A.8.6.1 Purpose and Applicability

A. This Section provides guidance on the use of Subordination, Non- Disturbance and Attornment Agreements (SNDA) for commercial leases in certain FHA insured projects and delegates approval authority of SNDAs to Satellite Office and Regional Centers.

B. Applicability

1. Applicable in its entirety to non-assisted or non-subsidized FHA insured multifamily projects under all Sections of the Act, except Section 232.

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Appendix 8 Mortgage Credit Requirements A.8.6 Subordination, Non-Disturbance and Attornment Agreements

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2. Section C.1 only is applicable to FHA insured projects that are subsidized under Section 202/811, 236, 221(d) (3) BMIR, or FHA insured projects with Project Based Rental Assistance.

C. A predictable, stable income stream from commercial leases with high quality, credit worthy commercial tenants provides a benefit to a property’s operating stability, particularly if the commercial tenants are nationally recognized or have national brands. FHA benefits by allowing Borrowers the latitude to negotiate with the widest pool of credit qualified commercial tenants. A stronger tenant increases the certainty of the commercial income stream, enhances the property’s marketability and decreases risk to the FHA Insurance Fund.

D. Permitting the use of SNDAs is necessary to induce higher quality commercial tenants to rent in insured properties. Therefore, guidance permits the use of SNDAs when a commercial lease is negotiated at a property with an existing insured mortgage, for a new property with a newly originated insured loan, or when a building owner with existing commercial tenants seeks an insured loan for refinancing.