Fannie Mae - Apartment Building Loan - Apartment Building Mortgage

Competitive financing for to-be-built or substantially rehabilitated apartment buildings - underwritten so that 51% of the units are affordable to tenants earning 100% of median income. No actual income or rent restrictions are placed on the property; however, coverage calculations will assume these rent levels.

Loan processing and closing are coordinated with a apartment construction lender prior to construction start. The permanent loan rate may be fixed prior to start of construction through Fannie Mae cash purchases. Lender provides a letter of credit to Fannie Mae during construction and lease up.

Alternatively, permanent loan proceeds may be invested in a guaranteed investment contract during construction, with construction lender funding a separate loan.

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Features

Allows Borrowers to lock in rates at start of construction
Increases availability of affordable housing for moderate-income renters
Additional loan dollars may be advanced to the borrower at prevailing interest rates 12 months after permanent loan term begins

Structure
Loan Amount	$4 to $20 million - smaller or larger loans considered on a case-by-case basis
Loan to Value	maximum 80%
Debt Service Coverage	minimum 1.25
Loan Terms	- Forward commitment - 24 to 30 months, interest-only - one six-month extension may be available during the construction loan period - permanent loan - 7 to 30 years
Amortization	30 years; no principal payment during construction phase; interest is due, at a reduced rate on amount disbursed to construction lender as disbursements occur, depending upon the credit rating of the construction lender providing the letter of credit
Recourse	nonrecourse with standard carveouts
Hedge Fees	no hedge fees are included in rate if all funds are advanced to construction lender or to GIC at start of construction

Optional Features
Subordinate Financing	generally not permitted for moderate-income properties - may be allowed if property receives subsidies or other support from governmental or quasi-governmental agencies - up to 100% of value, with 25% of cash flow remaining after payment of first mortgage debt service
Assumability	with lender's consent and payment of 1% fee
Prepayment Fee	yield maintenance varies; typically 9.5 years on a 10-year term

Requirements

Full third-party reports: appraisal, environmental and feasibility/pre-construction assessment
Construction loan security required in the form of acceptable letters of credit (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 due upon conversion

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