fannie mae loan

DUS Plus Mezzanine Loan Legal Training November 2, 2005 www.morganlewis.com Parties 1. 2. 3. 4. Mortgagor = Property Owner Mezzanine Borrower = Owner of Mortgagor Mezzanine Guarantor = Key Principal DUS Lender = Initial Mortgage Lender = Initial Mezzanine Lender = DUS Servicer = Mezzanine Servicer Fannie Mae = Mortgage Investor RCG Longview MezzPlus, L.P. = Mezzanine Investor 2 5. 6. Overview Principals Pledge of 100% equity interest in Mortgagor (Mezzanine Loan) Mezzanine BORROWER 100% equity ownership DUS Lender/Servicer Mortgage (Mortgage Loan) Fannie Mae RCG Longview MezzPlus, L.P. MORTGAGOR (Real Estate Borrower) owns DUS Lender/Servicer Fannie Mae Intercreditor Agreement Real Estate 3 Structural Documents 1. Master Mezzanine Financing and Intercreditor Agreement 2. Fannie Mae DUS Plus Addendum to MSSC 3. Guide Part XVII 4. Mezzanine Loan Servicing Agreement 4 DUS Plus (Mortgage) Loan Documents www.morganlewis.com DUS Plus (Mortgage) Loan Documents The following documents are available on efanniemae.com under “Multifamily”: 1. 2. 3. 4. Modifications To Multifamily Note (Mezzanine DUSTM Plus) - Fannie Mae Form 4169 Modification To Instruments (Mezzanine DUSTM Plus) - Fannie Mae Form 4099 Exceptions To Non-Recourse Guaranty (Mezzanine DUSTM Plus) - Form 4501-MEZZ Cash Management and Security Agreement rcglongview.com) Deposit Account Control Agreement (available on 5. Instructions for Preparing the Mortgage Loan Delivery Package/Folder IV (Fannie Mae Form 4600) 6 DUS Plus Mezzanine Loan Documents www.morganlewis.com DUS Plus Mezzanine Loan Documents 1. 2. Mezzanine Loan Agreement Mezzanine Promissory Note A. Endorsement to Fannie Mae B. Endorsement to RCG Longview MezzPlus, L.P. Pledge and Security Agreement A. Assignment in Blank of Membership/Partnership Interest Mezzanine Exceptions to Non-Recourse Guaranty Cash Management and Security Agreement A. Deposit Account Control Agreement 8 3. 3. 4. DUS Plus Mezzanine Loan Documents (cont’d) 6. 7. 8. 9. Environmental Indemnity Agreement Agreement Re: Property Management Certification of Organizational Documents Assignment of Mezzanine Loan Documents (Lender) 10. Assignment of Mezzanine Loan Documents (Fannie Mae) 11. UCC-1 Financing Statement and Assignment 12. UCC-3 Financing Statement 9 General Items 1. How to Prepare Mezzanine Loan Documents: Instructions for Preparing the Mortgage Loan Delivery Package/Folder IV (Fannie Mae Form 4600) 2. Mezzanine Loan Documents: RCGlongview.com 3. Choice of Law = New York 4. Date of Mezzanine Loan Documents = Date of DUS Mortgage Loan Documents 10 Mezzanine Loan Agreement 1. Parties to Agreement A. Mezzanine Borrower B. DUS Lender (as Initial Mezzanine Lender) 2. Conditions Precedent to Closing of Loan, including; A. Establishment of Accounts in accordance with Cash Management Agreement B. Loan Documents C. Third Party Agreements and Reports D. Insurance Policies E. Legal Opinion 11 Mezzanine Loan Agreement (cont.) F. Title Insurance i. First American Title Insurance Company Eagle 9™ UCC Insurance Policy ii. Mezzanine Financing Endorsement attached to ALTA Owner’s Policy G. Borrower Organizational Chart (Exhibit) H. Annual Budget (Exhibit) 3. Covenants of Mezzanine Borrower with Respect to its Organization and Existence A. Mezzanine Borrower must be SPE Bankruptcy Remote Entity B. Mezzanine Borrower must own 100% of equity interest in Mortgagor C. Financial Covenant re: DSCR 12 Mezzanine Loan Agreement (cont.) 4. Reps and Warranties with Respect to Real Estate 5. Events of Default A. Nonpayment B. Insurance C. Financial Covenants D. Special Purpose Covenants E. Fraud & Material Representation F. Sale, Encumbrance or Other Indebtedness G. Reports and Documents H. Breaches Under Note and Other Loan Documents I. Senior Loan Documents J. Bankruptcy Proceedings 13 Mezzanine Loan Agreement (cont.) 6. Remedies A. Actions upon Event of Default B. Lender’s Right to Perform C. Appointment of Lender D. Cross-Default Among Mezzanine Loan Documents 14 Mezzanine Promissory Note 1. 2. 3. 4. 5. Executed by Mezzanine Borrower Endorsed to Fannie Mae Endorsed to RCG Longview MezzPlus, L.P. Initial Term: Fixed Rate Period (5 years) Extension Option: Floating Rate Period First Extended Maturity Date: 2 years Second Extended Maturity Date: 1 year Third Extended Maturity Date: 1 year Fourth Extended Maturity Date: 1 year Mezzanine Interest Rate Cap Security Agreement (only used when, and if, Borrower opts to extend Maturity Date) Prepayment Penalty If Mezzanine Loan is Interest-Only, tailor note to correspond 15 6. 7. Pledge and Security Agreement 1. 2. 3. Parties to Agreement: A. Pledgor = Mezzanine Borrower B. DUS Lender Pledge: 100% equity interest in Mortgagor (the “Collateral”) Perfection of Security Interest: A. UCC-1 Financing Statement filed in state in which Mezzanine Borrower is organized B. UCC-1 assigned to Fannie Mae by Addendum to Financing Statement (and assigned to RCG Longview MezzPlus, L.P. by UCC-3 Financing Statement) C. Possession of certificated interests, if any Covenant: Pledgor agrees that it shall not sell, assign, transfer, pledge or encumber the Collateral without approval. Exhibit A: Assignment in Blank of [Membership][Partnership] Interest 16 4. 5. Mezzanine Exceptions to Non-Recourse Guaranty 1. Executed by Key Principal(s) 2. The list of events that trigger full recourse is much more extensive in the Mezzanine Promissory Note than in the Multifamily Note. 17 Cash Management and Security Agreement 1. Parties to Agreement: A. DUS Lender (as Servicer) B. Mortgagor C. Mezzanine Borrower D. Property Manager Establishment of a “Gross Receipts Account” Only deposit account used for deposit of rents, revenues and other receipts generated by the Property Establishment of a “Collection Account” A. An account that becomes available to receive a daily sweep of all funds on deposit in the Gross Receipts Account upon written notice from Mezzanine Lender to depository bank holding accounts Deposit Account Control Agreement(s) 2. 3. 18 Cash Management and Security Agreement (cont.) B. Subaccounts of the Collection Account: i. Security Deposit Account (if permitted by local law) ii. Impositions Account iii. Senior Debt Service Account iv. Replacement Account v. Expense Account vi. Mezzanine Debt Service Account vii. Excess Cash Flow Account Deposit Account Control Agreement(s) Mortgagor is permitted to withdraw funds from Gross Receipts Account unless and until any of the following Triggering Events i. Mezzanine Event of Default ii. Unwillingness or inability of Mezzanine Borrower to cure a Default iii. Debt Service Coverage Ratio is below 1:05 19 C. Cash Management and Security Agreement (cont.) iv. v. vi. vii. Failure to deliver financial information pursuant to Section 11 of Mezzanine Loan Agreement Property is not being maintained as required by Loan Documents A change in circumstances that may materially adversely affect the value of the Property Mortgagor requests modification of the terms of the Senior Loan or Mezzanine Borrower requests modification of the terms of the Mezzanine Loan related to an actual or potential default under the Senior Loan Documents or the Mezzanine Loan Documents 20 Environmental Indemnity Agreement Parties to Agreement: A. Mezzanine Borrower B. Key Principal(s) 21 Agreement Re: Property Management 1. Executed by Property Manager and DUS Lender 2. Mandatory modifications if A. the Property Manager is not a party to the Cash Management Agreement or B. Property Manager is affiliated with the Mezzanine Borrower 22 Certification of Organizational Documents 1. Parties to Certification: A. Mezzanine Borrower B. DUS Lender C. Mortgagor 2. Attach copies of Mortgagor and Mezzanine Borrower organizational documents 23 Assignments of Mezzanine Loan Documents and Note Endorsements 1. Assignment of Mezzanine Loan Documents Executed by DUS Lender in favor of Fannie Mae 2. Assignment of Mezzanine Loan Documents Prepared by DUS Lender and executed by Fannine Mae in favor of RCG Longview MezzPlus, L.P. 3. Note Endorsement to Fannie Mae 4. Note Endorsement to RCG Longview MezzPlus, L.P. 24 Document Waivers 1. Changes must be approved in writing by Fannie Mae Mezzanine Manager; and 2. Changes must be approved by RCG Longview MezzPlus, L.P. by contacting LegalWaivers@rcglongview.com 25