Section 302

Borrower Organizational Structure

302.01

Single-Asset Entity

Requirements

You must ensure:

  • the Borrower BorrowerPerson who is the obligor per the Note. is a domestic single-asset entity formed for the sole purpose of owning the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ;
  • if the Borrower BorrowerPerson who is the obligor per the Note. is ultimately owned by foreign persons or entities, it has at least 1 domestic tier of ownership; and
  • you review
    • the Borrower's Borrower'sPerson who is the obligor per the Note. complete formation documents, and
    • all amendments or restatements.

Guidance

As you analyze the Borrower BorrowerPerson who is the obligor per the Note. and its organizational documents to confirm that it has been a single-asset entity since formation, consider the following questions:

  • Can the Borrower BorrowerPerson who is the obligor per the Note. acquire any additional real property, personal property, or assets?
  • Can the Borrower BorrowerPerson who is the obligor per the Note. participate in any business other than managing and operating the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?
  • Are the Borrower’s Borrower’sPerson who is the obligor per the Note. assets or funds commingled with anyone else’s?  If so, can these assets or funds be separated and identified?
  • Are the Borrower’s Borrower’sPerson who is the obligor per the Note. financial statements, accounting records, and other organizational documents maintained with anyone else’s?
  • Has the Borrower BorrowerPerson who is the obligor per the Note. assumed, guaranteed, or obligated itself to cover anyone else’s liabilities?

Requirements

If the Borrower BorrowerPerson who is the obligor per the Note. owns more than a single asset, the Borrower BorrowerPerson who is the obligor per the Note. may still qualify as a single asset entity if you:

  • Obtain an operating statement for each real property owned.
  • Obtain proof that the Borrower BorrowerPerson who is the obligor per the Note. has no existing debt secured by a Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on any of the Borrower’s Borrower’sPerson who is the obligor per the Note. real property, other than a Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 purchased by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! .
  • Obtain proof that no direct or indirect equity interest in the Borrower BorrowerPerson who is the obligor per the Note. is subject to mezzanine financing.
  • Ensure that the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. prohibit the Borrower BorrowerPerson who is the obligor per the Note. from
    • acquiring any additional debt (except for supplemental debt on existing Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! loans),
    • increasing any existing debt, or
    • acquiring any additional real property.

Guidance

As you analyze the Borrower BorrowerPerson who is the obligor per the Note. that owns more than a single asset, you should consider whether its other real estate assets are only

  • multifamily properties, or
  • other types of real estate that do not pose an environmental risk to the Borrower BorrowerPerson who is the obligor per the Note. .
302.02

Co-Tenant Borrowers

Requirements

You must ensure that any Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. meets these eligibility requirements:

302.02A

Tenancy-in-Common Agreement

Requirements

You must ensure that a validly executed Tenancy-in-Common Agreement is in place prior to or at the Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 closing.

You must review the agreement to ensure that:

  • each co-tenant is bound by the terms of the agreement;
  • the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has a manager of its day-to-day business and affairs, which can be
    • a single co-tenant (or the Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. of such co-tenant) known as the “co-tenant representative”, or
    • a validly-appointed property manager; and
  • distributions to the co-tenant representative are subordinate to
    • all payments under any Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 secured by a Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. on the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , and
    • the terms and conditions of any such Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 .

Guidance

As you analyze the Tenancy-in-Common Agreement, consider the following questions.  The term “co-tenant” also includes any Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. who has the rights of the co-tenant.

Representation

  • Have the Co-Tenant Borrowers Co-Tenant BorrowersBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. given the co-tenant representative the power to deal with the Lender LenderPerson Fannie Mae approved to sell or service Mortgage Loans. through the Tenancy-in-Common Agreement or an irrevocable power-of-attorney?
  • Has each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. waived its right to reside in the Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ?

Buy outs

  • Does each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. have buy out rights to any other co-tenant?
  • Is each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. financially able to buy out any other co-tenant?

Communication

  • Does each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. have a name, address, telephone number, and percentage of ownership interest listed?
  • Has each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. agreed to promptly notify all other Co-Tenant Borrowers Co-Tenant BorrowersBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. and you if their address or telephone number changes?
  • Has a single Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. of the co-tenant representative agreed to receive any communication from you on behalf of all Co-Tenant Borrowers Co-Tenant BorrowersBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. ?
302.02B

Key Principal Execution of Guaranty

Requirements

You must ensure that:

  • each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. names at least 1 Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ; and
  • if a Guaranty GuarantyPayment Guaranty, Non-Recourse Guaranty, or other guaranty by a Guarantor for the Mortgage Loan. is required per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 311: Execution of Non-Recourse Guaranty , a Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. from each Co-Tenant Borrower Co-Tenant BorrowerBorrower consisting of tenants-in-common that own the Property in equal or unequal shares. must become a Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. and execute either a Non-Recourse Guaranty Non-Recourse GuarantyGuaranty executed by a Key Principal on Form 4501 series or Form 6015 series, or approved by Fannie Mae. or Payment Guaranty Payment GuarantyGuaranty executed by a Key Principal on Form 4502 series or Form 6020 series, or approved by Fannie Mae. .
302.03

Joint and Several Borrowers with Multiple Properties

Requirements

If a Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 not in a Credit Facility Credit FacilityStructured Transaction governed by a Master Credit Facility Agreement requiring Mortgage Loans and Properties to be cross-defaulted, and cross-collateralized. is secured by multiple Properties PropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). and any Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is owned by a different Borrower BorrowerPerson who is the obligor per the Note. , you must require each Borrower BorrowerPerson who is the obligor per the Note. to:

  • execute a single set of Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. with joint and several liability for the Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 ;
  • comply with the “single purpose entity” requirements per Modifications to Multifamily Loan and Security Agreement (Co-Borrowers) ( Form 6274 );
  • be owned, directly or indirectly, by the same Persons PersonsLegal person, including an individual, estate, trust, corporation, partnership, limited liability company, financial institution, joint venture, association, or other organization or entity (whether governmental or private). having the same percentage ownership interests;
  • be Controlled ControlledPossessing, directly or indirectly, the power to direct or cause the management and operations of an entity (e.g., through the ownership of voting securities or other ownership interests, or by contract). by the same Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). or Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. ;
  • execute  Form 6274 , restricting Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). Transfer/Assumption Transfer/AssumptionTransaction changing the ownership of the Borrower or Property. or release during the Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 term;
  • execute an acceptable Contribution Agreement complying with  Form 6274 ; and
  • if separate Security Instruments Security InstrumentsInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. are recorded to encumber Properties PropertiesMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). in different counties, execute separate Modifications to Security Instrument (Co-Borrowers) ( Form 6322 ) for each Security Instrument Security InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. .

Each Property PropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing the Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 must: