Multifamily New Issuance Bond Program NIBP HFA Underwriting Process for Private Placement Transactio

1
Multifamily New Issuance Bond Program (NIBP) HFA
Underwriting Process for Private Placement
Transactions
December 16, 2009
2
Agenda

• NIBP Program Overview
• HFA Underwriting Execution Overview
• Multifamily Underwriting Guides
• GSE NIBP Term Sheet
• Underwriting Process
• Transaction Overview Form
• General Underwriting Guidance
• Conversion to Permanent Underwriting Guidance
• Transaction Approval Memo (TAM)
• Submission
• Timing Cost
• Conclusion
• Fannie Mae/ Freddie Mac Specific Underwriting
  Training

3
MF NIBP Program Overview

• Multifamily bond mortgages issued under the NIBP
  must meet one of the following requirements
• FHA or Ginnie Mae guarantee or risk-sharing
• Credit enhanced by the GSEs
• Underwritten by GSEs pursuant to a new
  multifamily underwriting standard to be developed
  by the GSEs in concert with NCSHA, NALHFA, FHFA,
  and Treasury
• Note Exceptions are to be rare under this
  execution path more customized loans can go to
  other programs within the NIBP. For example, the
  GSE Lender Networks for a GSE Credit Enhancement.

4
HFA Underwriting Execution Overview

• Underwrite to the relevant GSEs Multifamily
  Underwriting Guidelines
• As amended by the GSE Term Sheet
• Access via AllRegs
• Relevant Multifamily Underwriting Guides
• Freddie Mac Delegated Underwriting for Targeted
  Affordable Housing Guide
• Fannie Mae Delegated Underwriting and Servicing
  Guide
• Fannie Mae will provide more targeted Chapter
  references

5
GSE NIBP Term Sheet
6
GSE NIBP Term Sheet
7
GSE/Contract Underwriting Process Overview

• Each HFA will underwrite its own transactions
  using the Multifamily Underwriting Guide of their
  GSE Point of Contact as modified by the GSE Term
  Sheet
• The HFA must submit a Transaction Overview Form
  prior to full underwriting
• The GSEs will have jointly selected one or more
  Qualified Contract Underwriting Firms (QCUF)
• The HFA will submit its underwriting package to
  the QCUF designated to the transaction by the
  GSEs
• The QCUF will perform the following on behalf of
  the GSEs
• Thorough review of the underwriting and third
  party reports
• Site visit of the property and its comparables
• Preparation a recommendation for the GSE Loan
  Committee
• The GSE Loan Committee will unanimously approve
  or reject the transaction

8
Submission of the Transaction Overview

• HFA must submit a Transaction Overview Form to
  the GSE POC for prescreening each deal
• Do NOT wait until submitting the Underwriting
  Package to the QCUF
• The GSE POC will coordinate approval with both
  GSEs
• Transaction Overview Form includes
• Brief Transaction Overview
• Waivers / Exceptions
• Underwriting waivers (if requested) must be
  approved by both GSEs
• Applicant Information
• Borrowers, General Partners/Key
  Principals/Guarantors and Limited Partners with
  gt25 ownership interest will need to pass an
  Applicant Experience Check by both GSEs

9
Transaction Overview Form
10
Transaction Overview Form
11
Points of Contact

• Fannie Mae
• Tabare Borbon
• Tabare_Borbon_at_fanniemae.com
• [phone]
• Freddie Mac
• Clayton Davis
• MF_NIBP_at_freddiemac.com
• [phone]
• Contract Underwriting Firm - TBD
• Contact for general underwriting questions

12
General GSE Underwriting Guidance

• Funded Impounds
• Taxes, Insurance and Replacement Reserves
• Required Third Party Reports include
  (stabilized/forward)
• Appraisal/Market Study
• Physical Needs Assessment (PNA)/ Plan Cost
  Review
• Environmental Report
• Other Third Party Reports, per relevant
  Multifamily Underwriting Guide
• Property valuation, per relevant Multifamily
  Underwriting Guide
• DCR and LTV calculation
• Income and Expense Line-by-Line Analysis

13
Conversion to Permanent Underwriting Guidance

• Conversion to Permanent/Release of Construction
  Period LOC must be approved by the GSE Loan
  Committee
• Each GSE will provide guidance on calculating the
  maximum permanent loan amount
• Fannie Mae Construction Phase Financing
  Agreement (not in the DUS Guide)
• Freddie Mac Construction Phase Financing
  Agreement for the specific transaction and
  generally in the TAH Delegated Guide

14
Transaction Approval Memo (TAM)

• Standardized Form for each GSE
• Freddie Mac Investment Brief (Loan Submission
  Template)
• Fannie Mae Underwriters Narrative
• During underwriting, the HFA is expected to
  analyze all reasonably identifiable strengths and
  weaknesses of the proposed transaction
• All factors that could impact the transaction
  during the term or at maturity of the Mortgage
  Loan must be reflected appropriately and
  mitigated in the ultimate underwriting
  conclusions and approved Mortgage Loan structure.
  
• Among other things, the HFA must address
• Borrowers, Key Principals and Principals
  financial capacity and experience
• Propertys financial performance and trends
• Propertys current physical condition and
  expected condition over the term of the Mortgage
• Property markets performance and trends

15
Transaction Approval Memo (TAM)

• Required Information
• An analysis of all material strengths and
  weaknesses with mitigations
• An affirmation that the proposed Mortgage Loan
  transaction complies with all relevant laws
  (including compliance with OFAC requirements)
• The underwriting conclusions and the Chief
  Underwriters (or your HFAs equivalent) approval
  of the proposed Mortgage Loan transaction
• All other information required by the applicable
  Guide
• GSE-specific underwriting spreadsheets must be
  attached

16
Submission to the Qualified Contract Underwriting
Firms (QCUFs)

• HFA Underwriting File Submission List (to be
  provided by each GSE)
• Electronic Submission
• QCUF will deliver the underwriting package to
  the appropriate GSE via the GSEs document
  delivery system

17
Timing and Cost

• Estimated approval time once submitted to QCUF
• 15-20 business days
• Cost
• The QCUF fee to re-underwrite the transaction
  will be passed on to the Issuer/Developer.

18
Conclusion

• Fannie Mae/ Freddie Mac Specific Underwriting
  Training
• Questions?