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Sponsor-Initiated Affordability

Doing well by doing good. Help stabilize communities and expand affordability.

Fannie Mae Multifamily offers Sponsor-Initiated Affordability (SIA), a product feature that provides better pricing and underwriting flexibility to incentivize the voluntary creation or preservation of units that are affordable to tenants earning 80% of Area Median Income (AMI) or less.

Competitive Advantage (PDF)


Benefits

  • Flexible loan terms
  • Competitive pricing. Mortgage Loans under $6M and Structured ARM Loans with less than a two-year lockout period are not eligible for pricing incentives.
  • Supports socially responsible investing
  • Potential DSCR Flexibility to 1.20 on a Pre-review basis for deals with deeper affordability*
  • Certainty of execution
  • Speed in processing and underwriting

Eligibility

  • Existing, stabilized conventional Properties
  • Minimum of 20% of units are affordable at 80% of AMI or less, as adjusted for family size
  • Rent does not exceed 30% of adjusted AMI for unit size
  • Borrower must execute a Sponsor-Initiated Affordability Agreement (Form 6490)
  • Borrower must execute a Modifications to Loan Agreement (Sponsor-Initiated Affordability) (Form 6271) and the Key Principal executes a Payment Guaranty (Pricing Incentive Recapture) (Form 6020.PIR)
  • Rent and income restrictions must be in place by the Mortgage Loan Origination Date
  • The Property must be compliant with the Sponsor-Initiated Affordability Agreement within 12 months of the Mortgage Loan Origination Date

 

Term

5 - 30 years.

Amortization

Up to 30 years.

Interest Rate

Fixed- and variable-rate options available.

Maximum LTV

80%.

Minimum DSCR

1.25x, with potential flexibility to go to 1.20*.

Sponsor-Initiated Affordability Agreement

Borrower executes a Sponsor-Initiated Affordability Agreement (Form 6490) that is recorded against the Property and remains in place during the entire Mortgage Loan term. Borrower also executes a Modifications to Loan Agreement (Sponsor-Initiated Affordability) (Form 6271) and the Key Principal executes a Payment Guaranty (Pricing Incentive Recapture) (Form 6020.PIR).

Annual Compliance Requirements

The affordability compliance requirements must be managed by a third-party Administering Agent and include annual verification of the rent and income restrictions.

Execution Options

MBS.

Supplemental Financing

Supplemental Mortgage Loans are available.

Prepayment Availability

Mortgage Loans may be voluntarily prepaid upon payment of yield maintenance for fixed-rate Mortgage Loans or declining prepayment premium for variable-rate Mortgage Loans.

Rate Lock

30- to 180-day Rate Lock periods are available.

Accrual

30/360 and Actual/360.

Escrows

Replacement reserve, tax, and insurance escrows are typically required.

Third-Party Reports

Standard third-party reports required, including Appraisal, Phase I Environmental Site Assessment, and Property Condition Assessment.

Assumption

Mortgage Loans are typically assumable, subject to review and approval of the proposed new borrower’s financial capacity and experience.

Asset Management

The Property must be compliant with the Affordability Agreement within 12 months of the Mortgage Loan Origination Date. Lender is responsible for notifying Fannie Mae of non-compliance.

Potential DSCR Flexibility on a Pre-review Basis*

DSCR at 1.20 will be considered on a Pre-Review, case-by-case basis if the Property meets the following criteria:

  • Property located in a Strong or Eligible MSA market.
  • At least 50% of the residential units have rents and incomes restricted at 80% of AMI or less.
  • Actual rents on restricted units are at the maximum of the restricted levels allowed for the Property (e.g., if the maximum restricted rent is $1,000, the actual rent cannot be below that level).
  • Actual rents on restricted units are at least 10% below comparable market rents.
  • The Borrower is an Affiliate of a repeat Sponsor.

*Work with your Deal Team to determine eligibility.