AFFORDABLE HOUSING LOAN PROGRAM GUIDELINES
Loan Term:
18 year.
Amortization
30 year.
Maximum Loan to Value:
90%
Minimum DSCR:
1.15x
Yield Maintenance:
15 year
Interest Rate:
The interest rate will be based upon Fannie Mae Net Yield requirements plus a .37% Servicing Fee by P/RMIC.
Non-Recourse Provisions:
Exculpatory language limiting the borrower’s personal liability may be added to the note and
mortgage through the use of a rider and an addendum, respectively.
Occupancy Requirement:
90% occupancy for 90 days, prior to closing.
Eligible Properties:
A Multifamily Affordable Housing (MAH) Property is a property encumbered by a regulatory
agreement or recorded restriction that limits rents, imposes income restrictions on tenants, or places
other restrictions on the use or occupancy of the MAH Property which are designed to make the
project affordable.
MAH Properties must have third-party and/or occupancy restrictions that meet or exceed the
following requirements:
- “20%@50%”: at least 20 percent of all units have a rent or income structure with restrictions in place such that the rents charged for those units are affordable to households earning no more than 50 percent of Area Median Income (AMI) as adjusted for family size; or
- “40%@60%”: at least 40 percent of all unts have a rent or income structure with restrictions in place such that the rents charged for those units are affordable to households earning no more than 60 percent of Area Median Income (AMI) as adjusted for family size; or
- Properties that i) have other rent and/or income restrictions, and ii) meet a noteworthy special public purpose, on a case-by-case basis may receive the benefits of the special underwriting standard and pricing normally reserved for MAH Properties.
- are subject to FHA Risk Sharing;
- are a Bond Financed Property;
- receive Low Income Housing Tax Credits (LIHTC) under Section 42 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), and the U.S. Treasury regulations promulgated under the Code;
- are subject to inclusionary zoning and/or resale restrictions; and/or
- receive other state, local or federal subsidies which are conditioned on affordability of some or all of the units in the property.
Other Costs:
The borrower is responsible for any costs incurred in closing the loan (i.e., survey, title insurance
policy, escrow and recording fees, and lender's and borrower's attorney costs).
Completion/Repair:
A repair escrow of 125% of the estimates repair cost will be required should the loan include repairs, replacements or rehabilitation work to be competed after loan closing. The escrow can be funded with cash or cash equivalents including disbursed mortgage proceeds and/or a letter of credit. Repairs must be competed within 6 months and moderate rehabilitation work must be completed within 18 months following loan funding.
Operating Deficit:
An operating deficit escrow will be required in cases where the property does not demonstrate breakeven at time of closing. This escrow will be funded by the mortgagor with cash or a letter of credit at 150% of any projected negative cash flows.
Replacement Reserve:
For underwriting purposes, FNMA requires the inclusion of a reserve for replacements in the estimate of operating expenses. The borrower is required to make an initial deposit to fund the reserve at the time of the loan closing and to make periodic deposits thereafter. In all cases, the note must contain specific language providing for the funding of the reserve. The initial deposit to replacement reserves is based on the economic life of each component and will be determined by FNMA based on the appraisal and engineering reports and a physical inspection of the property. Any initial deposit must be adequate to cover the lapsed economic life of the components. Annual deposits will be a minimum of $250.00 per unit or a higher amount as determined necessary after a review of the recommendations of the appraiser and engineer which consider the remaining economic life of the appropriate elements of the property.
Real Estate Taxes & Property Insurance:
Escrows are required for taxes and insurance. The escrow amount is determined at closing. Escrows will be funded by the borrower by an initial deposit and monthly deposit at 1/12th of the annualized amounts due for real estate taxes, special assessments, and property insurance premiums.
Lease Escrow:
If the property is held in a leasehold estate, the borrower must establish and maintain an escrow for the lease payments.
Subordinate Financing:
Subordinate financing is permitted with FNMA's prior written approval.
Commitment Procedures:
Upon completion of processing and underwriting of the loan request and at the borrower's direction, P/RMIC will deliver a loan application package to FNMA for review. Upon satisfactory review of the loan application package, FNMA will issue to P/RMIC an Offer to Commit which provides a listing of any applicable conditions and sufficient information to permit P/RMIC and borrower to review FNMA's pricing screen and determine the most advantageous pass-through rate, loan term and commitment period for the project. When these terms have been agreed to by the borrower, P/RMIC will call FNMA to accept the Offer on behalf of the borrower. The borrower will be given 30 days to accept the Offer to Commit. Once P/RMIC has called FNMA to accept on behalf of the borrower, the Offer to Commit becomes a mandatory delivery commitment. Failure to deliver or other-wise comply with the terms of the commitment will be a breach of the contract. In such event, FNMA will retain the entire commitment fee.
FNMA Commitment Fee:
FNMA's commitment fee of 2.0% of the mortgage amount, is payable to P/RMIC by the borrower upon the borrower's acceptance of the commitment. The commitment fee will be refunded upon Fannie Mae’s purchase of the loan.