Date: December 9, 2005

To: Fannie Mae Multifamily Lenders

Subject: Lender Memo 05-09, New Loan Document Form for Tier Dropping supplemental Loans

HIGHLIGHTS
Ø  Announcing a new Multifamily Loan Document form for Tier-dropping Supplemental Loan eligibility.

The purpose of this Lender Memo is to notify Lenders that Fannie Mae will be publishing a new Multifamily Loan Document form for Tier-dropping Supplemental Loan. Tier-dropping occurs when (i) a Lender permits a Borrower to exercise a contractual right to place a supplemental lien loan on a mortgaged property that is already securing an existing Fannie Mae multifamily loan and (ii) the resulting combined debt service coverage ratio and loan to value ratio do not meet the requirements of the Tier into which the existing first lien loan fell when it was originated. Only Tier 3 and 4 deals are eligible for Tier-dropping.

A Borrower’s contractual right to Tier-drop has historically been documented between the Borrower and the Lender. Often this documentation has taken the form of a commitment letter. Fannie Mae neither stipulates the form of commitment letter that Lenders use nor requires that executed commitment letters be provided to us. As a result, we have often not been in a position to verify that Tier-drop eligibility as reported by Lenders in our acquisitions systems is consistent with contractual documents between the Lender and the Borrower.

Discrepancies have come to light between Tier-drop eligibility as reported to Fannie Mae and as agreed to between the Borrower and the Lender. Fannie Mae disclosure to mortgage-backed securities investors may indicate that the Borrower does not have the right to Tier-drop when, in fact, the Borrower has this right. Discrepancies like this can necessitate changes to disclosure and may impact the liquidity of our MBS.

To address this situation, Fannie Mae now requires Borrowers to initial and Lenders to submit the attached Form 4077-TD, which must be used if the Borrower is being permitted to obtain a Tier-dropping supplemental loan in the future. Lenders are also required to indicate Tier-drop eligibility in C&D for MBS when they commit a loan. This indicator will default to “yes.” The Lender will have to proactively change the indicator to “no” if the loan is not Tier-drop eligible.

Questions regarding this form/policy should be directed to Marsha Baumgarner at (301) 204-8066.


Lender Memos

All Lenders Memos except those listed below have been superseded by previous Guide Updates. The Lender Memos listed below will be incorporated into the DUSSM Guide as the applicable sections are updated.

• 97-12 (12/08/97) Refinance Enhancements

• 98-12 (06/02/98) New Choice Loan Refinance Guidelines; Structured DUS and Rapid Refi Changes (ESP)

• 98-17 (07/23/98) Single Asset Seniors Housing Product Line

• 98-24 (11/17/98) Loan Limits

• 99-05 (08/24/99) Live Pricing for Cash Commitments/MCODES Commitment Procedures

• 00-01 (02/24/00) Mezzanine Equity

• 01-02 (01/16/01) Manufactured Housing Community Loans

• 01-05 (05/02/01) Modifications to Underwriting Guidelines for Seniors Housing Product

• 01-10 (07/18/01) Consolidation of the 5-50SM Streamlined Mortgage Loan Product with the DUS Small Loan Product

• 01-14 (10/04/01) 3MaxExpressTM Update

• 01-15 (11/27/01) Actual/360 Interest Accrual

• 02-06 (09/13/02) Changes to Underwriting Guidelines

• 02-08 (10/16/02) Forward Commitments

• 03-02 (04/17/03) Changes to Forward Conversion Worksheet (Form 4212)

• 03-03 (05/07/03) Guidelines for Physical Occupancy and Economic Vacancy

• 03-04 (09/11/03) Ninth Multifamily Assured Schedule Payment TrustSM

• 03-05 (11/05/03) Changes to Principal Analysis

• 03-06 (12/31/03) Large Loan Definition

• 04-01 (02/09/04) Terrorism Insurance Guidelines

• 04-02 (2/13/04) Expansion of Lenders’ Delegated Waiver Authority to Reduce the Underwriting Floors Applicable to Nine and Ten Year Balloon Mortgages

• 04-03 (02/13/04) Modifications to DUS/DMBS Product

• 04-04 (03/04/04) New DUS Lender Capital Standards and Requirements

• 04-05 (03/19/04) Establishment of Lender Delegated Waiver Authority to Reduce the Underwriting Floors Applicable for Fixed and Variable Rate Bond Credit Enhancement

·  04-06 (05/24/04) Preferred Delegation Memo

·  04-07 (06/03/04) Preservation and Section 8

·  04-08 (12/03/04) Preferred Delegation Memo, Manufactured Housing Expansion

·  05-01 (03/14/05) Channel Enhancements; Lender Delegated Waiver regarding environmental analysis, and expansion of 3MaxExpressTM loan limit to $5 million in additional counties

·  05-02 (4/7/05) DMBS SRT Revision

·  05-03 (7/1/05) Certified Rent Rolls for MATS

·  05-04 (7/14/05) Preservation and Section 8

·  05-05 (9/22/05) Seniors Transaction Screening Summaries

·  05-06 (10/18/05) 15-Year Structured Interest Rate Cap

·  05-07 (11/2/05) Revisions to Certain Loan Documents Published on Fannie Mae Multifamily Web Site

·  05-08 (11/17/05) Drafting of Yield Maintenance/ Prepayment Premium due Fannie Mae

·  05-09 (12/9/05) New Tier Dropping Form for Supplemental Loan Eligibility