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DUS Lender Memo 09-18.doc

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					                                                              MBS Special
                                                               Disclosure

To:                Fannie Mae Lenders

From:              Angela Benton, Vice President for Acquisitions, HCD Operations

Date:              August 14, 2009

Re:                DUSTM Lender Memo 09-18, MBS Special Disclosure

Dear Lender:



                                       HIGHLIGHTS
              The MBS Special Disclosure requirements have been expanded to
               reflect recent additions and revised to provide additional clarity
               regarding the use of Special Disclosure.



The purpose of this Lender Memo is to announce changes to the Special Disclosure
guidance and provide additional clarity regarding the use of Special Disclosure.

Disclosure Generally

The standard disclosure documents used at MBS issuance include the following:

             Standard Multifamily Base Prospectus – the base investor disclosure
              document that provides a general description of the MBS program along with the
              risk factors, Mortgage Loan types and asset classes available;

             Standard Prospectus Supplement Narrative – the transaction-specific
              disclosure document that provides more detailed information about the specific
              terms and structure of the Mortgage Loans underlying the specific MBS pool;

             Schedule of Pool and Loan Information – Part of the Prospectus Supplement
              Narrative that provides pool-level disclosure data and Mortgage Loan-specific
              disclosure data which includes key Mortgage Loan terms and Property
              information about the Mortgage Loans in a specific MBS pool.




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Special Disclosure

Mortgage Loans with characteristics and/or terms that differ from the standard MBS
parameters described in the Standard Multifamily Base Prospectus, Prospectus
Supplement Narrative and Schedule of Pool and Loan Information may require
transaction-specific information to be included in the standard disclosure documents
through a process called “Special Disclosure.”

When a Lender has marked a Mortgage Loan for Special Disclosure as described
below, Fannie Mae reviews the Mortgage Loan documents to determine whether
Special Disclosure documents are required. In some cases, Fannie Mae may
determine that Special Disclosure documents are not required and that the Standard
Prospectus Supplement Narrative and Schedule of Pool and Loan Information may be
used. In other cases, it may be determined that Special Disclosure is required and that
a Special Disclosure Prospectus Supplement Narrative is required or that the Standard
Prospectus Supplement Narrative may be used but that a Special Disclosure Schedule
of Pool and Loan Information is required. If it is determined that Special Disclosure is
required, Fannie Mae will prepare a Special Disclosure Prospectus Supplement
Narrative and/or Special Disclosure Schedule of Pool and Loan Information.

Special Disclosure may apply to Mortgage Loans being delivered on a flow basis
through the Multifamily Committing and Delivery System (C&D). For Mortgage Loans in
Structured Transactions that are delivered using the Multifamily Structured Facilities
Management System (MSFMS) and Negotiated Transactions (seasoned loan pools)
delivered through the Multifamily Negotiated Transactions System, disclosure is
processed in a different manner.

Mortgage Loans That May Require Special Disclosure

Special Disclosure documents may be required in the following circumstances:

      The Fannie Mae form Mortgage Loan documents have been modified in a way
       that could impact the following:

           o Amount and/or timing of monthly debt service payments;
           o Amount and/or timing of prepayments;

      The Lender’s Fannie Mae Representative or HCD Disclosure Operations Team
       indicates that Special Disclosure is required as part of a Pre-Review process or
       waiver approval; or

      The Mortgage Loan has any of the terms, characteristics or features listed in
       Attachment 1 of this Lender Memo.

This list in Attachment 1 is intended only to provide an indication of the types of
Mortgage Loan terms, characteristics or features that may require Special Disclosure,


LM 09-18                                   2                                     08/14/09
and is not comprehensive. If the Lender is uncertain whether Special Disclosure is
required for a specific transaction, the Lender should contact its Fannie Mae
Representative or the HCD Disclosure Operations Team.

Notifying Fannie Mae of Special Disclosure at Commitment

If Special Disclosure is required, the Lender must mark the Mortgage Loan for Special
Disclosure in the Multifamily Committing and Delivery System (C&D) at the time of
Commitment as follows:

          Special Disclosure Indicator: Select “Yes” in the drop down box.

          Comment Box: Provide the specific reason that Special Disclosure is required
           in the text box labeled “Special Disclosure Comments”. (Statements that
           “waivers were obtained” or “see legal disclosure memo” are not sufficient for this
           purpose.)

          Contact Information: Provide the contact name and e-mail address of the
           individual in the Lender’s organization that Fannie Mae should contact to
           coordinate the creation of the Special Disclosure documents.

If the Lender determines that Special Disclosure is required after the Commitment has
been confirmed, the Lender must submit a change request through C&D to update the
Special Disclosure flag.
.
As with other MBS, the Lender is responsible for reviewing the accuracy and
completeness of the Special Disclosure documents before the MBS is issued, as
required by the Guide.

Effective Date

These changes are effective immediately.

Questions

For questions on whether Special Disclosure is required for a specific transaction,
Lenders should contact their Fannie Mae representative or the HCD Disclosure
Operations Team, at mfmbs_disclosureqa@fanniemae.com..

For general questions on Special Disclosure and the process, please contact Bob
Schmid, Director, HCD Disclosure Operations Team, at (202) 752-1020 or
Robert_M_Schmid@fanniemae.com.




LM 09-18                                       3                                      08/14/09
                                     Attachment 1


           Mortgage Loan Characteristics That May Require Special Disclosure

The list below specifies the most common Mortgage Loan terms, characteristics and
features that generally trigger Special Disclosure, but is not exhaustive. If a Mortgage
Loan is expected to have any non-standard terms, please contact your Fannie Mae
Representative or the HCD Disclosure Operations Team before obtaining a
Commitment to determine if Special Disclosure is required.

Loans on Properties Securing Other Current or Future Debt:

   The Mortgage Loan is cross-defaulted and/or cross-collateralized with another
    Mortgage Loan in the pool or with any other mortgage loans (example: where each
    of two affiliated borrowers has a Mortgage Loan secured by its respective Property
    and the two Mortgage Loans are cross-defaulted and cross-collateralized with each
    other), unless the Mortgage Loan is a Fannie Mae Supplemental Mortgage
    Loan that (i) uses standard Fannie Mae Mortgage Loan documents, (ii) has an
    Underwritten DSCR at least equal to 1.20x, and (iii) is cross-defaulted with
    senior/subordinate Fannie Mae Mortgage Loan(s) secured by the same
    Property;

   The Mortgage Loan is expected to be cross-defaulted and/or cross-collateralized
    with a future Mortgage Loan (example: the Mortgage Loan is secured by the first
    phase of a planned multiphase Property);

   Lender agrees at the origination of the Mortgage Loan that a subordinate mortgage
    loan by a third party may be placed on the Property now or in the future;

   Lender agrees that any insurance or condemnation proceeds received during the
    term of the Mortgage Loan will be applied to the unpaid principal balance of the
    Mortgage Loan and will not be used for the repair or restoration of the damaged
    Property (example: Lender agrees at the origination of the Mortgage Loan that if a
    building in a multi-building apartment complex is damaged and demolished, the
    remaining insurance proceeds will be applied against the unpaid principal balance of
    the Mortgage Loan);

   Mezzanine financing, including DUS Plus, CI Mezz or DLA Mezz or third party
    financing secured by equity interests in the Borrower, is provided as part of the
    overall financing transaction of which the Mortgage Loan is a part;

   The Mortgage Loan is secured by two liens (example: Split Mortgage Loan) or is
    evidenced by two promissory notes (example: bifurcated notes);




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   Financing other than the Mortgage Loan contributed to the development or
    refinancing of the Property and resulted in a lien senior to the Mortgage Loan
    (example: state or federal loans or grants with senior liens on the Property).

Prepayment Provisions:

   The Mortgage Loan has a yield maintenance formula that does not use the U.S.
    Treasury Constant Maturity yield (for example, if the yield maintenance formula uses
    a U.S. Treasury Security that is specified at origination). Mortgage Loans committed
    on or after September 1, 2009 must use the U.S. Treasury Constant Maturity
    yield in the yield maintenance formula;

   The final "free" or open prepayment period is not the final 3 months of the term of
    the Mortgage Loan (example: the Mortgage Loan may be freely prepaid during the
    last 6 months of the term) excluding Fixed+1 (ARM Plan 3648) Mortgage Loans;

   The Mortgage Loan includes a fixed-rate graduated/declining prepayment option (in
    most cases, after review of the Mortgage Loan, the related MBS will be issued using
    a standard DUS graduated/declining prospectus supplement narrative);

   The Mortgage Loan includes a defeasance option (in most cases, after review of the
    Mortgage Loan, the related MBS will be issued using the Standard Prospectus
    Supplement Narrative and a Schedule of Pool and Loan Information that includes a
    footnote containing certain defeasance data);

   The Mortgage Loan permits a partial prepayment of principal, including as a result of
    applying reserve account funds or proceeds of additional collateral because
    conditions specified in a Completion/Repair Agreement or Replacement Reserve
    Agreement were not satisfied (example: Borrower posted a Letter of Credit to secure
    its obligations under a Completion/Repair Agreement, and failure to satisfy those
    obligations could result in a draw on the Letter of Credit to pay down the Mortgage
    Loan);

   A waiver is approved that may affect the timing or likelihood of prepayment of the
    Mortgage Loan, or the timing of cash flow on the Property;
.
Property-Related Issues:

   The Property is subject to an Achievement Agreement or the Mortgage Loan
    otherwise requires that the Property satisfy certain occupancy or performance
    thresholds which, if not satisfied, may result in or require a partial prepayment(s) of
    the Mortgage Loan during the term of the MBS;

   Lender is aware that a portion of the Property is scheduled to be condemned
    (example: a portion of the Property is expected to be taken by a governmental
    agency through eminent domain);


LM 09-18                                     5                                      08/14/09
   A portion of the Property is not available as security for the Mortgage Loan or may
    be released after the issue date of the MBS (example: Borrower plans to sell a
    portion of the undeveloped area of the Property);

   The Property is not a LIHTC-eligible property but is subject to a HAP contract or
    other regulatory contract imposing affordability restrictions. (In most cases, the
    related MBS will be issued using the Standard Prospectus Supplement Narrative
    and the affordability restrictions will be reflected in a footnote to the Schedule of Pool
    and Loan Information.)

    Other:

   The Mortgage Loan is a Rural Development Guaranteed Rural Rental Housing
    Loan, made under the Rural Development 538 program;

   The assumption/transfer provisions in the Mortgage Loan documents have been
    modified other than to permit transfers to affiliates or for estate planning purposes
    (example: the Mortgage Loan may not be assumed unless a minimum DSCR test
    is met);

   The Mortgage Loan is an MFlex Mortgage Loan, unless Fannie Mae’s HCD
    Disclosure Operations Team has informed the Lender that Special Disclosure is no
    longer required for the Lender’s standard MBS deliveries (in most cases, after
    review of the Mortgage Loan, the related MBS will be issued using a standard MFlex
    Prospectus Supplement Narrative);

   Events of Default: Mortgage Loans with additional or unusual events of default that
    are not standard (example: Reverse 1031 exchange, where failure to complete the
    exchange is an event of default);

   Borrower Recourse: Mortgage Loans that have full or partial Borrower recourse
    (other than the standard recourse carve-outs). Please note the following:

       Mortgage Loans with full recourse to the Borrower must comply with the full
        recourse requirements of the Guide and have an executed Form 4706 -
        Modification to Instrument (Permitted Transfers for Recourse Loans) in order to
        be eligible for MBS );

       Mortgage Loans permitting changes in recourse, including those listed below,
        may be ineligible for MBS execution:

                    Changes in the individual or entity providing recourse;
                    Changes from non-recourse to full recourse (e.g. springing
                     guarantees); and
                    Changes from full recourse to non-recourse.;


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   Revenue from a source other than the Property is a primary or contributing source of
    income needed to support debt service for the Mortgage Loan (example: where
    significant assistance is being provided under an agreement for a federal or state
    program but the term of the agreement is shorter than the term of the Mortgage
    Loan);

   Lender agrees at the origination of the Mortgage Loan that if any involuntary
    prepayment is made during the term of the Mortgage Loan (example: receipt of
    insurance or condemnation proceeds), the unpaid principal balance of the Mortgage
    Loan will be reamortized.




LM 09-18                                   7                                     08/14/09

				
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