FANNIE MAE DUS®
Moderate Rehabilitation (Mod Rehab) Supplemental Mortgage Loan
BENEFITS
- The Mod Rehab Supplemental Mortgage Loan is excluded from the one Supplemental loan rule.
- Loan sizing is comparable to the first lien mortgage loan.
- Lower pricing than generally available on other Supplemental Mortgage Loans.
- Lower cost than refinancing.
- Access to additional capital.
- Certainty of execution.
- Speed in processing and underwriting.
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ELIGIBILITY
- Stabilized Conventional, Multifamily Affordable Housing, Seniors Housing, Student Housing Properties, and Manufactured Housing Communities.
- First Mortgage Loan identified as Mod Rehab.
- Existing Fannie Mae fixed-rate or adjustable-rate mortgage loans.
- Lender must be the servicer of the existing Fannie Mae Mortgage Loan.
- Fannie Mae must be the only debt holder on the property.
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TERM
5-30 years; must be coterminous with the senior Mortgage Loan.
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AMORTIZATION
Up to 30 years.
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INTEREST RATE
Fixed- and variable-rate options available.
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MAXIMUM LTV
As high as 75%, depending upon asset class and use of proceeds. May be higher for Multifamily Affordable Housing properties and assumptions.
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MINIMUM DSCR
As low as 1.25x, depending upon asset class and use of proceeds. May be lower for Multifamily Affordable Housing properties.
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MOD REHAB SUPPLEMENTAL MORTGAGE LOAN TIMING
Within 36 months of origination of the Mod Rehab first Mortgage Loan or Credit Enhancement Mortgage Loan. No one-year waiting period.
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RATE LOCK
30- to 180-day commitments. Borrowers may lock a rate with the Streamlined Rate Lock option.
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ACCRUAL
30/360 and Actual/360.
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RECOURSE
Non-recourse execution with standard carve-outs required for “bad acts” such as fraud and bankruptcy.
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ESCROWS
Replacement reserve, tax and insurance escrows are typically required, based on the resulting Tier of the combined Pre-Existing Mortgage Loan and Mod Rehab Supplemental Mortgage Loan.
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THIRD-PARTY REPORTS
Standard third-party reports, including Phase I Environmental Site Assessment and a Property Condition Assessment, may not be required if certain conditions are met.
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ASSUMPTION
Loans are typically assumable, subject to review and approval of the new borrower’s financial capacity and experience.
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TIER-DROPPING
Permitted for fixed-rate Moderate Rehab Supplemental Mortgage Loans.
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REHABILITATION REQUIREMENTS
Completed at least $8,000/unit of property improvements. As a best practice, at least 60% of renovation budget allocated to interior unit improvements.
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VERIFICATION OF PROPERTY IMPROVEMENTS
Lender must document all completed rehabilitation work and verify its completion through a site inspection if the work is not performed pursuant to a Completion/Repair Agreement or a Rehabilitation Reserve Agreement.
