Preferred Equity | Fannie Mae Multifamily Guide

Guide Update 25-06

: Preferred Equity

Effective: 04/14/25

Associated Documents:

Summary of Changes:

HIGHLIGHTS
Effective for Mortgage Loans Committed as of April 14, 2025: updated: Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors; and Part III, Chapter 16: Mezzanine Financing and Preferred Equity, Section 1602 for Preferred Equity requirements; created a new Preferred Equity Checklist (Form 6441), and Preferred Equity Operating Procedures Job Aid; and aligned Preferred Equity guidance in Multifamily Asset Management Delegated Transaction: Transfer/Assumption (Form 4636.TA), and Multifamily Additional Disclosure Guidance (Form 4098).

HIGHLIGHTS

Effective for Mortgage Loans Committed as of April 14, 2025:

updated:
- Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors; and
- Part III, Chapter 16: Mezzanine Financing and Preferred Equity, Section 1602 for Preferred Equity requirements;
created a new
- Preferred Equity Checklist (Form 6441), and
- Preferred Equity Operating Procedures Job Aid; and
aligned Preferred Equity guidance in
- Multifamily Asset Management Delegated Transaction: Transfer/Assumption (Form 4636.TA), and
- Multifamily Additional Disclosure Guidance (Form 4098).

Primary Changes

Updated:
- Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors, requiring you to review organizational documents to determine needed compliance with Part III, Chapter 16: Mezzanine Financing and Preferred Equity, Section 1602;
- Part III, Chapter 16: Mezzanine Financing and Preferred Equity, Section 1602 requiring you to comply with the Preferred Equity Checklist (Form 6441);
- Multifamily Asset Management Delegated Transaction: Transfer/Assumption (Form 4636.TA); and
- Multifamily Additional Disclosure Guidance (Form 4098).
Created a new:
- Preferred Equity Checklist (Form 6441) to:
  - define 3 types of Preferred Equity structures that allow more flexibility;
  - continue delegation for Soft Pay Preferred Equity (previously Soft Preferred Equity);
  - clarify Mandatory Pay Preferred Equity (new classification) and Hard Pay Preferred Equity (previously Hard Preferred Equity) are subject to Pre-Review;
  - specify underwriting requirements for the 3 types of Preferred Equity structures, providing additional clarity on:
    - loan sizing requirements, if applicable; and
    - credit underwriting requirements for Preferred Equity investors;
  - outline permitted Preferred Equity Default Triggers;
  - specify Limitations on Equity Terms; and
  - require Pre-Review for any transactions with terms outside of Form 6441; and
- Preferred Equity Operating Procedures Job Aid.

Questions

Please contact Kathleen Iscra at (312) 368-6073, or at [email protected], with any questions.