Chapter 2

Mortgage Loan

Section 201

Registration and Multifamily Affordability Estimator

Requirements

You must:

  • register each 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 in DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. ; and
  • submit the Multifamily Affordability Estimator (MAE), and all other required affordability data, in DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. at the earlier of when you:
    • request a pricing quote, if it will incorporate the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). affordability; and
    • place the transaction under application.

Operating Procedures

You must submit:

  • the MAE;
  • all required data fields, including the following based on the completed MAE:
    • “% Mission Driven” in the “Deal Overview” section;
    • percent of AMI in the “Property Detail” section:
      • “% of Units <= 80% of AMI”;
      • “% of Units <= 60% of AMI”; and
      • “% of Units <= 50% of AMI”; and
    • loan options based on the proposed transaction structure.
Section 202

Delegated Mortgage Loans

Requirements

If your Lender Contract Lender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. provides you with the delegated authority, you may underwrite, commit, and Deliver DeliverSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. any fully-delegated 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 (see  Part I, Chapter 1: Overview, Section 102: Delegation and Underwriting ).

Section 203

Pre-Review Mortgage Loans

Requirements

You must obtain Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s Pre-Review approval before obtaining a Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. for any

  • Pre-Review Mortgage Loan Pre-Review Mortgage LoanMortgage Loan that is not delegated to you and requires Fannie Mae’s approval before Rate Lock. , and
  • 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 fully delegated to you.

You must ensure that your Chief Underwriter, or a delegated employee directly supervised by your Chief Underwriter, reviews and approves all material supporting the Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval request before submitting it.

Operating Procedures

The Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval process must follow these steps:

Step 1:  You submit a Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. request via DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. , including at a minimum:

  • a preliminary loan-sizing spreadsheet with
    • the preliminary Underwritten NCF NCFAt underwriting or for any specified period, the amount calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. , and
    • a refinance risk analysis;
  • a narrative describing the overall transaction, including risks and mitigating factors for each Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. reason; 
  • any additional information requested by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ; and
  • the following items.

Pre-Review Category

Required Submission

Credit Facility

Include an aggregate

 

  • summary of the overall transaction, and
  • loan-sizing spreadsheet roll-up of all 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). .

Crowdfunding Equity
Delaware Statutory Trust (DST)
Forward Commitment Your preliminary analysis of the construction and/or rehabilitation and feasibility review per  Part III, Chapter 19: Forward Commitments .
Near Stabilized Property

Your analysis of the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). monthly historical and projected lease-up schedule, including:

 

  • a spreadsheet presenting the Property’s Property’sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). monthly underwriting operating data and a lease-up schedule, including:
    • DSCR DSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of:  principal, interest, and required Mezzanine Financing or Hard Pay Preferred Equity payments. ;
    • cumulative economic occupancy;
    • bad debt;
    • cumulative physical occupancy;
    • concessions, incentives, discounts, and allowances for all
      • new move-ins, and
      • lease renewals;
    • expiring leases/renewals;
    • unit move-ins and move-outs since leasing inception; and
    • projected move-ins and move-outs through the stabilized occupancy period and beyond; and
  • a rent-comparable survey including:
    • each rent-comparable’s
      • occupancy,
      • concessions, and
      • rent level; and
    • an analysis of the comparable rents, net of concessions.

 

Your submission must:

 

  • analyze the impact of the competitive supply of new apartments entering the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). submarket during the Property's Property'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). lease-up period;
  • note the target Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. date; and
  • present 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). management company's experience leasing up newly constructed properties.
Preferred Equity

Step 2:  Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s Pre-Review response will indicate:

  • Pre-Review Approval.  You have Pre-Review Pre-ReviewRequirement that you obtain Fannie Mae’s approval before you Rate Lock a Mortgage Loan. approval to underwrite 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 and request a Commitment CommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. on the proposed terms without further Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! approval before purchase.
  • Pre-Review Resubmission Required.  You are authorized to underwrite 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 on the proposed terms and pricing, but at least 10 Business Days Business DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. before Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. , you must resubmit 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 for final Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! Pre-Review approval, along with: 
    • the applicable required resubmission documentation per the Multifamily Underwriting Standards (Form 4660 Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ); and
    • any additional requested documentation.
  • Enhanced Pre-Review Resubmission Required.  You are authorized to underwrite 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 on the proposed terms and pricing, but at least 15 Business Days Business DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. before Rate Lock Rate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. , you must resubmit 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 for final Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! Pre-Review approval, along with: 
    • the applicable required Enhanced Pre-Review resubmission documentation per the Multifamily Underwriting Standards (Form 4660 Form 4660Multifamily Underwriting Standards identifying Pre-Review Mortgage Loans and containing the underwriting requirements (e.g., debt service coverage ratio, loan to value ratio, interest only, underwriting floors, etc.) for all Mortgage Loans. ); and
    • any additional requested documentation.
  • Decline Approval.  You do not have Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! Pre-Review approval and may not request a Commitment CommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. on the proposed terms.  Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will issue a notice of denial containing its rationale. 

If you...

Within 30 days of Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! 's notice of denial, you must...

Either:

 

  • deny the Borrower credit; or
  • offer the Borrower another quote, commitment, or credit option (from a source other than Fannie Mae) that the Borrower does not expressly accept
  • issue the Borrower BorrowerPerson who is the obligor per the Note. an adverse action letter including Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s denial reasons; and
  • upload into the Deal Documents section of DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. your:
    • copy of final adverse action letter; and
    • issuance evidence (e.g., email, certified mail receipt, courier receipt, etc.).

Offer the Borrower another quote, commitment, or credit option (from a source other than Fannie Mae) that the Borrower expressly accepts

upload into the Deal Documents section of DUS Gateway DUS GatewayMultifamily pre-acquisition system, or any successor systems, recording deal registration, Pre-Review and/or waiver tracking, Mortgage Loan Commitments, and decision records. a statement confirming:

 

  • the Borrower BorrowerPerson who is the obligor per the Note. expressly accepted the credit; and
  • you sent no adverse action letter.

 

Section 204

Letters of Credit

 

 

204.01

Generally

Requirements

You must comply with this Section for all Letters of Credit Letters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. posted as Collateral CollateralProperty, Personal Property, or other property securing a Mortgage Loan. for 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 .

You must obtain Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s approval for any new or renewal Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , regardless of whether the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is required by you or Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! .

All Letters of Credit Letters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must:

All Letters of Credit Letters of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. must meet the requirements in the Irrevocable Letter of Credit Instructions ( Form 4663 ), including the form of sight draft on the Issuer IssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. .

Operating Procedures

How do you request approval to use a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ?

Step 1:  Complete the Letter of Credit Authorization and Certification Form ( Form 4664.B ) that states

  • whether the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is new or will renew or confirm an existing Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , and
  • that the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is posted as Collateral CollateralProperty, Personal Property, or other property securing a Mortgage Loan. for 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 .

Step 2:  Indicate whether the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is required by the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. or is required by you as additional collateral.  If you require the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , include the Loan Document Loan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. imposing the requirement.

Step 3:  Send the completed  Form 4664.B to Lender Risk Management Lender Risk ManagementTeam that can be contacted at [email protected]. .

What do you do after Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! has approved a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ?

Step 1:  Send the original Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. :

  • to be delivered the following business day; and
  • addressed to Multifamily Certification and Custody Multifamily Certification and CustodyTeam responsible for taking custody of and certifying Mortgage Loans that can be contacted at  [email protected], (800) 940-4646, or for submissions:  Fannie Mae (Multifamily) Certification and Custody 21240 Ridgetop Circle Suite 125-130 Sterling, VA  20166. , Attention: Manager, Multifamily Operations - Recourse and Collateral.

Step 2:  Include  Form 4664.B in the Mortgage Loan Delivery Package Mortgage Loan Delivery PackageLoan Documents and underwriting material required in connection with the Delivery of a Mortgage Loan.

Step 3:  Retain a copy of  Form 4664.B in your Servicing File Servicing FileYour file for each Mortgage Loan serviced. .

204.02

Issuers and Ratings

Operating Procedures

Who is eligible to issue a Letter of Credit?

A financial institution that satisfies the ratings criteria may issue or confirm a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .

You, one of your Affiliates AffiliatesWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… , or an Affiliate AffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of the Borrower BorrowerPerson who is the obligor per the Note. , may issue a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , but only if it is confirmed by a financial institution that is not an Affiliate AffiliateWhen referring to an affiliate of a Lender, any other Person or entity that Controls, is Controlled by, or is under common Control with, the Lender. When referring to an affiliate of a Borrower or Key Principal: any Person that owns any direct ownership interest in Borrower or Key… of you or the Borrower BorrowerPerson who is the obligor per the Note. .

Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! , in its sole discretion, may prohibit you from obtaining a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. (or confirming a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ) from a specific financial institution.

What ratings do Issuers need to satisfy?

A financial institution is eligible to issue or confirm a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. if it satisfies the following rating criteria:

Letter of Credit Rating Criteria
If rated by only 1 of the following rating agencies, the financial institution must have... If rated by both of the following rating agencies, the financial institution must have...

Either a:

 

  • Standard and Poor’s long-term issuer rating of "A" or better; or
  • Moody’s long-term issuer rating of “A2” or better.

Both a:

 

  • Standard and Poor’s long-term issuer rating of "A" or better; and
  • Moody’s long-term issuer rating of “A2” or better.

 

204.03

Verifying Issuer Ratings

Requirements

You must monitor and verify the rating of any financial institution issuing or confirming a Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit.

  • throughout the term of the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ,
  • on each anniversary of the date of issuance, and
  • on the date of any renewal, replacement, or amendment.

If the ratings of the financial institution issuing or confirming the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. fall below the ratings criteria you must

  • contact Multifamily Business Operations Multifamily Business OperationsTeam that can be contacted at [email protected].  promptly, and
  • use a financial institution that satisfies the ratings criteria to replace or confirm the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .

A change from “stable” or “positive outlook” to “negative outlook” or “on watch for downgrade” would represent a fall below the ratings criteria.

204.04

Restrictions on Issuer Collateral

Requirements

You must ensure that the Issuer IssuerEntity that: issues Bonds for a Credit Enhancement Mortgage Loan; packages mortgages for sale as a Security for an MBS; or issues a Letter of Credit. does not collateralize the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. with a lien 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). , or
  • any personal property that secures 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 .
204.05

Drawing on Letter of Credit

Operating Procedures

You may, with Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s written approval, instruct the issuing bank to honor a draw on the Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. by depositing the proceeds into an account designated by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! .