Fannie Mae has ended its blanket pre-review of brokered deals, replacing the months long effort with several policy changes — including third-party property inspection reports.
Fannie began pre-reviewing all brokered deals late last year, shortly after financial irregularities were discovered in some transactions sourced by Meridian Capital. Freddie Mac subsequently paused its deals involving that broker.
The new guidelines, rolled out on March 4, affect all brokered deals processed through Fannie’s DUS — or delegated underwriting and servicing — model, which accounts for most of the agency’s multifamily business.
Under the new rules, lenders must order a property inspection from either Armada Analytics of Greenville, S.C., or Birdsey Group of Atlanta on nearly all brokered deals. Fannie won’t purchase any loans on brokered deals involving properties given “4” or “5” ratings, which indicate deferred maintenance and physical deterioration. Previously, only properties with the lowest rating — “6” — were ineligible for Fannie loans.
Refinancings and supplemental loans are exempt from the new brokered transaction requirement if the property’s condition previously was rated a “1,” which is reserved for newly constructed properties not previously occupied. The brokered policy includes transfer-and-assumption deals — where a buyer acquires the property and assumes the loan. Poorly rated properties can qualify for transfer-and-assumption, but they require Fannie approval.
While property-condition assessments are required on nearly all deals, lenders can use their own employees for non-brokered deals rather than hire a third party. Additionally, the policy changes require that lenders directly submit financial statements, such as property rent rolls and operating statements, rather than obtain them from a mortgage broker. The agency also now requires certifications from the lender that it underwrote the loan and directly obtained all documents, as well as certifications from the borrower, guarantor and/or key principal that submitted financial statements and other documents are correct.
Lenders said Fannie’s pre-review process had slowed turn-around times on loan-quote requests from the typical one week or less to up to three weeks. However, some market pros acknowledged borrowers have been submitting more requests amid volatility in Treasurys, playing a role in the backlog
SOURCE: Green Street’s Commercial Mortgage Alert, March 22, 2024.