Competitive financing for to-be-built or substantially rehabilitated multifamily properties that have tenant income or rent restrictions based on tax-exempt bond requirements or low income housing tax credits. Loan processing and closing are coordinated with qualified Construction Lender prior to construction start.
Permanent loan rate may be fixed prior to start of construction through Fannie Mae cash purchase, or sale of tax-exempt bonds. Construction lender provides letter of credit to Fannie Mae during construction and lease up.

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Features

Available for new construction or substantial rehabilitation
Lock in rates at start of construction
Increases availability of affordable housing for low and moderate-income renters
Available for cash, MBS or bond (tax-exempt or taxable) financing

Structure
Loan Amount	minimum $4 million; smaller loans considered on a case-by-case basis.
Loan to Value	85% to 90%. *
Debt Service Coverage	1.15x to 1.25x. *
Loan Terms	a. forward commitment - 24 to 30 months, interest-only, one six-month extension may be available during the construction loan period b. permanent Loan - 18 to 30 years
Amortization	25 to 30 years; no principal payment during construction phase; interest is due, at a reduced rate on amount disbursed to construction lender as disbursements occur. Tax Exempt Bonds - Fannie Mae charges a reduced guaranty fee during construction.
Recourse	nonrecourse with standard carveouts a. cash purchase: based on Fannie Mae cash pricing at time of rate lock. No hedge fees are included in rate if all funds are advanced to construction lender or to GIC at start of construction b. tax exempt bonds: tax-exempt rates at time of sale of bonds plus Fannie Mae guaranty and servicing, and applicable bond related fees
* Where 100% of the units are restricted and restricted rents are at least 10% below market, higher LTV and lower DSC requirements may be used. Where less than 100% of units are restricted, rents are not less than 10% below market, or amount of equity generated from tax credits is minimal, lower LTV and higher DSC parameters are applied.

Optional Features
Taxable Tails	taxable financing in excess of bond amount available through issuance of taxable bonds or a subordinate MBS/DUS loan
Subordinate Financing	soft secondary financing permitted up to 100% of value with lender's consent, with 25% of cash flow remaining after payment of first mortgage debt service
Assumability	fully assumable with lender’s consent and upon payment of 1% fee
Prepayment	a. cash purchase: 10 to15 years yield maintenance; thereafter 1%; last 90 days at par b. tax exempt bonds: in accordance with bond documents; prepayment penalty for 10 years equal to present value of the unpaid guaranty and servicing fees, last 90 days at par

Requirements

Full third-party reports - appraisal, environmental and feasibility/pre-construction assessment
Construction loan security required in the form of acceptable letters of credit (LOCs, rated A or better), investment agreements (GICs or IAs, rated AA or better), or construction lender's guaranty
Funded replacement reserve escrow required for both new construction and substantial rehabilitation upon conversion
2% refundable commitment fee required at acceptance of commitment and refunded at conversion - letter of credit may be acceptable in lieu of cash.
Refundable delivery assurance fee based on yield maintenance formula.

Conversion Requirements

Completion of construction in accordance with final plans and specifications
Stabilized occupancy of a minimum of 90% for 90 days, at which time letter of credit will be released
Achievement of underwritten debt service coverage
Tax and insurance escrows upon conversion

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