Subordinate Financing

Under very limited circumstances, we may permit a borrower to place non-Fannie Mae subordinate financing on a multifamily property backing a first mortgage loan owned or securitized by Fannie Mae. Generally, Fannie Mae will allow subordinate financing only if it is completely soft with the subordinate lender having very limited rights. Third-party subordinate financing may be allowable with Multifamily Affordable Housing properties and Bond Credit Enhancement mortgage loans if they conform to the underwriting requirements of the Fannie Mae Multifamily Guide.

Such third party subordinate financing must meet the requirements summarized here:

  • The subordinate financing must comply with the underwriting policies for subordinate financing set forth in Parts IIIA, IIIB, and IIIC, and V of the Multifamily Guide.
  • Generally, the borrower must be a single-asset entity and may not request subordinate financing prior to the third year of the first lien mortgage loan.
  • The subordinate financing must be consistent with the terms and conditions of the loan documents for the first mortgage loan and the security disclosure documents, if any.
  • If the loan documents expressly prohibit subordinate financing, it cannot be allowed unless the transaction documents provide otherwise.
  • The borrower and the subordinate lender must be willing to enter into and record a Fannie Mae Subordination Agreement (Form 4507), described below.

Guide Reference

Multifamily Selling and Servicing Guide

  • Part IIIA: Base Underwriting Requirements
  • Part IIIB: Underwriting for Special Asset Classes
  • Part IIIC: Underwriting for Special Property Features or Executions, Chapter 2: Subordinate Financing
  • Part V: Servicing and Asset Management, Chapter 4, Section 415, Subordinate Financing

Delegation Criteria

Unless the loan documents explicitly allow subordinated debt on the property without the consent of the note holder, Fannie Mae’s prior approval is required.

What to Submit

Submit the following to Fannie Mae with your request:

Copy of the borrower’s request An appraisal dated no earlier than 90 days prior to the borrower’s request A copy of the subordinate loan documents which specify the applicable loan amount, interest rate, payment schedules, and all other transaction related information Multifamily Property Inspection (Form 4260 or equivalent or Form 4262) dated no earlier than 30 days prior to the borrower’s request A title policy update indicating no unauthorized encumbrances Your recommendation

You must submit the request at least 30 days before the projected closing date on the subordinate financing. Wire Fannie Mae’s share of the review fee at the same time you submit your request.

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.


$5,000 collectible from the borrower when it submits a formal request for approval of subordinate financing. The fee is shared equally by you, as the servicer, and Fannie Mae.

You also may ask the borrower to reimburse you for any reasonable out-of-pocket costs connected with the review of the subordinate financing.

Wire any fees due to Fannie Mae to the following account no later than 10 business days after you receive them. Include the type of fee or deposit, property name and Fannie Mae loan number.

ABA Number: 021 039 500
Telegraphic Abbreviation: FNMA/NYC
Account Number: 169220242
Note: Type of fee (Assumption or Partial Release), the Fannie Mae Loan Number and the Property Name.
Attn: Trans code 513 - GL 747669921

Use of Funds

Not applicable


Fannie Mae notifies you in writing of our decision to approve or disapprove the transaction. You, in turn, notify the borrower in writing and copy Drawer AM.

If we approve the transaction, you take the following steps:

  • Have the borrower and subordinate lender execute the Fannie Mae Subordination Agreement (Form 4507). Do not permit any changes to Form 4507 without our prior consent.
  • Send Form 4507 to Drawer AM for Fannie Mae’s execution.
  • Record the executed Subordination Agreement and distribute it to the subordinate lender and the borrower.
  • Complete any other follow-up instructions included with Fannie Mae’s approval notice.
  • Obtain a title policy endorsement that insures that Fannie Mae mortgage loan is senior to the subordinate mortgage and that reflects the recordation of the Subordination Agreement.
  • Send the original recorded Subordination Agreement along with a Custody Document Transmittal (Form 276) and the title policy endorsement to Drawer AM.
  • Retain a copy of the recorded Subordination Agreement in your servicing file.

Unauthorized Subordinate Financing

If you learn of an unauthorized subordinate lien on the property or any unauthorized pledge of ownership interest, immediately send the borrower a Reservation of Rights Letter (Form 4804). Send a copy of Form 4804 to Drawer AM along with the items listed above under What to Submit. Fannie Mae will decide whether to approve the subordinate financing or declare the mortgage loan in default.

Always consult the loan documents, transaction documents, your servicing agreement, the Multifamily Guide and the relevant forms for complete instructions.