Section 705
| 705.01A | |
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It is not unusual for a PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). securing a Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. to be in need of repairs during the default resolution process. Generally, a Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… or a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. will result in a default under the Collateral AgreementsCollateral AgreementsAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. for Replacement ReservesReplacement ReservesCustodial Account established by the Lender and funded by deposits from the Borrower over the term of the Mortgage Loan to fund the replacement of capital items at the Property. , Operating Deficit, Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Schedule or Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , or other Collateral AgreementsCollateral AgreementsAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. . When the BorrowerBorrowerPerson who is the obligor per the Note. is in default under a Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , the Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. has discretion in applying the reserves or Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. proceeds either to repairs or replacements or to the payment of amounts due and owing to Fannie Mae under the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .
1. Primary Risk Mortgage Loans
As part of its Asset Review for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , as provided in this Chapter, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must advise Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam that performs the work of the Special Servicer for Fannie Mae that can be contacted at [email protected] of the type of repairs or replacements that are necessary and recommend whether the repairs should be funded from the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. funds. It is Fannie Mae's decision whether or not to accept the recommendation and use the funds for repairs or replacements for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .
2. Secondary Risk Mortgage Loans
For Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. must provide a SWAT describing the actions it intends to take to ensure the repair of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). and to prevent further PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). deterioration. The decision whether or not to use Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. funds for repairs or replacements is the Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. 's. When making the decision whether to use the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. funds for repairs or replacements, the level of cooperation from the BorrowerBorrowerPerson who is the obligor per the Note. and remitting the monthly net operating income must be a factor to consider.
| 705.01B | |
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If in inspecting the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). securing the Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. , it is apparent that the BorrowerBorrowerPerson who is the obligor per the Note. is not making repairs related to the health and safety of the tenants or is allowing the physical condition of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). to deteriorate, then:
- for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must immediately notify Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam that performs the work of the Special Servicer for Fannie Mae that can be contacted at [email protected] and, if 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. has been transferred to Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam that performs the work of the Special Servicer for Fannie Mae that can be contacted at [email protected] for special servicing, Fannie Mae may elect to engage outside counsel to pursue the court appointment of a receiver, as well as enforce other rights and remedies; or
- for Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the LenderLenderPerson approved by Fannie Mae to sell or service Mortgage Loans. must provide a SWAT describing the actions it intends to take to ensure the repair of the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). and to prevent further PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). deterioration.
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THE SERVICER MUST NOT ATTEMPT TO MAKE THE REPAIRS, HIRE CONTRACTORS TO MAKE THE REPAIRS, OR OTHERWISE TAKE ANY ACTION THAT COULD RESULT IN A MORTGAGEE-IN-POSSESSION STATUS. |
For all Non-Performing Mortgage LoansNon-Performing Mortgage LoansMortgage Loan that is subject to an uncured default. , if the BorrowerBorrowerPerson who is the obligor per the Note. is not accounting for and paying to the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). the monthly net operating income from the PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). after the Date of DefaultDate of DefaultDate of the initial Payment Default or Performance Default, per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703: Mortgage Loan Defaults. , then:
- for all Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must notify Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam that performs the work of the Special Servicer for Fannie Mae that can be contacted at [email protected] as part of the Asset Review or otherwise; or
- for all Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. must provide in the SWAT the actions it intends to take to obtain control of the net operating income.
| 705.03 | |
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| 705.03A | |
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For Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , any proposed changes in the property management for PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). securing a Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. must be approved in writing by Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam that performs the work of the Special Servicer for Fannie Mae that can be contacted at [email protected] .
| 705.03B | |
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For Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the recommendation to change the property management for PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). securing a Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. must be included in the SWAT.
The decision to approve the replacement property management must focus on, among other customary underwriting criteria, identifying conflicts of interest between the proposed Property Manager and Fannie Mae, as well as evaluating the Property Manager's ability to maintain the Property'sProperty'sMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). physical condition and improve operating income.
Fannie Mae will communicate its approval or rejection of the proposed replacement of the property management within thirty (30) days after receipt from the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). of all information necessary to render its decision. Fannie Mae's approval may be conditioned upon receiving additional documentation or the satisfaction of additional requirements. If Fannie Mae has not approved or conditionally approved the proposed replacement property management within thirty (30) days after the Servicer'sServicer'sPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). request, the proposed change in property management will be deemed to be denied by Fannie Mae.
Unless the change in property management is through a court-appointed receiver, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). must send an original Assignment of Management Agreement (Form 4508) for the proposed new property management company executed by the BorrowerBorrowerPerson who is the obligor per the Note. and information regarding the new property management company to Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam that performs the work of the Special Servicer for Fannie Mae that can be contacted at [email protected] to effect a change in PropertyPropertyMultifamily residential property securing the Mortgage Loan and including the land (or Leasehold interest in land), Improvements, and personal property (as defined in the Uniform Commercial Code). management.