Multifamily Glossary of Terms

Below, we have provided a brief glossary of terms that will help you better navigate the pages within the Multifamily section of this Web site.

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Actual/360 (also Interest Calculation)

With the Actual/360 interest calculation method, the amount of each monthly payment that is allocated to interest is based on the actual number of calendar days during a given month (28, 29, 30 or 31), as a result, the note rate may be lower than if interest was calculated on a 30/360 basis. However, loans using an Actual/360 payment schedule amortize more slowly, generate more interest, and have a larger balloon balance than a loan at the same note rate using a 30/360 payment. For some borrowers the lower rate available using the Actual/360 option may be worth the slightly higher principal payment that is due at maturity.

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Bond Refunding

Issuance of additional bonds (and thus the incurring of additional debt) for the purpose of acquiring the funds needed to redeem outstanding bonds.

Credit Enhancement

The availability of additional outside support designed to improve an issuer's own credit standing. Examples include bank lines of credit or collateralized funds.

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Credit Facility

The credit facility ("Facility") utilizes a single pool of cross-collateralized and cross-defaulted mortgages ("the Collateral") as collateral for intermediate/long term financing as well as short term borrowing, at a competitive price.
More on Credit Facility

Defeasance

Fannie Mae's Defeasance option gives the borrower a choice in lieu of yield maintenance when a property is released from the mortgage lien prior to maturity. The property release does not interrupt the original expected cash flow to investors in securities backed by mortgages. Defeasance reduces the risk of reinvesting prepayment proceeds in an uncertain interest rate environment.

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Delegated Underwriting and Servicing (DUS®)

Fannie Mae's principal line for purchasing individual multifamily loans. We delegate the processing and approval of the loans to our DUS Lenders, and they take a percentage of the risk.
DUS Lenders

DUS Commitment

The Delegated Underwriting and Servicing Commitment is a contractual agreement between Fannie Mae and the lender in which Fannie Mae agrees to buy a mortgage at a future date at a specific price. The lender in turn agrees to deliver a mortgage that meets Fannie Mae's requirements and other terms of the commitment.

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DUS Guide

Fannie Mae's Multifamily Delegated Underwriting and Servicing Guide is available electronically by subscribing to AllRegs®.
Subscribe to AllRegs

DUS/Mortgage-Backed Securities (DUS/MBS)

Fannie Mae's Multifamily mortgage-backed securities offer highly competitive yields, liquidity, and quality. Offering prepayment protection, they suit diverse investment strategies. Properties must be income-producing multifamily rental or cooperative, with a minimum of five units.

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DUS Property

Typical DUS properties range from premium to modest, large to small, garden to high-rise. Nearly 80 percent of the mortgages purchased under our DUS product line are backed by properties over 10 years old, and 57 percent by properties over 20 years old. Nearly all of our mortgages are backed by properties that are affordable to families making the median income of the area.

Fannie Mae Wisconsin Avenue Securities REMIC

Fannie Mae's Wisconsin Avenue Securities (WAS) Real Estate Mortgage Investment Conduit (REMIC) allows the customer to time and/or credit tranche their loans, thus maximizing the securities offered to the customer's investor base. With this flexible solution, we create guaranteed senior Fannie Mae securities and an unguaranteed B-piece security that can be rated and tranched.
Negotiated Pools

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Forward Commitment Product

This product serves both Targeted Affordable Housing and new construction of market-rate apartments. It provides the borrower with a locked-in rate for the permanent loan in advance of the property being made available to tenants, and allows developers to know what their debt service will be in advance of construction.

Housing Revenue Bond

Bond secured by revenues derived from payments made from mortgages that finance single or multifamily housing units.

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Interest Calculation (also Actual/360 )

With the Actual/360 interest calculation method, the amount of each monthly payment that is allocated to interest is based on the actual number of calendar days during a given month (28, 29, 30 or 31), as a result, the note rate may be lower than if interest was calculated on a 30/360 basis. However, loans using an Actual/360 payment schedule amortize more slowly, generate more interest, and have a larger balloon balance than a loan at the same note rate using a 30/360 payment. For some borrowers the lower rate available using the Actual/360 option may be worth the slightly higher principal payment that is due at maturity.

Joint Fannie Mae/Lender Workout

A workout negotiated between the borrower, the lender, and Fannie Mae and approved by Fannie Mae.

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Low Income Housing Tax Credits (LIHTC)

As the largest investor in LIHTC, Fannie Mae increases the availability of funds for affordable multifamily housing by making equity investments in qualified properties. Legislated into existence in the 1986 Tax Reform Act, low income housing tax credits serve as incentives for corporations to invest in low-income rental housing. Fannie Mae serves previously underserved markets characterized by very low incomes, HOPE VI public housing replacements, and persons with special needs.

Multifamily Affordable Housing

Properties with rent and occupancy restrictions which meet or exceed the following requirements: 1) at least 20 percent of all units have restricted rents affordable to households earning no more than 50 percent of area median income as adjusted for family size; or 2) at least 40 percent of all units have restricted rents affordable to households earning no more than 60 percent of area median income as adjusted for family size.

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Market Rate Forwards

Fannie Mae finances new construction of multifamily properties with affordable rents for moderate-income families without rent restrictions. The Market Rate Forward product is targeted for financing construction of moderately priced new rental units.

Multifamily Property

A residential property composed of five or more dwelling units and in which no more than 20 percent of the net rentable area is rented to, or to be rented to non-residential tenants.

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Rehabilitation Product Line Initiative

A Fannie Mae product which offers permanent financing for multifamily properties in need of moderate or substantial rehabilitation. The Rehabilitation Financing product is available across all multifamily financing product lines, provided the transactions have 100 percent of the units affordable to low- and moderate-income tenants. The initiative provides for rehabilitation dollars in an amount not to exceed $15,000 per unit (minimum $3,000 per unit).

Reserve Agreement

The Delegated Underwriting and Servicing Reserve Agreement. This is a contractual agreement among Fannie Mae, the custodian, and the lender, in which the lender agrees to establish a lender reserve and to pledge collateral to Fannie Mae to secure the lender's obligations under Delegated Underwriting and Servicing. The Reserve Agreement also gives Fannie Mae contractual rights in the pledged reserve and provides Fannie Mae certain contract remedies to enforce the reserve requirements.

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Seniors Housing

Seniors Housing is a Fannie Mae product which provides financing for owners of congregate and Assisted-living properties through select DUS Lenders. Congregate living units are designed for seniors who pay for some congregate services (e.g., housekeeping, transportation, meals, etc.) as part of the monthly fee or rental rate, and who require little, if any, assistance with activities of daily living (ADL).
More on Seniors Housing

Tax-exempt Direct Bond Purchase

Fannie Mae will purchase up to $200 million of unrated, fixed-rate, tax-exempt bond issues from state and local housing finance agencies (HFAs) for small projects not exceeding $5 million. The Tax-exempt Direct Bond Purchase product helps the development of affordable housing properties that would otherwise not be able to access tax-exempt financing. Eligible properties must have 100% of the units at least 10% below comparable market rents.

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