Section 1002

Underwriting

Requirements

You must ensure that the maximum ARM Loan ARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. amount is the lowest of the amount:

  • calculated applying the applicable minimum 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. per  Form 4660  for both the
    • maximum lifetime interest rate limit, and
    • Fixed Rate Test per  Form 4660 ;
  • calculated using the applicable 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.   per  Form 4660 ; and
  • you determined is appropriate.

You must use the Fixed Rate Test interest rate to determine the UPB UPBUnpaid Principal Balance for the refinance risk analysis per  Part II, Chapter 2: Valuation and Income, Section 204: Refinance Risk Analysis .

For an ARM 5/5 Loan, you must:

  • instruct the PCA Consultant PCA ConsultantIndividual or firm conducting a PCA and preparing a PCA Report. to determine all required 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). capital improvements over a 12-year period (i.e., the initial 5-year adjustable rate term, plus the optional 5-year adjustable rate term, plus 2 years); and
  • calculate the Replacement Reserve Replacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. based on the required capital improvements during the first 5-year adjustable rate term, plus 2 years.