Fannie Mae DUS
Multifamily Affordable Housing
Forward Commitment Financing - New Construction or Substantial
Rehabilitation
Term & Amortization: 18-year
balloon or 25- or 30-year fully amortizing maturities for permanent
loans (24 to 30 month forward commitment terms with Lender’s option to
extend for 6 months); 25-year and 30-year amortization
Loan To Value Ratio: 90% Maximum Allowable
Debt Coverage: 1.15x Minimum Allowable
Program Mechanics: Fannie Mae does not take construction and
lease-up risk, but is able to forward commit to a loan amount and
interest rate prior to construction by advancing its funds to an
approved construction lender (the “Advances”) and relying upon the
credit of the construction lender for payment of interest during
construction and principal at commitment expiration if the property
fails to qualify for conversion to permanent loan. The interest rate due
during construction is reduced from the permanent loan interest rate to
reflect the construction lender’s credit and the fact that no servicing
fee is payable to the DUS lender during construction. There is no
amortization until conversion to permanent loan.
Rate Lock Options: Most borrowers elect to have the interest rate
on the entire permanent loan locked in advance of construction by
agreeing to have the full permanent loan amount advanced to the
construction lender within 30 days of rate lock but other options are
available that allow for delaying the funding of advances by: (1)
locking the interest rate incrementally on each of four advances funded
over the first year of the commitment; (2) paying a ‘hedge fee’, either
up front or as an addition to the interest rate to lock the entire rate
in advance but spread the funding of advances over the first year in
four equal increments; or (3) requesting a Standby Commitment which has
the lowest cost but in which the borrower assumes all interest rate risk
until the property qualifies for permanent loan delivery and the
interest rate is locked just prior to permanent loan closing. Standby
Commitments may be converted to rate locked Forward Commitments during
this term.
Mandatory Delivery: Upon acceptance of the rate locked permanent
loan commitment, Borrower posts 2% in cash or an acceptable letter of
credit in favor of Fannie Mae, which 2% will be refunded upon delivery
of the permanent loan to Fannie Mae. At construction loan closing the
Borrower must also execute a mandatory promissory note in favor of
Fannie Mae. The promissory note obligates the Borrower to pay yield
maintenance on Fannie Mae advances in the event that the Borrower
chooses not to convert a qualifying loan. The note is secured by a
subordinate mortgage on the project, and is returned to the Borrower
upon delivery of the permanent loan to Fannie Mae.
Prepayment: Prepayment terms, prepayment premiums, and yield
maintenance requirements are specified by Fannie Mae. Typically,
mortgages are subject to yield maintenance for 15 years from conversion
and a 1% prepayment premium thereafter except for the 90 day period
immediately prior to maturity. Yield maintenance and prepayment terms
can vary by mortgage term and interest rate. Consult an American Trust
Corporation representative for more detail.
Loan Features:
Eligible Properties/Transactions:
Conversion Requirements:
Forward Commitments are converted to permanent loans upon: (a)
satisfactory of construction in accordance with plans and specifications
that were independently reviewed at time of initial underwriting; (b)
completion of lease-up and stabilization as
evidenced by four consecutive rent rolls, each certified and dated at
one month intervals showing 90% or greater occupancy; and (c)
achievement of the Net Operating Income (“NOI”) estimated in the
original underwriting as evidenced by actual leases and actual operating
expenses.
Permanent Loan Requirements:
Pricing: Fees
and interest rates are quoted daily. Contact American Trust Corporation
for specific pricing.
limited operating deficit guarantees may be required until the property
has demonstrated its ability to achieve the anticipated rents and
operate at underwritten expense levels
Tax-Exempt Bonds: The New Construction Product Line may be
employed to credit enhance tax-exempt bonds.
Market Rate Housing: Forward Commitments are also available under
different terms and conditions for moderate-income and market rate
housing without rent restrictions.
Territory: Nationwide
In its pre-qualifying review, American Trust Corporation will attempt to
estimate both the loan amount and the fees and costs associated with the
transaction. Actual loan amounts and actual fees and expenses may vary
from the pre-qualifying estimates. A pre-qualifying estimate is not a
commitment to make a loan.
Application Fee: $2,500 non-refundable inspection/loan processing
fee payable to American Trust Corporation with the loan application,
will be credited to origination fee at closing.
Origination Fee: 1%
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