Fannie Mae DUS | 2026-10-14

Fannie Mae Zoning Review Needs a Destruction-Threshold Answer

The current Guide distinguishes non-conforming use from non-conforming characteristics and ties rebuild limits to Form 6275 and delivery.

Fannie Mae's current Multifamily Guide, Section 301, requires the lender to identify the property's zoning or land-use designation, determine whether its existing use is expressly permitted, and confirm whether characteristics such as height, density, and setbacks conform or are legally non-conforming. That distinction matters because the Guide applies different rebuild tests to a non-conforming use and to non-conforming characteristics.

For a legal non-conforming use, the borrower must execute the Modifications to Multifamily Loan and Security Agreement (Legal Non-Conforming Status), Form 6275. The lender must also confirm the casualty destruction threshold at which the jurisdiction would prohibit rebuilding all affected improvements to their pre-casualty use and condition under current law, zoning requirements, and building codes. If that threshold is below 50%, the Guide says not to deliver the mortgage loan.

For legally non-conforming characteristics, Form 6275 is also required. The lender must determine whether the improvements can be fully rebuilt after a full or partial casualty. If they cannot, the lender must evaluate whether the as-rebuilt property will support the mortgage loan at its current tier and document that analysis in the Transaction Approval Memo. When a consultant's zoning report is ordered, the Guide also requires it in DUS Docway Folder II and calls for structured data using Form 4089.

For borrower-side counsel, the zoning checklist should identify the permitted use, every non-conforming characteristic, the destruction-threshold percentage and its measurement basis, casualty rebuild limits, the source of the zoning conclusion, Form 6275 status, and any open lender analysis. Aligning those items with title, survey, insurance, and the property description early can prevent the zoning conclusion from becoming a late delivery issue. This note is informational only and is not legal advice for any specific transaction.