King County Multifamily Loan Document Modification
As noted in our announcement on October 9, 2019, the King County Housing Authority (KCHA) in Washington state has used its power of eminent domain to acquire certain multifamily properties to support affordable housing. Fannie Mae supports the nationwide effort to create and maintain affordable housing; we also have a need to maintain stability and liquidity in the housing market. In order to address the heightened risk to borrowers and investors of a multifamily property located in King County being taken by eminent domain, we are announcing a modification to our Multifamily Loan and Security Agreement and to our Multifamily Mortgage-Backed Securities (MBS) prospectus for new transactions with properties located in King County. These modifications provide that:
- If state law requires the acquiring agency to reimburse the property owner for any prepayment premium, that prepayment premium is due. This aligns Fannie Mae’s revised loan documents with the benefits allowed under the Revised Code of Washington Section 8.26.200, which requires an acquiring agency to make such a payment to the property owner.
- If no such law exists at the time of a taking, a prepayment premium is due to the extent that the amount received exceeds the unpaid principal balance (UPB), accrued interest, and any other amounts due under the loan documents, other than the prepayment premium.
This modification is prospective only. Modifying the terms of existing loans backing an MBS is difficult because of the significant tax and MBS trust limitations. Additionally, any amendment to payment terms for existing loans requires the borrower to agree. For any MBS issued backed by properties in King County, MBS Additional Disclosure will be provided to explain how prepayment premium will be handled in cases of eminent domain. MBS Additional Disclosure will be provided until the MBS Prospectus is updated, expected for pools with issue dates on or after December 1, 2019.
For further questions, please contact the Fannie Mae Investor Help Line at 1-800-232-6643 or send us an email.