Replacement Reserve
  • Chapter 7
    Multifamily Affordable Housing Properties
    • Section 701
      Generally
      • 701.01 Description
      • 701.02 Eligible Lenders
    • Section 702
      MAH Property Eligibility
      • 702.01 Eligible Characteristics and Underwriting
      • 702.02 Ineligible Characteristics and Underwriting
    • Section 703
      Property Income and Underwriting
      • 703.01 Underwritten NCF
      • 703.02 Underwriting
        • 703.02 A Appraised Value and Underwriting Value
        • 703.02 B Market Study
        • 703.02 C Affordable Regulatory Agreement Restrictions
        • 703.02 D 35-Year Amortization
        • 703.02 E LIHTC Income Averaging
        • 703.02 F Initial LIHTC Equity
        • 703.02 G Developer Fees
        • 703.02 H Rent-Stabilized Units
    • Section 704
      Subordinate Financing
      • 704.01 Interest Rate and Payments
      • 704.02 Loan Term
      • 704.03 Collateral and Credit Support
      • 704.04 Soft Financing
      • 704.05 Subordinate Lender
      • 704.06 Developer's Notes
      • 704.07 Subordination Agreement
      • 704.08 Lien Priority and Title Insurance Policy
      • 704.09 Form of Subordinate Loan Documents
      • 704.10 Prepayment
      • 704.11 LIHTC Equity Bridge Loans
    • Section 705
      Restrictive Covenants and Affordable Regulatory Agreements
    • Section 706
      ROAR Loan
      • 706.01 Generally
      • 706.02 Timing
      • 706.03 General Underwriting
      • 706.04 Additional Underwriting and Loan Documents
    • Section 707
      HAP Contract Properties
      • 707.01 Properties with Both HAP Contracts and LIHTC Units
      • 707.02 Restabilization Reserve
      • 707.03 HAP Contract Review Sheet
    • Section 708
      Refinancing Section 236 Properties – IRP is Maintained
      • 708.01 No Additional Proceeds
      • 708.02 Additional Proceeds from Mortgage Loan
      • 708.03 Additional Proceeds from Other Sources
    • Section 709
      LIHTC Properties – Lender Equity Interest
    • Section 710
      Transactions with Fannie Mae Debt and Equity Interests
      • 710.01 Transactions Funded with Tax-Exempt Bond Proceeds
      • 710.02 Fannie Mae Credit-Enhanced Tax-Exempt Bond Issuance
    • Section 711
      FHA Risk Sharing
      • 711.01 Description
      • 711.02 Eligibility
        • 711.02 A Borrowers, Key Principals, Guarantors, and Principals
        • 711.02 B Generally
        • 711.02 C Cash Out
      • 711.03 Mortgage Insurance Premium
      • 711.04 Subsidy Layering Review
      • 711.05 Lender FHA Risk Sharing Reserve and Loss Sharing Modifications
  • Chapter 8
    Cooperative Properties
    • Section 801
      Description
    • Section 802
      Eligible Mortgage Loans
      • 802.01 Basic Conditions
      • 802.02 Financial Conditions
      • 802.03 Property Management Conditions
      • 802.04 Other Considerations
    • Section 803
      Underwriting
      • 803.01 Financial Operation
      • 803.02 Property Valuation
      • 803.03 Subordinate Debt
    • Section 804
      Income Analysis
      • 804.01 Cooperative Market Rental Basis NCF (Underwritten NCF)
      • 804.02 Cooperative Market Rental Basis DSCR (Underwritten DSCR)
      • 804.03 Actual Cooperative Property NCF
      • 804.04 Actual Cooperative Property DSCR
    • Section 805
      Limited Equity Cooperative Properties
  • Chapter 9
    Small Mortgage Loans
    • Section 901
      Generally
      • 901.01 Description
      • 901.02 Applicability
    • Section 902
      Key Principal Guaranty Obligation
    • Section 903
      Occupancy
    • Section 904
      Corporate Leases; Leases to One Entity
    • Section 905
      Property Income Analysis
      • 905.01 Small Mortgage Loan Underwritten NCF (Underwritten NCF)
      • 905.02 Underwritten DSCR
    • Section 906
      Property Management
    • Section 907
      Property Condition
      • 907.01 Lender's Site Inspection and Lease Audit
      • 907.02 Site Inspection by Borrower
      • 907.03 PCA
    • Section 908
      Replacement Reserve
    • Section 909
      Environmental Matters and Inspections
    • Section 910
      Borrower, Key Principals, Guarantors, and Principals
      • 910.01 Borrower Organizational Structure
      • 910.02 Co-Tenant Borrowers
      • 910.03 Key Principals
      • 910.04 Principals
      • 910.05 Financial Statements
      • 910.06 Net Worth and Liquid Assets
    • Section 911
      Credit Reports
      • 911.01 Credit Report
      • 911.02 FICO Scoring
      • 911.03 Reviewing the Credit Report
  • Chapter 10
    Healthy Housing Rewards
    • Section 1001
      Healthy Housing Rewards
    • Section 1002
      Healthy Design
    • Section 1003
      Enhanced Resident Services
  • Chapter 11
    Adjustable Rate Mortgage (ARM) Loans
    • Section 1101
      Description
    • Section 1102
      Underwriting
    • Section 1103
      Prepayment Terms
      • 1103.01 Generally
      • 1103.02 1% Prepayment Premium Schedule
    • Section 1104
      ARM 5/5 Loan Optional 5-Year Adjustable Rate Term Renewal Eligibility
  • Chapter 12
    Structured Adjustable Rate Mortgage (SARM) Loans
    • Section 1201
      Description
    • Section 1202
      Underwriting
    • Section 1203
      Actual Amortization Calculation
    • Section 1204
      Prepayment Terms
      • 1204.01 Generally
      • 1204.02 Prepayment Option 1 – Declining Prepayment Premium Schedule
      • 1204.03 Prepayment Option 2 - 1% Prepayment Premium Schedule
    • Section 1205
      Interest Rate Caps
      • 1205.01 Generally
      • 1205.02 Determining the Cap Strike Rate
      • 1205.03 Establishing Interest Rate Cap Reserves
      • 1205.04 Interest Rate Cap Contract Documentation and Delivery
  • Chapter 13
    Hybrid Adjustable Rate Mortgage (Hybrid ARM) Loans
    • Section 1301
      Description
    • Section 1302
      Interest Rate Conversion Date
    • Section 1303
      Prepayment Terms
    • Section 1304
      Monthly Principal and Interest Payments
      • 1304.01 During the Fixed Rate Term
      • 1304.02 On the Hybrid ARM Loan Conversion Date
      • 1304.03 During the Adjustable Rate Term
  • Chapter 14
    Supplemental Mortgage Loans
    • Section 1401
      Description
    • Section 1402
      Supplemental Mortgage Loans
      • 1402.01 Description
      • 1402.02 Coterminous and Non-Coterminous
      • 1402.03 Loan Amount
        • 1402.03 A Maximum Loan Amount
        • 1402.03 B Calculating the Debt Service
        • 1402.03 C Calculating the DSCR and LTV
        • 1402.03 D New Loan Test
      • 1402.04 Tier Dropping
        • 1402.04 A Designating
        • 1402.04 B Eligibility
        • 1402.04 C Ineligible Mortgage Loans
      • 1402.05 Streamlined Underwriting
        • 1402.05 A Property
        • 1402.05 B Borrower, Guarantor, Key Principals, and Principals
  • Chapter 15
    Split Mortgage Loans and Bifurcated Mortgage Loans
    • Section 1501
      Description
    • Section 1502
      Characteristics
  • Chapter 16
    Mezzanine Financing and Preferred Equity
    • Section 1601
      Mezzanine Financing
      • 1601.01 Description
        • 1601.01 A Eligible Mortgage Loans
        • 1601.01 B Eligible Terms
        • 1601.01 C Loss Sharing
        • 1601.01 D Lender's Loan Application
      • 1601.02 Underwriting
      • 1601.03 Submission
        • 1601.03 A Materials
        • 1601.03 B Data
      • 1601.04 Intercreditor Agreement
      • 1601.05 Servicing
    • Section 1602
      Preferred Equity
  • Chapter 17
    Structured Transactions
    • Section 1701
      Description
    • Section 1702
      Credit Facilities
    • Section 1703
      Bulk Deliveries
  • Chapter 18
    Choice Refinance Loans
    • Section 1801
      Eligibility
    • Section 1802
      Lender Delegation
    • Section 1803
      Prepayment Premiums
    • Section 1804
      Streamlined Underwriting
      • 1804.01 Environmental Site Assessment
      • 1804.02 Radon Testing
      • 1804.03 Survey
      • 1804.04 Borrower Structure and Experience
      • 1804.05 Borrower Credit
      • 1804.06 Property Management
      • 1804.07 Replacement Reserve
      • 1804.08 Real Estate Tax and Insurance Escrows
    • Section 1805
      Property Ownership Change
  • Chapter 19
    Bond Transactions and Credit Enhancement Mortgage Loans
    • Section 1901
      Description
    • Section 1902
      Outside Counsel
      • 1902.01 Engagement
      • 1902.02 Fees
    • Section 1903
      Third Parties
      • 1903.01 Generally
      • 1903.02 Remarketing Agent
    • Section 1904
      Legal Documents
      • 1904.01 Generally
      • 1904.02 Credit Enhancement Instrument
      • 1904.03 MBS for Bonds
      • 1904.04 Affordable Regulatory Agreements
    • Section 1905
      Fannie Mae LIHTC Investment in Credit-Enhanced Bonds
    • Section 1906
      Credit Enhancing Fixed Rate Bonds
      • 1906.01 Terms
      • 1906.02 Multiple Fixed Rate Bonds
    • Section 1907
      Credit Enhancing Variable Rate Bonds
      • 1907.01 Terms
      • 1907.02 Principal Reserve Fund
      • 1907.03 Interest Rate Cap
      • 1907.04 Cap Strike Rate
      • 1907.05 Cap Cost Factor Included in Maximum Note Rate
      • 1907.06 Interest Rate Cap Reserve
      • 1907.07 Interest Rate Cap Reserve Adjustments
      • 1907.08 Interest Rate Cap Contract Documentation and Delivery
    • Section 1908
      Facility Fee
    • Section 1909
      Taxable Tails and Supplemental Mortgage Loans
      • 1909.01 Taxable Tails
      • 1909.02 Supplemental Mortgage Loans
    • Section 1910
      Third-Party Subordinate Financing
    • Section 1911
      Moderate Rehabilitation Mortgage Loan with Side-by-Side Bond Financing
  • Chapter 20
    Forward Commitments
    • Section 2001
      Generally
      • 2001.01 Description
      • 2001.02 Eligible Properties
    • Section 2002
      Funded Forward Commitments
    • Section 2003
      Unfunded Forward Commitments
      • 2003.01 Terms and Interest Rate Determination
        • 2003.01 A Terms
        • 2003.01 B Interest Rate Determination and Rate Lock
      • 2003.02 Good Faith Deposit and Fees
        • 2003.02 A Good Faith Deposit
        • 2003.02 B Fees
      • 2003.03 Forward Commitment Underwriting
        • 2003.03 A Generally
        • 2003.03 B Construction and Feasibility Review
        • 2003.03 C Third-Party Reports
      • 2003.04 Commitment
      • 2003.05 Construction Period
        • 2003.05 A Monitoring
        • 2003.05 B Reporting
        • 2003.05 C Forward Commitment Extensions
      • 2003.06 Construction Completion
      • 2003.07 Permanent Loan Final Underwriting
        • 2003.07 A Generally
        • 2003.07 B Stabilized NCF
        • 2003.07 C Final Permanent Mortgage Loan Amount
        • 2003.07 D Third-Party Reports
      • 2003.08 Conversion
        • 2003.08 A Eligibility
        • 2003.08 B Timeline
      • 2003.09 MBS Issuance
      • 2003.10 Forward Commitment Termination
  • Chapter 21
    Condominium Properties
    • Section 2101
      Eligible Mortgage Loans
    • Section 2102
      Control
    • Section 2103
      Loan Documents
  • Chapter 22
    Sponsor-Dedicated Workforce (SDW) Housing Properties
    • Section 2201
      Description
    • Section 2202
      Compliance
  • Chapter 23
    Expanded Housing Choice
Part IV
Committing and Delivery
  • Chapter 1
    Pricing, Fees, and Prepayment Premiums
    • Section 101
      Pricing
    • Section 102
      Fees
    • Section 103
      Prepayment Premiums
  • Chapter 2
    Rate Lock and Committing
    • Section 201
      Pre-Commitment
      • 201.01 Borrower Commitment
      • 201.02 Trading Agreements
      • 201.03 Trading Practices
    • Section 202
      Obtaining a Rate Lock
      • 202.01 Rate Lock Period
      • 202.02 Rate Lock Amount
      • 202.03 Locking the Rate
    • Section 203
      Good Faith Deposits
      • 203.01 Borrower Deposit
      • 203.02 Minimum Good Faith Deposit
      • 203.03 Good Faith Deposit and Breakage Fees
    • Section 204
      Commitments
      • 204.01 Submission
      • 204.02 Confirmation
      • 204.03 Modifications
        • 204.03 A Change Requests
        • 204.03 B Rate Lock Extensions
        • 204.03 C Commitment Extensions
    • Section 205
      ASAP Options
  • Chapter 3
    Streamlined Rate Lock
    • Section 301
      Description
      • 301.01 Eligibility
      • 301.02 Timing
    • Section 302
      Preliminary Underwriting
    • Section 303
      Rate Lock
    • Section 304
      Commitment
    • Section 305
      Rate Lock and Commitment Extensions
    • Section 306
      Full Underwriting
      • 306.01 Rate Lock or Commitment Amount Changes
      • 306.02 Mortgage Loan Delivery Package
      • 306.03 Post-Underwriting Scenarios
    • Section 307
      Dual Commitment Option
      • 307.01 Description
      • 307.02 Additional Proceeds
  • Chapter 4
    Delivery
    • Section 401
      Delivery Deadline
    • Section 402
      Submission
      • 402.01 Data and Documents
      • 402.02 Participation Interests
    • Section 403
      Warehouse Lender
    • Section 404
      Wiring
      • 404.01 Wiring Instructions
      • 404.02 Wiring Payee Codes
    • Section 405
      Delivery
      • 405.01 Acceptability and Delivery Tolerance
      • 405.02 Data Changes
    • Section 406
      MBS Delivery Options
    • Section 407
      Delivery Problems and Changes
      • 407.01 Delivery Problems
      • 407.02 Changing the Book-Entry Date
    • Section 408
      Delivery Failure
  • Chapter 5
    Purchase
    • Section 501
      Generally
      • 501.01 Cash and MBS
      • 501.02 Delivery and Purchase
      • 501.03 C&D Purchase Notification
      • 501.04 Fannie Mae Loan Number
    • Section 502
      Purchase Amount
    • Section 503
      Third Party MBS Investor Delivery Scenarios
    • Section 504
      MBS Mortgage Loan Disclosure
      • 504.01 Multifamily MBS Prospectus
      • 504.02 Additional Disclosure
      • 504.03 Disclosure Obligations
    • Section 505
      ASAP
  • Chapter 6
    Structured Transactions
    • Section 601
      Registration
    • Section 602
      Approval
      • 602.01 Approval Documents
      • 602.02 Expiration Dates
      • 602.03 Fees
      • 602.04 Rate Lock
      • 602.05 Loan Documents
    • Section 603
      Commitment
      • 603.01 Generally
      • 603.02 MBS Mortgage Loans
      • 603.03 Cash Mortgage Loans
    • Section 604
      Delivery
      • 604.01 Delivery Process
      • 604.02 MSFMS Data Errors
    • Section 605
      MBS Disclosure
    • Section 606
      Features and Activities
      • 606.01 Process
      • 606.02 Asset Management Activities
  • Chapter 7
    Variable Rate Conversions and Renewals
    • Section 701
      Conversion Process
    • Section 702
      ARM Loan and SARM Loan Conversions
      • 702.01 Governing Documents
      • 702.02 Minimum Conversion Debt Service Ratio
      • 702.03 Conversion Criteria
      • 702.04 Guaranty Fee and Servicing Fee
      • 702.05 Interest-Only
      • 702.06 Fixed Rate Amortization
      • 702.07 Fixed Rate Debt Service Payments
      • 702.08 Fixed Rate MBS Trade Premium
      • 702.09 New Property Condition Assessment (PCA)
    • Section 703
      Commitment and Delivery
      • 703.01 Rate Lock and Commitment
      • 703.02 Conversion Delivery
        • 703.02 A Deliver Loan Document Amendments
        • 703.02 B Deliver Mortgage Loan Delivery Package
      • 703.03 Conversion Activities
      • 703.04 Pay Off
    • Section 704
      ARM 5/5 Optional 5-Year Adjustable Rate Term Renewal
      • 704.01 Eligibility
      • 704.02 Underwriting
      • 704.03 Prepayment Terms
  • Chapter 8
    Bond Transactions and Credit Enhancement Mortgage Loans
    • Section 801
      Credit Enhancement Mortgage Loan Committing and Delivery
      • 801.01 Pre-Commitment
      • 801.02 Preliminary Official Statement
      • 801.03 Good Faith Deposit
      • 801.04 Rate Lock
      • 801.05 Commitment
    • Section 802
      Data and Document Delivery
      • 802.01 Credit Enhancement Mortgage Loans
      • 802.02 Interest Rate Cap
Part V
Servicing and Asset Management
  • Chapter 1
    Servicing
    • Section 101
      Generally
      • 101.01 Relationship
      • 101.02 Standard
      • 101.03 Servicing File
      • 101.04 Loan Document Compliance
    • Section 102
      Uniform Commercial Code (UCC) Financing Statements
      • 102.01 Filing Documents
      • 102.02 UCC Continuations, Amendments, and Terminations
    • Section 103
      Letters of Credit
      • 103.01 Servicing File
      • 103.02 Certification
      • 103.03 Monitoring Expiration Dates
      • 103.04 Replacement Letter of Credit
      • 103.05 Verifying Issuer Ratings
        • 103.05 A Monitoring
        • 103.05 B Rating Noncompliance
      • 103.06 Managing Draws and Releases
        • 103.06 A Letter of Credit Draws
        • 103.06 B Releasing/Reducing Letters of Credit or Other Collateral
    • Section 104
      Bond Transactions and Credit Enhancement Mortgage Loans
      • 104.01 Borrower Obligations
        • 104.01 A Payments
        • 104.01 B Principal Reserve Fund
      • 104.02 Cash Collateral Agreements
      • 104.03 UCC Filings
      • 104.04 Remarketing Agent Changes
  • Chapter 2
    Reporting and Remitting
    • Section 201
      Generally
    • Section 202
      Collection, Tracking and Reporting of Monthly P&I Payments and T&I Amounts
    • Section 203
      Reporting Loan Activity and Security Balance
      • 203.01 Use of Fannie Mae eServicing System
      • 203.02 Reporting Specific Transactions
      • 203.03 Monthly Activity Reporting
        • 203.03 A When to Begin Reporting
        • 203.03 B Cutoff Dates for Loan Activity Reporting
      • 203.04 Monthly Securitized Mortgage Loan Security Balance Reporting
        • 203.04 A Reporting Security Balances
        • 203.04 B Same Month Pooling – Security Balance for First Reporting Cycle
        • 203.04 C Security Balances Due by Second Business Day
        • 203.04 D Failure to Meet Reporting Deadline
      • 203.05 Due Dates for Reports
        • 203.05 A Removal Transactions
        • 203.05 B All Other Transactions
      • 203.06 Mortgage Loan Activity Record
        • 203.06 A Payment Collection
        • 203.06 B Fee Collection
        • 203.06 C Mortgage Loan Status
      • 203.07 Fannie Mae-Generated Monthly Reports
        • 203.07 A MBS Mortgage Loan P&I Draft Report
        • 203.07 B Cash Mortgage Loan P&I Draft Reports
        • 203.07 C Month-End Report
      • 203.08 Monthly MBS Mortgage Loan Reconciliations - Pool-to-Security Balance Reconciliations (Not Applicable to PFP MBS)
        • 203.08 A Reconciliation Required
        • 203.08 B Rounding Adjustment
        • 203.08 C Required Annual Adjustment to Correct Principal Balance vs. Security Balance Difference
        • 203.08 D Pool-to-Security Reconciliation Certification
    • Section 204
      Calculation of Interest Due
      • 204.01 Generally
      • 204.02 Calculating Interest Due
        • 204.02 A Actual/360 Interest Calculation Method
        • 204.02 B 30/360 Interest Calculation Method
    • Section 205
      ARM Loan Interest Rate and Monthly Payment Changes
      • 205.01 Adjustable Rate Mortgage Loan Interest Rate Changes and Required Monthly Payments
        • 205.01 A The Adjustable Rate Mortgage Loan Index
        • 205.01 B Determining the New Monthly Payment
      • 205.02 Monthly Reporting for ARM Loan Payment/Rate Changes
      • 205.03 Structured ARM Loans
    • Section 206
      Application of Monthly Payments
      • 206.01 Fannie Mae Form Loan Documents
      • 206.02 Non-Fannie Mae Form Loan Documents
    • Section 207
      Payment Shortages
    • Section 208
      Delinquency and Servicing Advances
      • 208.01 Generally
        • 208.01 A Applicability
        • 208.01 B Delinquency Advances on a Mortgage Loan other than a Credit Enhancement Mortgage Loan
        • 208.01 C Delinquency Advances on a Credit Enhancement Mortgage Loan
        • 208.01 D Servicing Advances on a Mortgage Loan other than a Credit Enhancement Mortgage Loan
        • 208.01 E Servicing Advances on a Credit Enhancement Mortgage Loan
      • 208.02 Duration of Payment of Delinquency Advances or Servicing Advances
        • 208.02 A Obligation to Make Delinquency Advances
        • 208.02 B Obligation to Make Servicing Advances
        • 208.02 C Reimbursement for Delinquency and Servicing Advances
      • 208.03 Repayment of Servicing Advances from Borrower
      • 208.04 No Capitalization of Servicing Advances for Securitized Mortgage Loans
      • 208.05 Entitlement to Default Interest
    • Section 209
      Remittance Procedures
      • 209.01 Definitions
        • 209.01 A Interest Distribution Amount
        • 209.01 B Principal Distribution Amount
        • 209.01 C Monthly Remittance
      • 209.02 Monthly P&I Remittance Due Dates for Cash and MBS Transactions
      • 209.03 Cash Remittance System
        • 209.03 A Drafting Account Use
        • 209.03 B Drafting Account Setup
        • 209.03 C Remittance Transaction Codes
      • 209.04 Additional Requirements for Monthly Remittance for Security Transactions
        • 209.04 A Amount of Security Monthly Remittance
        • 209.04 B Security Interest Distribution Amount
      • 209.05 Securitized Mortgage Loans – Remitting Fees to Fannie Mae
        • 209.05 A Guaranty Fee Due on 7th Calendar Day of Month
        • 209.05 B Guaranty Fee Remittance
        • 209.05 C Same Month Pooling – Interest and Guaranty Fee Remittance for First Reporting Cycle
      • 209.06 Notification to Fannie Mae if Unable to Have Funds Available on any Remittance Date
    • Section 210
      Full Prepayments
      • 210.01 Review of Applicable Loan Documents Required
      • 210.02 Notification of Prepayment; Timing of Prepayment
        • 210.02 A Notice and Timing Consistent with Loan Documents
        • 210.02 B Borrower Notice Must Contain Date of Intended Prepayment and Comply with Notice Requirements of the Loan Documents
        • 210.02 C Loan Document Requirements for Payoff and Lockout Dates
        • 210.02 D Notice to Fannie Mae of Proposed Payoff; Use of Fannie Mae Payoff Calculator
      • 210.03 Timing of Confirmation of the Full Prepayment Payoff Amount
      • 210.04 Full Prepayment for Cash Transactions and PFP MBS
        • 210.04 A Confirming the Full Prepayment Payoff Amount
        • 210.04 B Reporting Full Prepayment Payoff Amount
        • 210.04 C Remitting Full Prepayment Payoff Amount
      • 210.05 Full Prepayment for Securitized Transactions (Not Applicable to PFP MBS)
        • 210.05 A Confirming the Full Prepayment Payoff Amount
        • 210.05 B Reporting Full Prepayment Payoff Amount
        • 210.05 C Remitting Full Prepayment Payoff Amount
    • Section 211
      Partial Prepayments Not From Insurance or Condemnation Proceeds
      • 211.01 Partial Prepayments Generally Prohibited
      • 211.02 Partial Prepayment Procedures
        • 211.02 A Servicer’s Analysis of Loan Documents
        • 211.02 B Fannie Mae Approval Required for Partial Prepayments
        • 211.02 C Prepayment Premium Due on Partial Prepayment
        • 211.02 D Reporting and Remitting Partial Prepayments When Not Permitted in Loan Documents
        • 211.02 E Reporting and Remitting Partial Prepayments When Permitted in Loan Documents
    • Section 212
      Prepayments (Full or Partial) Involving Insurance Proceeds or Condemnation Awards
      • 212.01 Partial Prepayments Generally Permitted
      • 212.02 No Prepayment Premium Required
      • 212.03 Reporting and Remitting Partial Prepayments
    • Section 213
      Prepayment Premium Sharing
      • 213.01 General
      • 213.02 Yield Maintenance Prepayment Premiums – Prepayment Occurs Before the Yield Maintenance Period End Date
        • 213.02 A Calculation of Total Prepayment Premium
        • 213.02 B Calculation of Investor’s Share of Total Prepayment Premium for a Securitized Mortgage Loan
        • 213.02 C Calculation of Fannie Mae’s Share of Total Prepayment Premium
        • 213.02 D Calculation of Servicer’s Share of Total Prepayment Premium
      • 213.03 Yield Maintenance Prepayment Premiums – Prepayment Occurs On or After the Yield Maintenance Period End Date
        • 213.03 A Prepayment On or After Yield Maintenance Period End Date
        • 213.03 B Prepayment During Open Period
      • 213.04 Fixed Rate Mortgage Loans with Graduated Prepayment Premiums
      • 213.05 Prepayment Premiums for ARM Loans and Structured ARM Loans
      • 213.06 Prepayment Premium Waivers; Servicer’s Share of Prepayment Premium
    • Section 214
      Maturing Mortgage Loans/Payoffs
      • 214.01 Balloon Mortgage Loans
      • 214.02 Servicer Notification of Payoff Amount to Borrower
      • 214.03 Calculating and Obtaining Confirmation of Payoff Amount
        • 214.03 A Calculating the Full Payoff Amount
        • 214.03 B Fannie Mae Will Not Confirm Nor Is Responsible for Amounts Owing to Servicer
        • 214.03 C Fannie Mae Confirmation of Full Payoff Amount
        • 214.03 D No Quote to Borrower Until Fannie Mae Confirmation
      • 214.04 Reporting the Payoff and Remitting the Payoff Funds
        • 214.04 A Reporting Full Payoff Amount Through the eServicing System Due By 2nd Business Day of Month
        • 214.04 B Remitting Full Payoff Amount
    • Section 215
      Post-Payoff Actions
      • 215.01 Servicer Required Actions
        • 215.01 A General
        • 215.01 B Individual Mortgage Loan Releases
      • 215.02 Post Payoff Document Retention Requirements
    • Section 216
      DUS Bond Credit Enhancement Transactions – Reporting and Remitting Requirements
      • 216.01 Monthly Bond Credit Enhancement Reporting
      • 216.02 Monthly Remittance Procedures
        • 216.02 A Monthly Remittances of Scheduled Payments to Bond Trustee
        • 216.02 B Replenishment of Withdrawals from the PRF
        • 216.02 C Collection and Remittance of Borrower Reimbursement Obligations for Fannie Mae Advances
        • 216.02 D Monthly Remittance of Fees to Fannie Mae
        • 216.02 E Notice and Collection of Other Fees and Expenses
      • 216.03 Prepayments – General Introduction
        • 216.03 A Bond Redemption Premiums Payable to Bondholders
        • 216.03 B Termination Fee or Prepayment Premium Payable to Fannie Mae
        • 216.03 C Termination When No Prepayment Occurs; Weekly Variable Rate Transactions
      • 216.04 Prepayments – Processing
        • 216.04 A General
        • 216.04 B Prompt Notice of Intended Prepayment
        • 216.04 C Critical Path Due Dates
        • 216.04 D Fannie Mae’s Confirmation Required
      • 216.05 Prepayments: Prepayment Reporting
      • 216.06 Prepayments: Remittances
      • 216.07 Reporting on Delinquency Status
    • Section 217
      Mezzanine Loan Reporting and Remitting
      • 217.01 Remitting DUS Plus Mezzanine Loans
      • 217.02 Payoffs
    • Section 218
      Defeasance
      • 218.01 Mortgage Loan Documents Must Permit Defeasance
      • 218.02 Borrower’s Election to Defease
      • 218.03 Defeasance Option Procedures
        • 218.03 A Defeasance Documents
        • 218.03 B Defeasance Notice
        • 218.03 C Defeasance Commitment Fee
        • 218.03 D Verification of the Defeasance Notice
        • 218.03 E Substitute Collateral
        • 218.03 F Assignment and Assumption
        • 218.03 G Closing Documents
        • 218.03 H Amounts Payable by Borrower
        • 218.03 I Defeasance Deposit
        • 218.03 J Release
        • 218.03 K Fannie Mae Security Liquidated Damages
        • 218.03 L Third-Party Costs
        • 218.03 M Post Defeasance Closing Date
    • Section 219
      Delinquency Reporting and Certification
    • Section 220
      Reporting Collateral Balances in Custodial Accounts
      • 220.01 P&I Custodial Accounts
      • 220.02 Letters of Credit as Collateral
      • 220.03 Report on Fair Value Basis
      • 220.04 What to Report
      • 220.05 When to Report
    • Section 221
      Internal Revenue Service Reporting Requirements
      • 221.01 What to Report
      • 221.02 Filing IRS Form 1099 MISC
      • 221.03 Notifying the Internal Revenue Service about Abandonments or Acquisitions (IRS Form 1099-A)
        • 221.03 A When Required
        • 221.03 B Preparing IRS Form 1099-A
      • 221.04 Notifying the Internal Revenue Service about Cancellations of Indebtedness (IRS Form 1099-C)
        • 221.04 A When Required
        • 221.04 B Determining When a Debt Is Cancelled
        • 221.04 C Preparing IRS Form 1099-C
        • 221.04 D Exceptions to IRS Form 1099-C Reporting
        • 221.04 E Coordination with Reporting Abandonments or Acquisitions
      • 221.05 Reporting via Magnetic Media
  • Chapter 3
    Custodial Accounts
    • Section 301
      Generally
      • 301.01 Maintenance
      • 301.02 Fannie Mae's Rights
      • 301.03 Eligible Depositories and Ratings
        • 301.03 A Eligible Depository
        • 301.03 B Verifying Depository Ratings
      • 301.04 Investments and Interest
      • 301.05 Clearing Accounts
      • 301.06 Liability
        • 301.06 A Losses
        • 301.06 B Overdrafts
    • Section 302
      Administration
      • 302.01 Notifications
      • 302.02 Titling
      • 302.03 Deposits
    • Section 303
      P&I Custodial Accounts
      • 303.01 Accounts and Deposits
      • 303.02 Withdrawals
    • Section 304
      T&I Custodial Accounts
      • 304.01 Deposits
      • 304.02 T&I Impositions
      • 304.03 Shortfalls
      • 304.04 Prohibited Uses
      • 304.05 No Financing for T&I Impositions
    • Section 305
      Collateral Agreement Custodial Accounts
      • 305.01 Deposits
      • 305.02 Full Disbursement
    • Section 306
      Clearing Accounts
    • Section 307
      Drafting Accounts
      • 307.01 Establishing Drafting Accounts
      • 307.02 Consolidated Custodial Accounts
    • Section 308
      Recordkeeping and Reconciliations
      • 308.01 Account Analysis and Reconciliation
      • 308.02 Records
      • 308.03 For T&I Custodial Accounts
      • 308.04 Borrower's T&I Impositions and Custodial Accounts
        • 308.04 A Analysis Timing
        • 308.04 B Insufficient Funds
        • 308.04 C Surplus
      • 308.05 Annual Statements
  • Chapter 4
    Asset Management: Loan Document Administration
    • Section 401
      Servicing Requirements
      • 401.01 General
      • 401.02 Monitoring Compliance with Loan Documents
    • Section 402
      Delegation of Decision-Making Authority; Retention of Outside Legal Counsel
      • 402.01 Delegation of Decision-Making Authority
      • 402.02 Retention of Outside Legal Counsel
    • Section 403
      Execution of Documents by Servicer – Limited Power of Attorney
    • Section 404
      Execution of Documents by Fannie Mae
      • 404.01 Submission of Documents to Fannie Mae
      • 404.02 Servicer Certification When Fannie Mae Approval Is Not Required
      • 404.03 Servicer Certification When Fannie Mae Approval Is Required
    • Section 405
      Fees Due to Fannie Mae
    • Section 406
      Follow-Up Actions by the Servicer
    • Section 407
      Subordinate Financing
      • 407.01 Non-Fannie Mae Subordinate Financing
      • 407.02 Prerequisite for Subordinate Financing
      • 407.03 Fees for Subordinate Financing
      • 407.04 Submitting the Request for Subordinate Financing
      • 407.05 Fannie Mae Approval and Execution
      • 407.06 Subsequent Servicer Actions
    • Section 408
      Administration of Collateral Agreements
      • 408.01 General Administrative Requirements
        • 408.01 A Administration of Funds
        • 408.01 B Funds to be Held in a Custodial Account
        • 408.01 C Use of Funds
        • 408.01 D Funds as Additional Security for Mortgage Loan
        • 408.01 E Servicer’s Fees and Costs
        • 408.01 F Waiver or Modification of Terms of Collateral Agreement
      • 408.02 Achievement Agreement or Other Agreement for Additional Collateral
        • 408.02 A General
        • 408.02 B Releases or Reductions in Collateral
        • 408.02 C Draws on Letters of Credit or Application of Other Collateral
        • 408.02 D Releasing Additional Escrows for Principal and Interest, Taxes and Insurance, and Replacement Reserves
      • 408.03 Completion/Repairs
        • 408.03 A General
        • 408.03 B Extensions for Completion/Repairs
        • 408.03 C Completion/Repair Loan Document Amendments
        • 408.03 D Servicer’s Administrative Requirements
        • 408.03 E Processing Borrower Requisitions
        • 408.03 F Inspections
        • 408.03 G Fees
        • 408.03 H Completion/Repair Defaults
        • 408.03 I Green Rewards Efficiency Measure Verification
      • 408.04 Replacement Reserve
        • 408.04 A General
        • 408.04 B Replacement Reserve Loan Document Amendments
        • 408.04 C Servicer’s Administrative Requirements
        • 408.04 D Modifications to Replacement Reserve Deposits
        • 408.04 E New Property Condition Assessments
        • 408.04 F When Replacement Reserve Funding Was Partially or Fully Waived
        • 408.04 G Interest on Replacement Reserve Funds
        • 408.04 H Items Eligible for Funding from the Replacement Reserve
        • 408.04 I Items Not Eligible for Funding from the Replacement Reserve
        • 408.04 J Processing Borrower Requisitions
        • 408.04 K Inspections
        • 408.04 L Fees
        • 408.04 M Replacement Reserve Defaults
        • 408.04 N Return of Replacement Reserve Funds to Borrower
        • 408.04 O Alternative Funding of Replacement Reserves for Portfolio Mortgage Loans
    • Section 409
      Interest Rate Hedge Requirements
      • 409.01 General
      • 409.02 Interest Rate Hedge Coverage
        • 409.02 A Bond Credit Enhancement Transactions
        • 409.02 B Structured Transactions
        • 409.02 C Adjusting Interest Rate Hedge Reserves for SARM Loans Using Form 6442 Series with an Effective Date Before May 2024
        • 409.02 D Adjusting Interest Rate Hedge Reserves for SARM Loans Using Form 6442 Series with an Effective Date of May 2024 or Later
      • 409.03 Interest Rate Hedge Term
      • 409.04 Lien Filings and Collateral
      • 409.05 Borrower Payments
        • 409.05 A Interest Rate Caps
        • 409.05 B Interest Rate Swaps
      • 409.06 Provider Ratings
      • 409.07 Replacement Interest Rate Hedge and Notification
      • 409.08 Replacement Interest Rate Hedge Documents and Follow Up
    • Section 410
      Ground Leases
    • Section 411
      Notice of Lien or Noncompliance with Applicable Laws, Ordinances and Regulations
    • Section 412
      Property Forfeitures and Seizures
    • Section 413
      Property and Liability Insurance
      • 413.01 Property and Liability Insurance
        • 413.01 A Generally
        • 413.01 B Policy Renewal
        • 413.01 C Compliance Review
        • 413.01 D Exceptions
        • 413.01 E Ratings
      • 413.02 No Servicer Financing of Insurance Premiums
      • 413.03 Flood Map Changes; Obtaining Flood Insurance
      • 413.04 Lender Placed Insurance
        • 413.04 A Property and Liability Insurance
        • 413.04 B Servicer’s Administrative Costs and Expenses
    • Section 414
      Casualty Losses – Performing Mortgage Loans
      • 414.01 Notice
      • 414.02 Filing Proof of Loss
      • 414.03 Casualty Loss Assessment
      • 414.04 Required Casualty Loss Property Inspection
      • 414.05 Documentation for Required Casualty Loss Property Inspections
      • 414.06 Endorsement of Insurance Loss Draft or Check When Payable to Fannie Mae
      • 414.07 Endorsement of Insurance Loss Draft or Check When Not Payable to Fannie Mae
      • 414.08 Insurance Loss Draft or Check Not Payable to Either Fannie Mae or Servicer
      • 414.09 Application of Insurance Loss Proceeds
        • 414.09 A Fannie Mae Determination Required
        • 414.09 B Disposition of Insurance Loss Proceeds
      • 414.10 Property Restoration Requirements
      • 414.11 Commencement of Repair/Restoration Work
      • 414.12 Disbursements
        • 414.12 A Prerequisites for Disbursement of Funds
        • 414.12 B Disbursing Funds
        • 414.12 C Content of Disbursement Request
        • 414.12 D Disbursement Amount
        • 414.12 E Final Disbursement; Notice to Fannie Mae
        • 414.12 F Documentation in Servicing File
      • 414.13 Borrower’s Failure to Diligently Pursue Repair
      • 414.14 Reimbursement of Administrative Costs
    • Section 415
      Casualty Losses – Non-Performing Mortgage Loans
    • Section 416
      Credit Facilities and Bulk Deliveries
      • 416.01 General
      • 416.02 Delegation of Decisions
        • 416.02 A Decisions and Actions Not Delegated
        • 416.02 B Decisions Delegated by the Delegated Transaction Form 4636 series
        • 416.02 C Other Delegated Decisions
      • 416.03 Approval Requests
      • 416.04 Credit Facility Release and Substitution Requests
      • 416.05 Credit Facility Future Advance and Conversion Requests
      • 416.06 Bulk Delivery Additions, Substitutions, and Releases
      • 416.07 Credit Facility Revaluations
      • 416.08 Capitalization Rate Derivation
      • 416.09 Credit Facility Supplemental Mortgage Loans Not Permitted
      • 416.10 Quarterly Monitoring and Re-Underwriting Assessments
        • 416.10 A Quarterly Monitoring Reports (QMR)
        • 416.10 B Credit Facilities with a Springing Debt Service Reserve Provision
        • 416.10 C Monitored Debt Service Coverage Ratio
        • 416.10 D Re-Underwriting Assessment Determination
        • 416.10 E Re-Underwriting Assessments
        • 416.10 F Re-Underwriting Assessment Timing
      • 416.11 Springing Debt Service Reserve
      • 416.12 Additional Information
    • Section 417
      Seniors Housing Properties
      • 417.01 General
      • 417.02 Decisions and Actions Delegated and Not Delegated
      • 417.03 Approval Requests
      • 417.04 Seniors Housing Expansion/Conversion Requests
        • 417.04 A Permitted Purpose
        • 417.04 B Submission Requirements
        • 417.04 C Requirements and Monitoring
        • 417.04 D Construction Completion Requirements
        • 417.04 E Request Changes in Unit Count/Mix in the MAMP
    • Section 418
      Credit Enhancement Mortgage Loans and Multifamily Affordable Housing Properties
      • 418.01 Bond Transactions and Credit Enhancement Mortgage Loans
      • 418.02 Compliance Issues Relative to Bond Credit Enhancement Transactions
      • 418.03 Monitoring Compliance; Notification of Noncompliance
        • 418.03 A Affordable Regulatory Agreement
        • 418.03 B Default Notice for Failure to Comply with the Bond Documents
      • 418.04 Multifamily Affordable Housing (MAH) Properties
      • 418.05 Low-Income Housing Tax Credits
      • 418.06 Enhanced Resident Services
      • 418.07 Expanded Housing Choice
      • 418.08 HAP Contract Approval and Releasing Restabilization Reserve
    • Section 419
      Sponsor-Dedicated Workforce Housing Properties
    • Section 420
      MH Communities with Tenant Site Lease Protections
    • Section 421
      Single Asset Entity Conversion
    • Section 422
      Loan Document Amendments
    • Section 423
      Maturing Mortgage Loans
      • 423.01 Written Policy
      • 423.02 Refinance Eligibility
      • 423.03 Borrower Communications
      • 423.04 Fannie Mae Communications
  • Chapter 5
    Surveillance
    • Section 501
      Generally
    • Section 502
      Property Inspections
      • 502.01 Forms
      • 502.02 Property Condition Concerns
      • 502.03 Property Inspection Protocol
      • 502.04 Scheduling and Submissions
        • 502.04 A Scheduling
        • 502.04 B Submissions
      • 502.05 Property Inspectors
        • 502.05 A Qualifications
        • 502.05 B Third Parties
      • 502.06 Content
        • 502.06 A Unit Selection
        • 502.06 B Photos
        • 502.06 C Interviews
        • 502.06 D Market Analysis
        • 502.06 E Collateral Analysis
        • 502.06 F Life Safety Issues
      • 502.07 Quality Control
        • 502.07 A Program
        • 502.07 B Inspection Form Retention
        • 502.07 C Additional Inspections and Fees
    • Section 503
      Financial Analysis of Operations
      • 503.01 Reporting
      • 503.02 Quarterly Financial Analysis of Operations
      • 503.03 Annual Financial Analysis of Operations
        • 503.03 A Reporting Period
        • 503.03 B Submission
        • 503.03 C Annual Review
      • 503.04 Waiver Request
    • Section 504
      Loan Agreement Compliance
      • 504.01 Generally
      • 504.02 Financial Reports and Information
        • 504.02 A Borrower and Guarantor Notices
        • 504.02 B Borrower Fails to Provide Guarantor Financial Reports
        • 504.02 C Review Financial Reporting
        • 504.02 D Records
    • Section 505
      Compliance
Appendix
Glossary
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:

  • AcquisitionsAcquisitionsAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. 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;
  • if adjustments were made to any reviewed historical operating statement:
    • document and reconcile each individually adjusted line item; and
    • provide supporting detail in the Transaction Approval Memo; 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 AcquisitionAcquisitionAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. ).

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 $500 per unit;
  • actual management fee is equal to or less than the underwritten management fee (provided you exclude any portion of a non-arm's length property management fee that is subordinated to the Mortgage Loan);
  • Mortgage Loan has an original principal amount greater than $9 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 AcquisitionAcquisitionAny Purchase of either the: Property’s fee simple or leasehold interest via a deed transfer; or Controlling Interest in the Borrower. :

     

    • 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: Lease Audits, Inspections, and Reserves, Section 406: 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

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