Condemnation Requests

Guide Reference

Multifamily Selling and Servicing Guide
Part V, Servicing and Asset Management, Chapter 4, Section 411

Delegation Criteria

Generally, you may approve a condemnation provided you answer “No” to all of the questions in Part VI of Form 4636.

Fannie Mae approval is required if

• You answer “Yes” to even one question on Form 4636

• The property was financed through a credit facility or bulk delivery.

What to Submit

Multifamily Asset Management Delegated Transaction Form (Form 4636), Parts I, II, III, and VI.

If You Answer “No” to All Questions
Complete the relevant parts of Form 4636 and keep a signed copy in the servicing file for the mortgage loan.

If You Answer “Yes” to Even One Question
Complete the relevant parts of Form 4636 and submit a signed copy to Fannie Mae along with the documents specified for each question with a “Yes” answer (see example below).

You’ll also need to submit certain other information, such as:

• Key documents, including the condemnation appraisal, issued by the government body in connection with the condemnation.

• A full explanation of the condemnation including the purpose, the government body involved, the proposed timing, a description of the portion of the property that will be affected, and the size of the proposed condemnation award.

• A legal description of the property to remain as security for the mortgage loan after the condemnation.

• Your recommendation

Example:
You answer “Yes” to the question: “Does the Servicer believe that the proposed condemnation award is inadequate in relation to the value of the portion of the Property to be taken?”

Along with any other documents required by the Guide and Form 4636, and your recommendation, you would submit a description of the issues concerning the condemnation award.

How to Submit

Generally: [email protected].

Structured Facilities*
(Credit Facilities and Bulk Deliveries): [email protected]

Seniors Housing*: [email protected]

Hard Copy (if required by Fannie Mae)
Fannie Mae
Credit Services/Drawer AM
Mailstop 8H-607
3900 Wisconsin Ave. NW
Washington, DC 20016

*Please contact us at these e-mail addresses for requirements specific to these financing types.

Fees

Not applicable

Use of Funds

A condemnation award received by the borrower generally must be applied to the outstanding principal balance of the mortgage loan, unless the mortgage loan documents provide otherwise.

Unless the loan documents and MBS disclosures, if applicable, provide otherwise, you also may use funds for the following purposes:

• Reimbursing certain direct expenses incurred by you, as the servicer, or by the borrower in connection with the condemnation action

• Restoring the property to pre-condemnation condition

• Offsetting the impact on the marketability of the property

• Funding restricted escrow accounts for future property improvements  

• Funding replacement reserve accounts or adding funds to an existing account

See the Multifamily Guide for details.

Resolution/Follow-up

For non-delegated requests, Fannie Mae reviews the request and advises you of any follow-up actions that need to be taken.

For delegated requests, follow the instructions in the Guide for executing any documents required with this request.

If You Have Limited Power of Attorney
If you have delegated authority and a limited power of attorney to execute documents to effect the condemnation, an officer of your company may sign the documents as attorney-in-fact for Fannie Mae. The signature block must be signed “[Name of Servicer], as Attorney-in-Fact for Fannie Mae.”

If You Do Not Have Limited Power of Attorney
If you do not have a limited power of attorney to execute condemnation documents, send the documents to Drawer AM for review and execution.

In either case, you need to retain a copy of the documentation in your servicing file and send any executed originals to Drawer AM at the physical address listed above.

Note: The borrower does not owe a prepayment premium on a partial prepayment that results from the application of condemnation proceeds, unless otherwise provided in the loan documents

Condemnation Action Taken without Prior Notification to Servicer

If you become aware that a condemnation action was taken without prior notification to you or to Fannie Mae, promptly complete Form 4636 and follow the same process you would if the condemnation had not yet occurred. Immediately send the borrower a Reservation of Rights Letter (Form 4804). Send a copy of Forms 4636 and 4804 to the applicable Asset Management mailbox. Fannie Mae will decide whether to approve the condemnation or declare the mortgage loan in default.