Chapter 19

Forward Commitments

Section 1901

Generally
1901.01

Description

Requirements

You must 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. a permanent 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 that complies with the Forward Commitment Confirmation.

1901.02

Eligible Properties

Requirements

A 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). undergoing new construction or substantial rehabilitation is eligible for a Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .  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). substitutions are not permitted.

Section 1902

Funded Forward Commitments

Guidance

You may contact the Fannie Mae Deal Team Fannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. for funded Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. information.

Section 1903

Unfunded Forward Commitments
1903.01

Terms and Interest Rate Determination
1903.01A

Terms

Requirements

Terms Unfunded Forward Commitment Requirements
Forward Commitment Term 30-month maximum for construction and lease up, unless extended per  Part III, Chapter 19: Forward Commitments, Section 1903.05C: Forward Commitment Extensions .
Borrower Commitment

Must:

 

  • have the same terms as the Forward Commitment Confirmation;
  • comply with this Chapter; and
  • comply with all Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. documents.
Loan Type

Must be a fixed rate or variable rate:

 

  • 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 ; or
  • tax-exempt bond credit enhancement or associated Taxable Tail Taxable TailTaxable debt secured by the Property securing the Credit Enhancement Mortgage Loan. .
Expiration or Termination

You must not 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. 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 as an immediate Delivery DeliverySubmission 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. if the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property.

 

  • expired, or
  • terminated.
1903.01B

Interest Rate Determination and Rate Lock

Guidance

The interest rate for a permanent 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 is determined:

  • with 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. as of the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. date; or
  • for a Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. on a Credit Enhancement Mortgage Loan Credit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , at Bond BondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. pricing per Part IV, Chapter 8: Bond Transactions and Credit Enhancement Mortgage Loans, Section 801.04: Rate Lock .

Operating Procedures

You must

  • set the Guaranty Fee Guaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. and Servicing Fee Servicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. at 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. , and 
  • ensure they are paid only on the permanent 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 . 

No Guaranty Fee Guaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. or Servicing Fee Servicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. will be charged during the construction period.

1903.02

Good Faith Deposit and Fees
1903.02A

Good Faith Deposit

Requirements

You must collect the Good Faith Deposit Good Faith DepositAmount you collect from the Borrower when originating a Mortgage Loan per ​Part IV, Chapter 2: Rate Lock and Committing, Section 203: Good Faith Deposits. from the Borrower BorrowerPerson who is the obligor per the Note. per 

1903.02B

Fees

Requirements

The following fees apply to Forward Commitments Forward CommitmentsCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .

Fees Requirements
Standby Fee

For the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. term, the fee is:

 

  • per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ; and
  • due when the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. is confirmed.
Standby Extension Fee

For each extension contemplated in the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , the fee is:

 

  • per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ; and 
  • due when Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! processes the extension.
Any additional extension terms and fees are at Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s discretion.
Rate Lock Extension Fee For a Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. not involving a Credit Enhancement Mortgage Loan Credit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , per  Part IV, Chapter 2: Rate Lock and Committing, Section 204.03B: Rate Lock Extensions and the Pricing Memo Pricing MemoApplicable DUS Pricing Memo or non-DUS Pricing Memo communicating pricing for various products and features. .
Non-Delivery Fee

If the conversion conditions are not met or the permanent 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 is not Delivered DeliveredSubmission 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. per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , the fee is:

 

  • for: 
    • a Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. involving a Credit Enhancement Mortgage Loan Credit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , per the Credit Enhancement Commitment Letter; or 
    • all other Forward Commitments Forward CommitmentsCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , per Form 4210 ; and
  • drafted from your account on the earlier of the Forward Commitment’s Forward Commitment’sCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property.
    • expiration date, or
    • termination by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! .
Shortfall Fee

For a Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. not involving a Credit Enhancement Mortgage Loan Credit Enhancement Mortgage LoanMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , if the permanent 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 closes, but its original principal amount is less than 90% of the maximum 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 amount, the fee is:

 

  • per Form 4210 ; and
  • drafted from your account by the permanent 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.
Origination Fee; Construction Loan Administration Fee

You must:

 

  • charge the Borrower BorrowerPerson who is the obligor per the Note. :
    • an Origination Fee Origination FeeFee you charge the Borrower for underwriting and originating the Mortgage Loan. per the Pricing Memo Pricing MemoApplicable DUS Pricing Memo or non-DUS Pricing Memo communicating pricing for various products and features. ; and
    • a Construction Loan Administration Fee covering the actual loan administration costs, but no less than $500 per month; and
  • not pay these fees to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! .
1903.03

Forward Commitment Underwriting
1903.03A

Generally

Requirements

You must:

  • Underwrite, originate, and service a Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. 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 as if it were an immediate funding 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 .
  • Agree to issue the Borrower Commitment Borrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. .
  • Determine the construction lender has 
    • completed its underwriting, and 
    • agreed to issue a construction financing commitment.
  • Confirm the Investor InvestorMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. will
    • issue its commitment to purchase the MBS MBSMortgage-Backed Security , and
    • meet the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. conditions, including timing.
1903.03B

Construction and Feasibility Review

Guidance

You should:

  • Assess the:
    • construction lender’s capacity to fund and monitor the construction loan; and
    • ability of the development team and general contractor to 
      • complete the project, and
      • post an acceptable bond or letter of credit for the construction lender.
  • Review and approve the:
    • project budget, including construction contingencies, and align any deferred development fee to market rates;
    • LIHTC LIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. equity funding schedule;
    • pro forma underwriting;
    • feasibility of repaying the construction loan at conversion, including:
      • evaluating several stress-test scenarios such as a decline in rents, an increase in operating expenses, or other circumstances; 
      • having the LIHTC LIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor or construction lender retain an appropriate portion of the development fee until specified construction and lease up milestones are met; 
      • the sufficiency of the LIHTC LIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor’s equity funding; and
      • the availability of other capital sources such as grants or subordinate debt; 
    • absorption schedule, including a capture band analysis of submarket income;
    • Borrower BorrowerPerson who is the obligor per the Note. organizational documents;
    • Affordable Regulatory Agreements Affordable Regulatory AgreementsRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. ; and
    • Subordinate Loan Subordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. documents.
  • Ensure the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. term is sufficient to allow for:
    • 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). to be completed and leased;
    • you to submit the conversion package;
    • Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! to approve the conversion; and
    • you to 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. the permanent 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 .
1903.03C

Third-Party Reports

Requirements

If you and the construction lender use a single set of third-party reports for underwriting, the reports 

  • must be addressed to both lenders, but
  • can be contracted and paid for by either lender.

Operating Procedures

You must obtain the following reports.

Report Timing You must...
Property Condition Assessment Before Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. Complete a PCA PCAAssessment of the Property's physical condition and historical operation. for all substantial rehabilitation properties.
Before conversion Obtain a PCA PCAAssessment of the Property's physical condition and historical operation. and complete the Replacement Reserve Schedule Replacement Reserve ScheduleThe Required Replacement Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement (or other agreement approved by Fannie Mae), that evidence the: Borrower’s agreement to replace identified capital items and perform required… per  Part II, Chapter 4: Lease Audits, Inspections, and Reserves .
Environmental Site Assessment Before construction Obtain a Phase I ESA Phase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
Before conversion
  • Obtain a new Phase I ESA Phase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. . 
  • Obtain a Phase II ESA Phase II ESAEnvironmental Site Assessment conducted per the current ASTM E-1903 standard, or any other post-Phase I ESA, and the resulting report. if recommended by the new Phase I ESA Phase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
  • Ensure any required remediation is complete before you 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. the permanent 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 .
Architectural Review Before Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property.

From an independent consulting architect, obtain an architectural review assessing 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).

 

  • preliminary plans and specifications,
  • compliance with local building codes,
  • site characteristics, 
  • choice of building materials and finishes, 
  • asset quality, 
  • marketability, and 
  • overall design appropriateness for the intended use.
During construction Use a consulting architect for in-field inspections.
Final inspection

Require the consulting architect to conduct a final inspection confirming 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). :

 

  • was built according to the approved plans and specifications; and
  • meets all applicable building codes and zoning requirements. 
Appraisal Before 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. Obtain an Appraisal AppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. per  Part II, Chapter 2: Valuation and Income .
Before conversion

Obtain a new or updated Appraisal AppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. if

 

  • you request an increase in the permanent 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 amount above the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. terms, or
  • Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! requires it.

Guidance

You may use the same consulting architect as the construction lender if the consulting architect:

  • is independent and not an employee of the construction lender;
  • is retained directly by you and engaged separately by the construction lender; and
  • acknowledges they may be required to make recommendations that do not align with those of the construction lender. 
1903.04

Commitment

Requirements

All:

Operating Procedures

You must

  • complete the steps in the following table, and 
  • submit the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. per the  Committing & Delivery of Unfunded Forwards Job Aid .
Step You must...
For All Mortgage Loans
1

Obtain an executed Borrower Commitment Borrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. including:

 

  • Borrower BorrowerPerson who is the obligor per the Note. covenants to 
    • close the permanent 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 per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. terms, and
    • pay all required fees and deposits; and 
  • all required Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. and third-party documents in final form, including
    • Affordable Regulatory Agreements Affordable Regulatory AgreementsRecorded or unrecorded regulatory, land use, extended use, restrictive covenant, or similar agreement or restriction that is imposed by a Public Entity, placing rent, income, or other affordability restrictions on the use or occupancy of the Property, but which does not include a HAP Contract. (or other affordable housing restrictions), and
    • Subordinate Loan Subordinate LoanMultifamily residential real estate loan secured by a Lien against the Property having a lesser priority than the Lien securing another multifamily residential real estate loan on the same Property. documents and subordination agreements.  
2 Pay all fees or submit acceptable collateral to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! .
3

Ensure the Borrower BorrowerPerson who is the obligor per the Note.

 

  • accepted the construction loan commitment, and 
  • complied with its conditions.
4

Obtain evidence that state and local authorities issued the Borrower BorrowerPerson who is the obligor per the Note. all 

 

  • land disturbance, 
  • site, 
  • grading, 
  • foundation, and 
  • building permits, or their equivalents.
Additionally, for all non-Credit Enhancement Mortgage Loans
5 Obtain 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. .
6 Obtain the signed Delivery Assurance Agreement (Unfunded Forwards) ( Form 6488 ).
7 Ensure any Delivery Assurance Security Instrument Delivery Assurance Security InstrumentThe applicable Security Instrument (Form 6025 series). covers any permitted Borrower Commitment Borrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. extension terms.
8 Record any Delivery Assurance Security Instrument Delivery Assurance Security InstrumentThe applicable Security Instrument (Form 6025 series). 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). before the construction loan closing.
Additionally, for all Credit Enhancement Mortgage Loans
9 Ensure Bond BondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. pricing complies with  Part IV, Chapter 8: Bond Transactions and Credit Enhancement Mortgage Loans, Section 801.04: Rate Lock .
10 Obtain the Credit Enhancement Commitment Letter.

After you complete these steps, Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will confirm the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .  

Within 30 days after the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. is confirmed, you must 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. the documents listed in: 

  • steps 4, 6, 8, and 10; and 
  • the Pre-Construction Monitoring Package ( Form 4543 ).
1903.05

Construction Period
1903.05A

Monitoring

Requirements

You must monitor the construction process to ensure that when the permanent 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 is converted it will comply with the

  • Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , and
  • permanent 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 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. .

Guidance

During the construction or substantial rehabilitation period:

Responsible Party Activities
You
  • Evaluate inspections and change orders.
  • Reject any change orders that would:
    • change 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).  main design or asset quality features;
    • make material changes; or
    • result in combined hard and contingency costs greater than the construction loan budget (i.e., the construction loan must remain in balance).
  • Review the consulting architect’s progress reports and provide them to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! upon request.
  • Monitor the construction loan and lease-up status.
Consulting Architect
  • Regularly perform on-site construction progress inspections.
  • Ensure the time between inspections is not more than 2 months.
  • Issue a progress report after each
    • inspection, and
    • whenever the construction lender approves a disbursement. 

You and the construction lender may both use the same consulting architect for the

  • preliminary and final plans,
  • specification reviews, and
  • construction period inspections.
1903.05B

Reporting

Requirements

You must provide quarterly reports to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! 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. using Construction Period Monitoring ( Form 4211 ).

1903.05C

Forward Commitment Extensions

Requirements

You must inform the Fannie Mae Deal Team Fannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and the Forwards Team Forwards TeamTeam that can be contacted at [email protected]. if conversion may be delayed.

Guidance

If the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. permits, you may approve a maximum delegated Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. extension up to:

  • for MBS for Bonds MBS for BondsFannie Mae MBS: issued to credit enhance tax-exempt Bonds; or exchanged for Bonds redeemed at MBS issuance. , two 6-month periods; or
  • for any other 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 , one 6-month period.

Operating Procedures

The delegated Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. extension will become effective when all of the following occur:

  • you submit the following extension documentation to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! at least 30 days before the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration: 
    • the Borrower's Borrower'sPerson who is the obligor per the Note. extension request;
    • a project status report, including reasons for the delay;
    • verification the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. is likely to convert to a permanent 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 within the extension period;
    • anticipated shortfall analysis of 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 amount at conversion and the source of funds for filling the shortfall;
    • confirmation there has been no material adverse change in the Borrower BorrowerPerson who is the obligor per the Note. or 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
    • confirmation the Borrower's Borrower'sPerson who is the obligor per the Note. construction loan will be extended by the same extension period as the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. term.
  • Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! processes the extension request; and
  • at least 1 business day before the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration:
    • you enter all fees into C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. ;
    • Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! receives the fees;
    • you submit a C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. request to adjust the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration date; and 
    • you are notified the adjustment has been completed. 

Requirements

Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! must approve all Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. extensions beyond the maximum delegated term.  To request Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! approval:

  • you must submit
    • all extension documentation required for a delegated extension, and
    • any requested revised stabilization analysis; and
  • the Borrower BorrowerPerson who is the obligor per the Note. must pay any required fees.
1903.06

Construction Completion

Reqiurements

You must ensure that all Improvements ImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). 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). are completed, including

  • amenities, 
  • landscaping, 
  • signage, 
  • parking, etc.

If sufficient funds will be reserved in a Completion/Repair Escrow Completion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. , minor punch list and weather-sensitive items may be incomplete.

Guidance

Use the following table for confirming construction completion and occupancy.

Responsible Party Activities
Consulting Architect
  • Conduct a final 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). inspection.
  • Certify 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). was completed per this Section.
You

Ensure all Improvements ImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). :

 

  • were completed in a good and workmanlike manner per the approved plans and specifications;
  • are Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. -free; and
  • for all governmental authorities with jurisdiction over 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). , comply with all
    • applicable laws,
    • building codes,
    • zoning requirements,
    • subdivision requirements,
    • fire and safety laws,
    • ADA requirements, and
    • design and construction requirements per the Fair Housing Act.

 

Obtain: 

 

  • certificates and reports showing the Borrower BorrowerPerson who is the obligor per the Note. completed all Improvements ImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). per the Guide GuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. from the
    • architect, 
    • consulting architect, and 
    • other project consultants;
  • evidence of all public utilities for 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). ;
  • copies of:
    • all 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). operating permits and licenses; and
    • either:
      • each unconditional certificate of occupancy (or the local equivalent) for all required portions of 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
      • evidence 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). passed all inspections and received all approvals before occupancy, if local law does not require certificates of occupancy; and
  • a Certification of Substantial Completion (AIA Document G704) stating the Improvements ImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). were completed per the final plans and specifications, and executed by the appropriate parties, including the 
    • architect, 
    • general contractor, and 
    • Borrower BorrowerPerson who is the obligor per the Note. .
1903.07

Permanent Loan Final Underwriting
1903.07A

Generally

Requirements

Before converting, you must complete the permanent 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 final underwriting.

Topic You must...
DSCR and LTV Ensure 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). complies with the committed 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. and LTV LTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  .
Eligibility

Ensure:

 

  • The Borrower BorrowerPerson who is the obligor per the Note. :
    • does not change;
    • remains eligible; and
    • still owns 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). .
  • The Key Principals Key PrincipalsPerson 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. :
    • do not change; and
    • have not reduced their direct or indirect ownership interest and control over the Borrower BorrowerPerson who is the obligor per the Note. or 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). .
  • There is no material adverse change in the condition, financial or otherwise, of 
    • the Borrower BorrowerPerson who is the obligor per the Note. , 
    • any Guarantor GuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. ,
    • 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. , or 
    • 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). .
Construction Loan Status

Ensure the Borrower BorrowerPerson who is the obligor per the Note.

 

  • is current on the construction loan payments and not in default, and
  • has not been delinquent during the previous 12 months.
Certification of Rent Roll On the permanent Mortgage Loan Origination Date Mortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. , certify with the Borrower BorrowerPerson who is the obligor per the Note. there has been no material adverse change in the Certification of Project ProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 103.01: Single Borrower Ownership.  Rent Roll.
Equity Contributions

As of the permanent 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 Delivery DeliverySubmission 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. , obtain a Borrower BorrowerPerson who is the obligor per the Note. certificate, or other Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! -accepted evidence, that all funds reflected on the Borrower's Borrower'sPerson who is the obligor per the Note. sources and uses of funds statement were: 

 

  • received, including all equity contributions; and
  • properly invested 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). .
LIHTC Reservation or Allocation If 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). is eligible for LIHTCs LIHTCsFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. , verify the Borrower's Borrower'sPerson who is the obligor per the Note. IRS Form 8609 issued by the state housing finance agency reflects the required LIHTC LIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. amount.

Guidance

Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! may defer the requirement to obtain IRS Form 8609 before conversion based on factors such as whether:

  • 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). financials exceed the pro-forma underwriting per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ;
  • all other conversion criteria were met;
  • the Borrower BorrowerPerson who is the obligor per the Note. certified 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). complies with the LIHTC LIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. requirements;
  • you and the tax accountant approved the cost certification;
  • the Borrower BorrowerPerson who is the obligor per the Note. submitted the cost certification to the state, with no anticipated significant adjustments;
  • the LIHTC LIHTCFederal program offering tax credits to owners of eligible properties that contain low-income occupants and rent restrictions. investor contributed at least 90% of their equity, with the remaining 10% withheld for any minor adjustments to 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). tax depreciable basis, 
    • adjusters, or 
    • developer fee;
  • the sources and uses of funds are in balance, and all required funds were received to complete and lease-up 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). ;
  • you have documentation confirming the IRS Form 8609 application and the state’s acknowledgement of receipt;
  • you expect to receive the IRS Form 8609 timely post-conversion;
  • you will monitor receipt of IRS Form 8609 as a post-closing matter and deliver a copy to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ; and
  • the Borrower BorrowerPerson who is the obligor per the Note. has experience complying with IRS Form 8609 in the specific state. 
1903.07B

Stabilized NCF

Requirements

You must:

  • Confirm 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). will qualify for the full 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. by
    • evaluating its performance, and
    • assessing whether it meets the projected 
      • income, 
      • expenses, and 
      • 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. .
  • Use the Forward Loan Conversion Analysis ( Form 4212 ) to
    • annualize the certified project rent rolls,
    • compare pro forma and actual operating expenses, and
    • calculate 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). stabilized 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. per 
  • Submit the Forward Conversion Analysis Summary ( Form 4618 ) that verifies your Chief Underwriter’s involvement and agreement with the analysis.

The permanent Mortgage Loan Delivery Package Mortgage Loan Delivery PackageLoan Documents and underwriting material required in connection with the Delivery of a Mortgage Loan. documentation must include:

  • the percentage 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). occupied units categorized by
    • bedroom configuration,
    • square footage, and
    • rent type (low income or market rate) delineating any Section 8 or other subsidized rental program tenants;
  • 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). actual Effective Gross Income Effective Gross IncomeFor any specified period, the Property's total Net Rental Income, plus commercial income, plus other income, all calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. for each of the previous 3 months, including only rental income and permitted other income from the units less any 
    • rent concessions, 
    • reductions, 
    • inducements, or 
    • forbearance; and
  • rental income by rent type (low income or market rate).

You must use the following table to calculate stabilized 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. .

STABILIZED NCF
Item Function Description
1  

For each of the most recent trailing 3 months before conversion:

 

  • determine the Gross Potential Rent Gross Potential RentOn an annual basis or any specified period, the total actual and potential rent for a Property per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis and the applicable products and features in Part III. from an executed Certification of Project ProjectMultifamily buildings on multiple Properties, owned by the same Borrower, and that comply with Part II, Chapter 1: Attributes and Characteristics, Section 103.01: Single Borrower Ownership.  Rent Roll; and
  • confirm that at least 90% of the units were physically occupied by a Qualified Tenant Qualified TenantParty occupying a dwelling unit in a Property in full compliance with a lease. with an acceptable Lease LeaseWritten agreement between an owner and the tenant of a Property stipulating the conditions for possession and use of real estate for a specified period of time and rent. .
  EQUALS GROSS POTENTIAL RENT
2 MINUS
  • Economic vacancy using the higher of
    • original Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting, or
    • actual annualized trailing 3-month operating statements.1
  • Include: 
    • concessions if they
      • are prevalent in the market, or
      • were used to achieve initial stabilization and will remain; and
    • a re-leasing cost allowance if 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 short term leases.
3 PLUS For an MAH Property MAH PropertyProperty that: complies with Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 702: MAH Property Eligibility; and is underwritten per Part III, Chapter 7: Multifamily Affordable Housing Properties. , include annualized other income per  Part III, Chapter 7: Multifamily Affordable Housing Properties, Section 703.01: Underwritten NCF .
4 PLUS Commercial income per  Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF) .
  EQUALS EFFECTIVE GROSS INCOME
5 MINUS

Line-by-line operating expenses using the higher of:

 

  • actual annualized trailing 3-month operating statements; or
  • original Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting, adjusted by substituting the following actual expenses, if known:
    • real estate taxes;
    • property liability and other insurance; and
    • management fees.
6 MINUS Replacement Reserve Replacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. expense per  Part II, Chapter 2: Valuation and Income, Section 203.01: Underwritten Net Cash Flow (Underwritten NCF) .
  EQUALS STABILIZED NCF
1 Assess if there was any decline in NRI per  Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis .
1903.07C

Final Permanent Mortgage Loan Amount

Requirements

You must ensure the permanent 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 amount is less than or equal to the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .

Operating Procedures

Steps Actions
1 You must determine the permanent 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 amount using the Forward Loan Conversion Analysis ( Form 4212 ).
2 If 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). actual stabilized 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. before permanent 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 Delivery DeliverySubmission 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. is less than the original Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting, reduce the permanent 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 amount to comply with the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. 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. and LTV LTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  .
3 If the permanent 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 amount in Step 2 is less than the Forward Commitment Confirmation Mortgage Loan amount, verify the Borrower BorrowerPerson who is the obligor per the Note. has secured a source of funds, whether debt or equity, to cover the difference.
4

Ensure any additional debt the Borrower BorrowerPerson who is the obligor per the Note. incurs to cover the difference in Step 3, is only 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). if

 
5

If the permanent 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 amount in Step 2 results in a loan curtailment,

 

  • the Borrower BorrowerPerson who is the obligor per the Note. must close the permanent 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 at the reduced amount, and
  • you must 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. the permanent 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 at the reduced amount.
6

If 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). qualifies for additional financing beyond the Forward Commitment Confirmation Mortgage Loan amount, submit 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. :

 

  • a request for additional financing;
  • your conversion documentation; and
  • a comparative analysis showing the stabilized 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. is greater than the original Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. underwriting.
A new pre-conversion Appraisal AppraisalWritten statement independently and impartially prepared by a qualified Appraiser stating an opinion of the Property's market value as of a specific date, and supported by the presentation and analysis of relevant market information. is not required if the pre-construction Appraised Value Appraised ValueAppraiser’s opinion of the Property's market value documented in the Appraisal, on an “as is” basis, unless use of an “as completed” basis is specifically permitted per the Guide. and permanent 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 amount comply with the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. maximum LTV LTVRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  .
7

Any increase in the permanent 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 amount approved by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will:

 

  • be limited to the Maximum Loan Amount Increase percentage per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. ;
  • be made on the currently available terms and conditions; and
  • not be approved simply because construction costs, cost overruns, or change orders were higher than expected.
1903.07D

Third-Party Reports

Requirements

You must obtain third-party reports per Part III, Chapter 19: Forward Commitments, Section 1903.03C: Third-Party Reports .

1903.08

Conversion
1903.08A

Eligibility

Requirements

To convert to the permanent 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 confirm:

  • construction is complete;
  • 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). achieved the 
    • minimum occupancy, 
    • income, and 
    • debt service coverage;
  • the eligibility criteria in Part III, Chapter 19: Forward Commitments, Section 1903.07A: Generally  have been met; and
  • the permanent 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 is Delivered DeliveredSubmission 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. on Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
1903.08B

Timeline

Operating Procedures

Timing You must...
30 days before the Borrower's closing
  • Contact the Fannie Mae Deal Team Fannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and Forwards Team Forwards TeamTeam that can be contacted at [email protected]. , to provide the 
    • project development status, and 
    • anticipated conversion and Delivery DeliverySubmission 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. date.
  • Submit 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. :
    • Preliminary Notice of Conversion:
      • for Credit Enhancement Mortgage Loans Credit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , using the form attached in the Credit Enhancement Commitment Letter; and
      • for all other Mortgage Loans Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 , using Form 4616 ;
    • Forward Loan Conversion Analysis ( Form 4212 ); 
    • Forward Conversion Analysis Summary ( Form 4618 ); and
    • compliance evidence required by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! conditions.
  • Receive a conversion approval letter from the Forwards Team Forwards TeamTeam that can be contacted at [email protected]. after all Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! imposed conditions are met.
At Conversion
  • Submit the permanent 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 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. in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. per the  Committing & Delivery of Unfunded Forwards Job Aid .
  • Document the permanent 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 using Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. attached to the Borrower Commitment Borrower CommitmentYour written commitment with the Borrower to originate a Mortgage Loan, and any separate written or oral rate lock agreements between you and the Borrower to rate lock the Mortgage Loan. .
  • For Credit Enhancement Mortgage Loans Credit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. , submit 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. the final conversion notice using the form attached in the Credit Enhancement Commitment Letter.
By the Delivery Deadline
  • 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. the permanent Mortgage Loan Delivery Package Mortgage Loan Delivery PackageLoan Documents and underwriting material required in connection with the Delivery of a Mortgage Loan. and submit the permanent 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 data per 
  • For a Credit Enhancement Instrument Credit Enhancement InstrumentAgreement between Fannie Mae and a Bond Trustee where Fannie Mae provides credit enhancement of a Credit Enhancement Mortgage Loan, Bonds issued to finance a Credit Enhancement Mortgage Loan, or an Interest Rate Hedge Agreement; and if applicable, a Bond liquidity facility. , also submit applicable data on the Bond, Loan, Borrower, and Property pages in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. within 3 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. after 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. 
1903.09

MBS Issuance

Operating Procedures

The MBS MBSMortgage-Backed Security will be issued per your delivery instructions after you 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. the permanent 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 .

1903.10

Forward Commitment Termination

Guidance

Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! may terminate the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. if:

  • You fail to 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. a permanent 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 per the Forward Commitment Confirmation terms and conditions.
  • The Borrower BorrowerPerson who is the obligor per the Note. does not begin 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). construction or substantial rehabilitation within 180 days after you accept the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. .
  • A construction loan default occurs and is not cured within 90 days.
  • A substantial construction defect occurs that may threaten tenant life and safety unless:
    • the Borrower BorrowerPerson who is the obligor per the Note. repairs the defect within 90 days;
    • the repairs satisfy both you and your consulting architect; and
    • after paying all repair costs, the available remaining funds are sufficient to pay for all
      • work performed,
      • materials used or ordered, and
      • other required unpaid project costs per the contract.

Requirements

If Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! terminates the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , all applicable fees must be paid per the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. terms. 

If the Borrower BorrowerPerson who is the obligor per the Note. terminates the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. , you must:

  • submit a request to collapse the transaction to the Fannie Mae Deal Team Fannie Mae Deal TeamTeam responsible for reviewing Pre-Review Mortgage Loans, waivers, etc. and the Forwards Team Forwards TeamTeam that can be contacted at [email protected]. at least 30 days before the Forward Commitment Forward CommitmentCommitment to purchase a permanent Mortgage Loan for a to-be constructed or rehabilitated Property. expiration;
  • for Bond BondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. transactions, coordinate with Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! ’s counsel; and
  • contact Multifamily Acquisitions Multifamily AcquisitionsTeam that can be contacted at [email protected]. to withdraw the transaction in C&D C&DElectronic committing and delivery system used for issuing and confirming Commitments for acquiring Mortgage Loans, or any such successor system. .