Andrews: Fannie Mae requiring 90 for 90

Published Dec 27, 2011 at 9:20 am (Updated Dec 27, 2011)

I have seen several Fannie Mae loan applications for apartment complexes falter this year because of their failure to meet one of the most basic requirements: complexes need to be at 90% occupancy for 90 straight days to qualify for Fannie Mae financing. This requirement has been around for a long time but we sometimes seem to forget it, so here are a few reminders:

• The requirement is one of those "got-to-have" items that Fannie Mae lenders simply will not waive except in extreme situations

• The level is absolute and not average, meaning that occupancy must remain above 90% at all times. While occupancy of 85%, 90% and 95% for each of three months averages 90%, the project fails the test because the first month was under 90%

• Even if the project meets the 90 for 90 test, trends must be positive, meaning that occupancy cannot be falling at the end of that 90 day period

Apartment financing has been strong in 2011 and is projected to be strong again in 2012 as the asset type is performing well. Successful refinancing or acquisition financing is possible so long as we keep the basic underwriting requirements in mind.

(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Real Estate Services and he can be reached at brian.andrews@acmla.com.)