408.02
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The provisions of this Section govern Achievement Agreements Achievement AgreementsAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. and all Collateral Agreements Collateral AgreementsAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. , other than:
- Multifamily Loan Agreements Multifamily Loan AgreementsAgreement evidencing Mortgage Loan terms using Form 6001 series Loan Documents, or another Fannie Mae-approved form. , including the Completion/Repair Schedule Completion/Repair ScheduleThe Required Repair Schedule to the Multifamily Loan Agreement (Form 6001 series) and the applicable parts of the Multifamily Loan Agreement, or other Fannie Mae-approved agreement, evidencing: the Borrower’s agreement to fund the Completion/Repair Escrow, and perform Completion… and 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… ;
- Security Instruments Security InstrumentsInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. ;
- Replacement Reserve Agreements Replacement Reserve AgreementsThe 4000 series Replacement Reserve and Security Agreement (Form 4606), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to replace identified capital items and perform required maintenance; terms for funding the identified capital item replacement and… ; and
- Completion/Repair Agreements Completion/Repair AgreementsThe 4000 series Completion/Repair Security Agreement (Form 4505), or Fannie Mae-approved agreement, evidencing: the Borrower’s agreement to fund the Completion/Repair Escrow, and perform Completion/Repairs; and Completion/Repair Escrow disbursement terms. .
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must maintain an effective system for monitoring the expiration date of any Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. , and ensure that all actions required to be taken pursuant to any such agreement have been timely performed and, if not timely performed, immediately notify Multifamily Asset Management Multifamily Asset ManagementTeam that can be contacted at [email protected]. .
Any request for a release or reduction of collateral must be processed in accordance with this Section, unless these instructions conflict with the terms and conditions of the Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. .
1. General
If the Borrower BorrowerPerson who is the obligor per the Note. has not satisfied the requirements for a release or reduction of collateral contained in the Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. , the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must not approve the Borrower BorrowerPerson who is the obligor per the Note. request, and may decline the Borrower BorrowerPerson who is the obligor per the Note. request without notice to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! . If the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. determines that the Borrower BorrowerPerson who is the obligor per the Note. has satisfied the requirements of the Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. , the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must recommend the release or reduction of collateral through the MAMP MAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. , accompanied by the supporting documentation listed below. Upon receipt and review of all pertinent information, Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will approve or deny the request and notify the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. of its decision.
2. Supporting Documentation and Analysis
The following documentation must be submitted through the MAMP MAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. , and maintained in the Servicing File Servicing FileYour file for each Mortgage Loan serviced. , in connection with each request for a release or reduction of collateral
(a) Income and Expense Statements; Current Rent Roll
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). income and expense statements and a current rent roll must be obtained from, and certified by, the Borrower BorrowerPerson who is the obligor per the Note. . The statements must cover the applicable period required by the Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. . Based on the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , Parts I - III, the certified income and expense statements, and the current rent roll, the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must develop a Net Cash Flow Net Cash FlowAt 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. estimate to determine whether the release or reduction provisions of the applicable Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. are satisfied. The income, vacancy, collection loss, and concession information should support the 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. that the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is relying on in assessing whether a release or reduction is warranted.
In deriving its estimate of 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. , the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must adjust for:
- income that was not allowed or recognized in the original underwriting;
- the effect of a partial year’s performance when the shorter period reflects the short-term, positive impact from seasonal variations that do not reflect 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). year-round performance; and
- non-monetary concessions, requiring the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to deduct the pro-rata value of the concession from the monthly rent for the applicable unit.
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must ensure that all appropriate types of expenses, including underwritten Replacement Reserve Replacement ReserveCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. deposits, are included, and that any inappropriate expenses (e.g., capital improvement costs, repair costs covered by funds set aside for Completion/Repairs Completion/RepairsRepairs or capital item replacements and deferred maintenance: identified per the Property Condition Assessment; and required per the Completion/Repair Schedule, or Completion/Repair Agreement. , partnership costs, etc.) are excluded. To avoid unwarranted releases or reductions of collateral, the expense figures must reflect stabilized operating conditions, and must not be understated due to efficiencies or savings that could not be replicated by a different owner or manager, or that would not be recognized for underwriting purposes.
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must perform a line-by-line expense analysis, including a comparison of the original underwriting estimates with the actual expenses shown on the Borrower’s Borrower’sPerson who is the obligor per the Note. income and expense statements. The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must use the greater of the underwritten or the actual expense figure shown for each item on the Borrower’s Borrower’sPerson who is the obligor per the Note. statement.
(b) Servicer’s Analysis
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must provide an analysis and recommendation regarding the release or reduction of collateral, including any calculations required under the terms of the applicable Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. .
(c) Correspondence
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must provide any correspondence with the Borrower BorrowerPerson who is the obligor per the Note. that pertains to the release or reduction request.
3. Property Inspection
Before approving any request for a release or reduction of collateral, the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must perform a physical inspection 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). to verify that:
- no deferred maintenance exists;
- necessary capital improvements have been made; and
- the general management and operations are acceptable and characteristic of a stabilized project.
The Servicer’s Servicer’sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. inspection must occur no more than 90 days prior to the date of the submission to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! of the release or reduction request. The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must document the results of its inspection by completing the MBA MBAMortgage Bankers Association Standard Inspection Form.
1. Draws Triggered by Adverse Events
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must promptly notify Multifamily Asset Management Multifamily Asset ManagementTeam that can be contacted at [email protected]. when any of the following events occur, which could result in a draw on 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. issued for an Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. :
- a default under the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , including the Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. ;
- the failure to renew or replace an expiring Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. at least 30 days prior to its expiration date, or other deadline specified in the Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. ; or
- the failure to replace 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. by the replacement deadline when 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. is no longer acceptably rated.
The Servicer’s Servicer’sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. notice to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! must include a recommended course of action, and be accompanied by a copy of the executed Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. .
2. Draw Resulting from Noncompliance with Issuer Rating Requirements or Expiration of Letter of Credit
If 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. occurs due to noncompliance with the rating requirements for 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. or because of an imminent expiration 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. , Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will hold 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. proceeds in its designated account until the earliest of the following:
- the Borrower
BorrowerPerson who is the obligor per the Note.
presents a replacement 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 Fannie Mae
Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!!
agrees, in its sole discretion, to accept 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.
;
(NOTE: Any agreement by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! to accept a replacement Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. will be conditioned upon the Borrower’s Borrower’sPerson who is the obligor per the Note. payment of all administrative and legal costs incurred by the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. and Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! in connection with the replacement 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. .) - the release or reduction provisions of the applicable Achievement Agreement Achievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral Agreement Collateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. are satisfied; or
- the Borrower BorrowerPerson who is the obligor per the Note. pays all amounts due and payable under the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , including any required Prepayment Premium Prepayment PremiumFor a Mortgage Loan prepayment, amount the Borrower must pay in addition to the prepaid principal and accrued interest per the Loan Documents. , and Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! releases the Lien LienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. of the Security Instrument Security InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. .
3. Draws Occasioned by Borrower Request
If the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. receives a request from the Borrower BorrowerPerson who is the obligor per the Note. to 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. and have the proceeds applied as a partial prepayment against the UPB UPBUnpaid Principal Balance , and the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. allow partial prepayments, the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must immediately forward the request, along with an analysis and recommendation, including an estimate of the applicable Prepayment Premium Prepayment PremiumFor a Mortgage Loan prepayment, amount the Borrower must pay in addition to the prepaid principal and accrued interest per the Loan Documents. , to Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! . If the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. do not allow partial prepayments, the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must deny the Borrower BorrowerPerson who is the obligor per the Note. request.
Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will assess the Borrower BorrowerPerson who is the obligor per the Note. request and determine if the proposed use 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. proceeds or other collateral would be in the best interest of Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! and/or the Investor InvestorMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. in any Securitized Mortgage Loan Securitized Mortgage LoanMortgage Loan backing an MBS, PFP MBS, or REMIC. . Any decision to apply Letter of Credit Letter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. proceeds or apply other collateral to a partial prepayment will be made by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! in its sole discretion. Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will notify the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. of its determination and will provide appropriate follow-up instructions.
4. No Interest on Proceeds Held by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!!
Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! will not pay interest on the cash proceeds it holds resulting from a draw on 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. .
Notwithstanding anything contained in this Chapter, if no Event of Default has occurred and is continuing under any of the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. (including Forbearance), the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is delegated the authority to waive any Loan Document Loan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. requirement prohibiting the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. from immediately approving a partial or final disbursement request of Additional Escrows for P&I P&IPrincipal and interest , T&I T&ITaxes or assessments that may become a Lien on the Property and insurance premiums. , and Replacement Reserves Replacement ReservesCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. required by:
- Form 6268 – Modifications to Multifamily Loan and Security Agreement (Additional Reserve Escrows);
- Form 6640 – Amendment to Multifamily Loan and Security Agreement (Additional P&I Escrow Agreement); or
- Form 6641 – Additional P&I Escrow Agreement (4000 series Loan Documents).
The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is delegated the authority to:
- determine whether the waiver requires a Loan Document Loan DocumentAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. amendment; and
- document any amendment in any form the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. determines to be legally enforceable.
Servicers ServicersPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must document all disbursement requests, including any supporting documentation and analysis, in the Servicing File Servicing FileYour file for each Mortgage Loan serviced. .