MBS Exchange (Taxable Forward)
Fannie Mae Multifamily provides a forward commitment to issue an MBS for taxable bonds issued to finance the acquisition, new construction, refinancing, or moderate to substantial rehabilitation of multifamily properties.
Benefits
- Low borrowing cost, “AA+” rating keeps the interest rates on bonds low
- Supports affordable rental housing stock
- Flexible structures
- Certainty and speed of execution
Eligibility
- Multifamily Affordable Housing properties
- New money issues, refundings, or credit substitutions
- Non-LIHTC transactions
Forward Period
30-to-36-month commitments. Two delegated six-month extensions available.
Loan Term
10 – 15 years.
Amortization
Up to 30 years.1
Interest Rate
Fixed- and variable-rate options available.
Maximum LTV
80% for properties with at least 20% of the units at 50% AMI or below; or
40% of units at 60% AMI or below including rent and income restrictions; or
80% for all others.
Minimum DSCR
1.20x for properties with at least 20% of the units at 50% AMI or below; or
40% of units at 60% AMI or below including rent and income restrictions; or
1.25x for all others.
Extension Eligibility & Fees
One or two six-month extensions are delegated to the lender, determined at loan origination. For each extension contemplated in the Forward Commitment, the fee is:
- per the Forward Commitment; and
- due when Fannie Mae processes the extension.
Prepayment Availability
Flexible prepayment options available, including yield maintenance and declining prepayment premium.
Restrictions
LURA or other publicly required affordability including rent and income restrictions (i.e., through zoning, tax abatements, or public facility corporation status).
Minimum Rent Advantage
Affordable rents should be at least 10% below market.
MBS Execution
Bondholder will serve as the MBS investor after the exchange.
Premium
Permitted up to 3% at sale of bonds, to be used only to offset negative arbitrage or bond issuance costs. The Guaranty Fee will be assessed a –3- basis point adder for up to 2% premium; or an additional 3 basis point adder for >2% up to 3% premium.
Sponsor
Repeat sponsors with relevant experience in developing, owning, and operating workforce housing property type.
Good Faith Deposit
2% of the amount of the Forward Commitment, due at issuance of the Forward Commitment, and refundable upon conversion to the permanent Mortgage Loan.
Eligible Markets
Strong or Eligible MSAs or major Nationwide.
Standby Fee
25 basis points per year.
Issuer and Trustee Fees
Loan sizing must include underwriting of the Issuer Fees; however, the fees will be paid directly by borrower and are not enhanced or passed through by Fannie Mae.
There are no Trustee fees as the bonds are redeemed and replaced with an MBS.
Third-Party Subordinate Financing
Hard subordinate debt (which requires scheduled repayment of principal) is permitted only if provided by a public, quasi-public, or not-for-profit lender and combined debt service coverage cannot fall below 1.05x. Soft subordinate debt is permitted subject to requirements which include capping payments at 75% of available Property cash flow after payment of senior liens and Property operating expenses.
Recourse
Non-recourse execution with standard carve-outs for “bad acts” such as fraud and bankruptcy.
Escrows
Replacement reserve, tax, and insurance escrows are required.
Third-Party Reports
Standard third-party reports required, including Appraisal, Phase I Environmental Site Assessment, and Property Condition Assessment.
Delivery Tolerance
The original principal amount of the permanent Mortgage Loan must not be (i) greater than 105% or (ii) less than 90% of the amount of the Unfunded Forward Commitment.
1 Adjustments may be made depending on the property, product, or market
