Insurance Loss Proceeds Collateral Agreement

INSURANCE LOSS PROCEEDS COLLATERAL AGREEMENT

This INSURANCE LOSS PROCEEDS COLLATERAL AGREEMENT (this “Agreement”) is dated as of ______, by and between ______(“Borrower”), and Fannie Mae, a corporation duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C. Section 1716 et seq. and duly organized and existing under the laws of the United States (“Fannie Mae”).

RECITALS:

A. Pursuant to that certain Multifamily Loan and Security Agreement dated as of ______(as amended, restated, replaced, supplemented or otherwise modified from time to time, the “Loan Agreement”), executed by and between Borrower and ______(“Original Lender”), Original Lender made a loan to Borrower in the original principal amount of ______and ___/100 Dollars ($______) (the “Mortgage Loan”), as evidenced by that certain Multifamily Note dated as of ______, executed by Borrower and made payable to Original Lender in the amount of the Mortgage Loan (as amended, restated, replaced, supplemented or otherwise modified from time to time, the “Note”), which Note has been assigned to Fannie Mae.

B. In addition to the Loan Agreement, the Mortgage Loan and the Note are also secured by, among other things, that certain Multifamily Mortgage, Deed of Trust or Deed to Secure Debt dated as of ______(as amended, restated, replaced, supplemented or otherwise modified from time to time, the “Security Instrument”) encumbering the Mortgaged Property, as defined in the Security Instrument. The Loan Agreement, the Note, the Security Instrument and all other documents executed in connection with the Mortgage Loan are hereinafter collectively referred to as the “Loan Documents.”

C. ______(“Servicer”) has contracted with Fannie Mae to service the Loan and perform the duties required by Fannie Mae under the terms of this Agreement.

D. On ______, a casualty occurred at the Mortgaged Property, causing damage thereto (the “Damage”). On ______, Borrower’s insurance company issued a loss draft in the amount of $______(the “Proceeds”) payable to “Fannie Mae” or “Fannie Mae and Borrower” as compensation for the Damage.

E. Fannie Mae requires that the Proceeds be placed in escrow for the purpose of completing the repairs needed to fully restore the Mortgaged Property to its condition prior to the Damage, or to a condition otherwise acceptable to Fannie Mae (the “Casualty Repairs”), under and subject to the terms of this Agreement.

Accordingly, in consideration of the mutual agreements set forth herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:

1. Recitals.

The recitals set forth above are incorporated herein by reference.

2. Defined Terms.

Capitalized terms used and not specifically defined herein have the meanings given to such terms in the Loan Agreement. The following terms, when used in this Agreement, shall have the following meanings:

“Additional Funds” shall mean $______, which amount is equal to the difference between (a) Fannie Mae’s estimate of the total cost to complete the Casualty Repairs, and (b) the Proceeds.

“Casualty Escrow” shall mean, collectively, the Proceeds and the Additional Funds, together with all interest earned thereon.

“Casualty Repair” shall have the meaning set forth in Recital E of this Agreement.

“ Construction Personnel” shall mean, collectively, any contractor, architect or engineer that Borrower wishes to engage in connection with the Casualty Repairs.

“Estimated Completion Date” shall mean the date by which Borrower reasonably estimates the Casualty Repairs will be completed in accordance with this Agreement.

“Plans” shall mean the plans and specifications relating to the Casualty Repairs.

“ Prohibited Lien” shall mean any official claim or charge against property for payment of a debt or an amount owed for services rendered, including any materialman’s or mechanic’s lien or other encumbrance.

“ Request for Casualty Disbursement” shall mean a written request from Borrower for disbursements from the Casualty Escrow, subject to the terms and conditions of Section Requests for Disbursements..

“ Required Completion Date” shall mean the date by which Borrower shall complete the Casualty Repairs in accordance with this Agreement.

3. Deposit of Funds.

Borrower hereby agrees to deliver the Additional Funds to Fannie Mae, and Fannie Mae shall deposit the Casualty Escrow into a custodial account. 4. Security Interest in Casualty Escrow.

Borrower hereby assigns and grants to Fannie Mae a continuing security interest in all of Borrower’s right, title and interest in and to the Casualty Escrow, as additional security for all of Borrower’s obligations under the Loan Documents. Upon the occurrence and during the continuation of an Event of Default under the Loan Documents, Fannie Mae may use the Casualty Escrow for any purpose in accordance with Section Default under other Loan Documents. hereof.

5. Borrower Representations and Warranties.

Borrower hereby represents and warrants to Fannie Mae as follows:

(a) The Proceeds and any Additional Funds are sufficient to complete the Casualty Repairs.

(b) The Mortgaged Property, upon completion of the Casualty Repairs, will have sufficient rental income to pay all operating expenses, payments for reserves, and loan repayment obligations required under the Loan Documents.

(c) The Casualty Repairs can be completed within one (1) year from the date of this Agreement.

6. Required Deliveries to Fannie Mae.

Prior to commencement of any Casualty Repairs, Borrower shall deliver to Fannie Mae, for review and approval by Fannie Mae: (a) a copy of all building and other permits and authorizations required by any law, ordinance, statute, rule or regulation of the Governmental Authority to carry out the Casualty Repairs, (b) a copy of the Plans, (c) resumes and references for all Construction Personnel, and (d) the Estimated Completion Date.

7. Agreement to Complete Casualty Repairs.

Borrower shall commence the Casualty Repairs as soon as reasonably practicable after (a) Borrower has made all deliveries required in Sections Deposit of Funds. and Required Deliveries to Fannie Mae. of this Agreement, and (b) Fannie Mae has approved the Plans and the Construction Personnel. Borrower shall diligently pursue the completion of the Casualty Repairs, and shall complete the Casualty Repairs on or before the Required Completion Date. Borrower shall pay all costs necessary for completion of the Casualty Repairs without regard to the sufficiency of the funds in the Casualty Escrow.

(a) Requests for Disbursements.

(a.1) Upon receipt of a Request for Casualty Disbursement and satisfaction of the requirements set forth in Sections Disbursements from the Casualty Escrow. and Performance of Casualty Repairs. of this Agreement, Fannie Mae shall make disbursements to Borrower from the Casualty Escrow. Each disbursement (other than the final disbursement) shall be in the amount specified in clause The actual cost of the Casualty Repair covered by the disbursement request, or, if such Casualty Repair was done under a contract or subcontract pursuant to which other work remains to be done, an amount equal to ninety percent (90%) of the actual cost of such Casualty Repair, plus one hundred percent (100%) of the cost of any materials used, or to be used, in connection with such Casualty Repair, if at the time of such Request for Casualty Disbursement, title to such materials has passed to Borrower and such materials have been installed, or are being properly stored, on the Mortgaged Property; or or The difference between the balance of the Casualty Escrow at the time of the disbursement request and the estimated cost of all remaining Casualty Repairs at the time of such Request for Casualty Disbursement. below, whichever is less:

(a.1.A) The actual cost of the Casualty Repair covered by the disbursement request, or, if such Casualty Repair was done under a contract or subcontract pursuant to which other work remains to be done, an amount equal to ninety percent (90%) of the actual cost of such Casualty Repair, plus one hundred percent (100%) of the cost of any materials used, or to be used, in connection with such Casualty Repair, if at the time of such Request for Casualty Disbursement, title to such materials has passed to Borrower and such materials have been installed, or are being properly stored, on the Mortgaged Property; or

(a.1.B) The difference between the balance of the Casualty Escrow at the time of the disbursement request and the estimated cost of all remaining Casualty Repairs at the time of such Request for Casualty Disbursement.

(a.2) Each Request for Casualty Disbursement shall be made on a form provided or approved by Fannie Mae and shall specify the specific Casualty Repair for which reimbursement is being sought, the quantity and price of all materials (grouped by type or category) or specific replacement items (e.g., appliances) purchased in connection with such Casualty Repair, and the cost of all contracted labor or other services involved in completing such Casualty Repair. Borrower shall certify to Fannie Mae that such Casualty Repair has been completed in a good and workmanlike manner in accordance with the Plans as approved by Fannie Mae and is in compliance with all applicable laws, ordinances, rules, and regulations of any Governmental Authority. Borrower shall provide to Fannie Mae with each Request for Casualty Disbursement copies of invoices and evidence of payment for all items/materials purchased and all labor/services provided in connection with such Casualty Repair together with an acknowledgment of payment and release of lien from all Construction Personnel providing services and/or materials in connection with such Casualty Repair. (a.3) Borrower shall not make a Request for Casualty Disbursement more frequently than once in any month unless Fannie Mae determines, in its sole and absolute discretion, that more frequent disbursements of funds are appropriate and can be managed effectively by Fannie Mae. Borrower shall not be entitled to receive any funds from the Casualty Escrow if Borrower is in default under this Agreement or an Event of Default has occurred and is continuing under the Loan Agreement.

(a.4) Borrower shall pay all invoices for items or material supplied or purchased and all contracted labor or services performed in connection with the Casualty Repairs prior to submitting a Request for Casualty Disbursement for such Casualty Repair. However, Fannie Mae, at its option, may issue joint checks, payable to Borrower and the supplier, materialman, mechanic, subcontractor or other party to whom payment is due in connection with a Casualty Repair. In the case of all payments made by joint check, a waiver of liens from each party receiving payments will be required prior to Fannie Mae’s disbursement of such Casualty Escrow funds.

(a.5) Fannie Mae or Servicer shall keep a record of each action taken by Fannie Mae, or by Servicer on behalf of Fannie Mae, with respect to each Request for Casualty Disbursement. Borrower agrees that Fannie Mae and/or Servicer, as applicable, may reimburse itself from the Casualty Escrow for its actual, reasonable administrative and/or inspection costs in an amount not to exceed that provided for in the insurance policy and actually disbursed by the insurance company.

(b) Final Disbursement.

Fannie Mae shall disburse to Borrower all remaining funds in the Casualty Escrow on completion of the Casualty Repairs to the satisfaction of Fannie Mae and satisfaction of all conditions set forth in this Agreement, and provided that no Event of Default has occurred and is continuing under any of the Loan Documents, Fannie Mae has received all cost and architectural information required by Fannie Mae, including proof that any required Certificates of Occupancy for units in the Mortgaged Property have been duly issued to Borrower, and Fannie Mae has received satisfactory evidence that there are no mechanic’s or materialmen liens encumbering the Mortgaged Property.

2. Performance of Casualty Repairs.

(a) Workmanlike Completion.

(a.1) If Fannie Mae determines that Borrower has failed to proceed diligently with any Casualty Repair, any Casualty Repair is not being performed in a workmanlike or timely manner in accordance with all applicable laws, or the Casualty Repairs have not been completed prior to the Required Completion Date, Fannie Mae may assume

Insurance Loss Proceeds Collateral Agreement Form 6615 Page 5 Fannie Mae 01-16 © 2016 Fannie Mae responsibility for the completion of the remaining Casualty Repairs upon at least one (1) business day’s prior notice to Borrower.

(a.2) In order to facilitate Fannie Mae’s completion or making of the Casualty Repairs under Section Performance of Casualty Repairs.Workmanlike Completion.If Fannie Mae determines that Borrower has failed to proceed diligently with any Casualty Repair, any Casualty Repair is not being performed in a workmanlike or timely manner in accordance with all applicable laws, or the Casualty Repairs have not been completed prior to the Required Completion Date, Fannie Mae may assume responsibility for the completion of the remaining Casualty Repairs upon at least one (1) business day’s prior notice to Borrower., Fannie Mae shall have the right to enter onto the Mortgaged Property and perform any work and labor necessary to make or complete the same and employ watchmen to protect the Mortgaged Property from damage. All sums expended by Fannie Mae pursuant to this Section Performance of Casualty Repairs.Workmanlike Completion.In order to facilitate Fannie Mae’s completion or making of the Casualty Repairs under Section Performance of Casualty Repairs.Workmanlike Completion.If Fannie Mae determines that Borrower has failed to proceed diligently with any Casualty Repair, any Casualty Repair is not being performed in a workmanlike or timely manner in accordance with all applicable laws, or the Casualty Repairs have not been completed prior to the Required Completion Date, Fannie Mae may assume responsibility for the completion of the remaining Casualty Repairs upon at least one (1) business day’s prior notice to Borrower., Fannie Mae shall have the right to enter onto the Mortgaged Property and perform any work and labor necessary to make or complete the same and employ watchmen to protect the Mortgaged Property from damage. All sums expended by Fannie Mae pursuant to this Section Performance of Casualty Repairs.Workmanlike Completion.In order to facilitate Fannie Mae’s completion or making of the Casualty Repairs under Section 9(a)(1), Fannie Mae shall have the right to enter onto the Mortgaged Property and perform any work and labor necessary to make or complete the same and employ watchmen to protect the Mortgaged Property from damage. All sums expended by Fannie Mae pursuant to this Section 9)(2) or any other provision of this Agreement shall be deemed to have been advanced to Borrower and shall be secured by the Security Instrument and this Agreement. Borrower hereby authorizes and appoints Lender as attorney-in-fact pursuant to Section 14.03(c) (Appointment of Lender as Attorney-in-Fact). Borrower agrees that all power granted to Fannie Mae pursuant to this paragraph may be exercised by Fannie Mae and/or Servicer. or any other provision of this Agreement shall be deemed to have been advanced to Borrower and shall be secured by the Security Instrument and this Agreement. Borrower hereby authorizes and appoints Lender as attorney-in-fact pursuant to Section 14.03(c) (Appointment of Lender as Attorney-in-Fact). Borrower agrees that all power granted to Fannie Mae pursuant to this paragraph may be exercised by Fannie Mae and/or Servicer. or any other provision of this Agreement shall be deemed to have been advanced to Borrower and shall be secured by the Security Instrument and this Agreement. Borrower hereby authorizes and appoints Lender as attorney-in-fact pursuant to Section 14.03(c) (Appointment of Lender as Attorney-in-Fact). Borrower agrees that all power granted to Fannie Mae pursuant to this paragraph may be exercised by Fannie Mae and/or Servicer. (a.3) Nothing in this Section Performance of Casualty Repairs.Workmanlike Completion. shall require Fannie Mae to expend funds other than those funds in the Casualty Escrow to make or complete any Casualty Repair.

(b) Inspections.

Fannie Mae shall determine whether to conduct periodic inspections during the course of the Casualty Repairs and upon completion. Borrower shall permit Fannie Mae or Fannie Mae’s representatives (including an independent person such as an engineer, architect or inspector) to enter onto the Mortgaged Property during normal business hours (subject to the rights of tenants under their leases, as applicable) to inspect the progress of any Casualty Repairs and all materials being used in connection with the same, to examine all plans and shop drawings relating to the Casualty Repairs that are kept at the Mortgaged Property, to inspect all books, contracts, subcontracts and records of Borrower with respect to the Mortgaged Property and to complete the Casualty Repairs in accordance with Section Performance of Casualty Repairs.Workmanlike Completion..

(c) Lien-Free Completion.

(c.1) Borrower covenants and agrees that the Casualty Repairs and all materials, equipment, fixtures or other items comprising a part of any Casualty Repair shall be constructed or installed, as the case may be, and completed free and clear of any Prohibited Lien.

(c.2) Prior to each disbursement from the Casualty Escrow, Fannie Mae may require Borrower to provide to Fannie Mae either a search of title to the Mortgaged Property effective to the date of the disbursement from the Casualty Escrow, or an endorsement to the title insurance policy insuring Fannie Mae’s interest in the Mortgaged Property updating the effective date of the policy to the date of such disbursement. Such search or endorsement shall show that no Prohibited Liens (other than Prohibited Liens that have been bonded off to Fannie Mae’s satisfaction) have been placed against the Mortgaged Property since the date of recordation of the Security Instrument, and title to the Mortgaged Property is free and clear of all liens other than the lien of the Security Interest and any other Permitted Encumbrance previously approved by Fannie Mae in writing.

(c.3) In addition to the requirements set forth in Section Performance of Casualty Repairs.Lien-Free Completion.Prior to each disbursement from the Casualty Escrow, Fannie Mae may require Borrower to provide to Fannie Mae either a search of title to the Mortgaged Property effective to the date of the disbursement from the Casualty Escrow, or an endorsement to the title insurance policy insuring Fannie Mae’s interest in the Mortgaged Property updating the effective date of the policy to the date of such disbursement. Such search or endorsement shall show that no Prohibited Liens

Insurance Loss Proceeds Collateral Agreement Form 6615 Page 7 Fannie Mae 01-16 © 2016 Fannie Mae (other than Prohibited Liens that have been bonded off to Fannie Mae’s satisfaction) have been placed against the Mortgaged Property since the date of recordation of the Security Instrument, and title to the Mortgaged Property is free and clear of all liens other than the lien of the Security Interest and any other Permitted Encumbrance previously approved by Fannie Mae in writing., Fannie Mae may require Borrower to obtain from any Construction Personnel an acknowledgment of payment and release of lien for work performed and/or materials supplied on or to the Mortgaged Property. Any such acknowledgment and release shall conform to the requirement of any Governmental Authority and shall cover all work performed and materials (including equipment and fixtures) supplied on or to the Mortgaged Property (other than amounts held back as provided in Section Requests for Disbursements. hereof) through the date covered by the current Request for Casualty Disbursement.

(d) Insurance Requirements.

In addition to any insurance required pursuant to the Loan Documents, Borrower shall provide to Fannie Mae original insurance policies for workmen’s compensation, builder’s risk, public liability, and any other coverage required by any law, ordinance, statute, rule or regulation of any Governmental Authority or a prudent lender in connection with the Casualty Repairs. All such policies shall be issued by companies approved by Fannie Mae, in form and amount satisfactory to Fannie Mae, and endorsed with standard mortgagee clauses making loss payable in the manner provided by Fannie Mae.

3. Defaults.

(a) Default under this Agreement.

Borrower shall be in default under this Agreement if Borrower abandons or ceases work on any Casualty Repair for a period of more than twenty (20) days, unless the cessation results from any Force Majeure and Borrower is diligently seeking to recommence work, Borrower fails to complete the Casualty Repairs in a good and workmanlike manner prior to the Required Completion Date, a Prohibited Lien is filed against the Mortgaged Property, unless Borrower promptly contests and bonds off the same to Fannie Mae’s satisfaction, Borrower fails to comply with any other provision of this Agreement within ten (10) days after receipt of notice from Fannie Mae of such failure, or an Event of Default occurs and is continuing under any of the Loan Documents. In the event of a default under this Section Defaults.Default under this Agreement., Fannie Mae may, at its option, hold and apply the funds remaining in the Casualty Escrow pursuant to Section Defaults.Default under other Loan Documents. hereof. Borrower acknowledges that a default under this Agreement shall be deemed to be an Event of Default under the Loan Documents, and in addition to the remedies specified in this Agreement, Fannie Mae may exercise all of its rights and remedies under the Loan Documents.

(b) Default under other Loan Documents.

So long as an Event of Default occurs and is continuing, Borrower shall not have the right to receive disbursements from the Casualty Escrow and Fannie Mae, in its sole and absolute discretion, may use the Casualty Escrow or any portion thereof for any purpose, including, but not limited to repayment of the Indebtedness and the prepayment premium due on a full or partial prepayment (as applicable), provided that such application of funds shall not cure or be deemed to cure any Event of Default, reimbursement of Fannie Mae and/or Servicer for any losses or expenses, including legal fees and costs, suffered as a result of such Event of Default, making or completing the Casualty Repairs as provided in Section Performance of Casualty Repairs., or applying the funds in connection with the exercise of any and all rights and remedies available to Fannie Mae at law or in equity or under this Agreement or pursuant to the Loan Documents. Nothing in this Agreement or the Loan Documents shall obligate Fannie Mae to apply all or any part of the Casualty Escrow on account of any Event of Default or to the repayment of the Indebtedness or in any specific order of priority.

4. Additional Documents.

Borrower agrees that, at the request of Fannie Mae, Borrower shall execute and deliver to Fannie Mae an amendment to the Loan Agreement and/or the Security Instrument and the related UCC financing statements to perfect Fannie Mae’s lien on any property for which funds from the Casualty Escrow were expended.

5. Indemnification.

Borrower shall indemnify and hold Fannie Mae and Servicer, and their respective agents, employees, and representatives, harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs or expenses, including litigation costs and reasonable attorneys’ fees, arising from or in any way connected with the performance of the Casualty Repairs or the investment of the Casualty Escrow, provided that Borrower’s liability for such indemnities shall not include any loss caused by the gross negligence or willful misconduct of Fannie Mae or Servicer as determined by a court of competent jurisdiction pursuant to a final non-appealable court order. Borrower hereby assigns to Fannie Mae all rights and claims that Borrower may have against all persons or entities supplying labor or materials in connection with the Casualty Repairs, provided that Fannie Mae may not pursue any such right or claim unless Borrower is in default under this Agreement or an Event of Default has occurred and is continuing under the Loan Documents.

6. Servicer to Act for Fannie Mae.

In all instances in which the consent or approval of Fannie Mae may be given or is required, or in which any determination, judgment or decision is to be rendered by Fannie Mae, the rendering of such consent, approval, determination, judgment or decision shall be made or exercised by Servicer on behalf of Fannie Mae. All notices and communications to be given under this Agreement shall be given to Servicer, at the address provided below, and not to Fannie Mae. All requests for disbursement of funds shall be made to, and the disbursing of funds shall be made by Servicer and not Fannie Mae. The delegation of authority to the Servicer by Fannie

7. Miscellaneous.

(a) Successors and Assigns Bound.

Any reference to any of the parties to this Agreement shall be deemed to include the successors and assigns of such party, provided that Borrower shall not assign its rights and obligations under this Agreement except with the prior written consent of Fannie Mae. All covenants and agreements contained in this Agreement are for the benefit of the parties to this Agreement only, and nothing expressed or implied in this Agreement is intended to be for the benefit of any other person.

(b) Notice.

Section 15.02 (Notice) of the Loan Agreement is hereby incorporated herein as if fully set forth in the body of this Agreement. Notices to Fannie Mae shall be made to Fannie Mae care of the Servicer at the Servicer’s address.

(c) Counterparts.

Section 15.04 (Counterparts) of the Loan Agreement is hereby incorporated herein as if fully set forth in the body of this Agreement.

(d) Severability; Entire Agreement; Amendments.

Section 15.07 (Severability; Entire Agreement; Amendments) of the Loan Agreement is hereby incorporated herein as if fully set forth in the body of this Agreement.

(e) Waiver; Conflict.

Section 15.11 (Waiver; Conflict) of the Loan Agreement is hereby incorporated herein as if fully set forth in the body of this Agreement.

(f) Compliance with Applicable Laws.

Fannie Mae’s disbursement of the Casualty Escrow or acknowledgment of completion of any Casualty Repair in a manner satisfactory to Fannie Mae shall not be deemed a certification by Fannie Mae that the Casualty Repair has been completed in accordance with applicable laws. Borrower shall at all times have the sole responsibility for insuring that all Casualty Repairs are completed in accordance with all such applicable laws and governmental requirements.

[Remainder of Page Intentionally Blank] IN WITNESS WHEREOF, the parties have signed and delivered this Agreement under seal (where applicable) or have caused this Agreement to be signed and delivered under seal (where applicable) by its duly authorized representative. Where applicable law so provides, the parties intend that this Agreement shall be deemed to be signed and delivered as a sealed instrument. BORROWER: ______

By: (SEAL) Name: Title:

FANNIE MAE:

By: (SEAL) Name: Title:

All Notices to Fannie Mae should be sent to Servicer at:

______Attention: Telecopy:

(DESCRIPTION OF THE MORTGAGED PROPERTY)