Fannie Mae Multifamily Lender Memo 14-04 (09/10/14)
OVERVIEW
Fannie Mae creates new form loan documents and makes minor revisions to existing loan documents.
Use of the new/revised documents is mandatory for loans committed on and after 10/15/14.
SOME OF THE HIGHLIGHTS
New Form Documents
Three new document riders are required when loan proceeds are used to redeem existing tax-exempt bond financing. The new riders are updates of previously circulated but unpublished Fannie Mae forms.
Notable Loan Document Revisions
Loan Agreement
Section 4.01(f) was revised to delete the Borrower’s insolvency representation because the concept is covered in Section 4.01(i). The Borrower’s representation that it has sufficient working capital to pay its obligations as they come due has been revised to explicitly carve out the Borrower’s ability to pay off the Mortgage Loan on the Maturity Date, (which eliminates the friction around the refinancing or payoff uncertainties surrounding loans with maturing balloon payments.)
Sections 4.01(h)(3)(A) and 4.02(d)(5)(A) trade payables associated with rehabilitation, restoration, repairs, replacements, or amounts otherwise approved by Lender have been expressly excluded from the cap on trade payables, and trade payables over the 2% cap but not exceeding 4% of the original principal balance of the Mortgage Loan are permitted for up to 90 days, (which accommodates seasonal variation in payables.)
Section 11.02(b)(2) was revised to provide additional clarity around Transfers of ownership interests in a Publicly-Held Corporation or a Publicly-Held Trust.
Sections 11.02(c) and 11.02(d) were revised to incorporate the defined terms “Mezzanine Debt” and “Permitted Mezzanine Debt” (which are modeled after the Preferred Equity definitions).
Section 11.03(g)(2)(C) was revised to make the Borrower’s obligation to pay the Lender’s out-of-pocket costs separate from the Review Fee in connection with a Transfer request.
Section 13.02(a)(3)(A) the property condition assessment schedule for affordable housing properties was revised to align with the Multifamily Guide requirement. The phrase “physical needs assessment” has been replaced with the phrase “property condition assessment” throughout the Loan Documents to better reflect industry vernacular.
Section 14.03(c) was revised to clarify the circumstances under which the Lender can exercise its power of attorney under the Loan Documents.
Opinion of Borrower’s Counsel
The opinions as to venue for foreclosure proceedings and the choice of law governing the Loan Documents have been deleted from the Opinion of Borrower’s Counsel.
© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.