A Seismic Shift in Policy for Fannie Mae
The final new Fannie Mae Multifamily Selling and Servicing Guide is hot off the press this week (as of Monday February 3rd), and with it comes some new requirements for Seismic Risk Assessments. All reports ordered on or after this date will require compliance with the revised policy.
Fortunately, Section 321, which includes the seismic hazard and building risk factors, has not changed too drastically over the old Guide unlike the Fannie Mae Physical Needs Assessment (PNA), which underwent extensive revisions. However, one change in particular is causing a fair number of questions and will require some adjusting in the industry.
Shifting from Seismic Zones to Peak Ground Acceleration
The biggest change is that Fannie lenders will no longer be relying on the seismic zone map to determine if the subject property is in a region of moderate to high seismicity. The old PNA guide used the historic, 1997 Uniform Building Code seismic zone maps as the basis for seismic hazard determination. Under the old PNA guide a property would require a seismic risk assessment if it was located in Seismic Zone 3 or 4, and exhibited one or more of seven (7) documented structural or site hazards. As of this moment, Freddie Mac and CMBS lenders will still rely on the seismic zone map to determine the seismicity of the property, though there is some debate whether this change will carry across the industry at some point.
Now, Fannie will require the use of peak ground acceleration (PGA) values as the determination of whether a property is located in a region of moderate to high seismicity. Peak ground acceleration is basically a measure of how hard the earth will shake in a specific area. Users and providers are required to search the 475-year return period (10% chance in 50-year probability exceedance) peak ground acceleration. (If you’re not an engineer and that didn’t make any sense to you, not to worry, I’ll explain it more in an upcoming webinar.)
Why the Change?
This is a much more targeted way to screen for seismic risk, as the search drills down to a property-specific level, rather than classifying an entire region as one zone. There is some debate as to whether that means more or fewer Seismic Risk Assessments will need to be ordered – the jury is still out on that. The justification for this change is to be more consistent with the seismic hazard determination used in the modern International Building Codes (IBC) and referenced engineering design standards.
How Do I Determine the Peak Ground Acceleration for the Subject Property?
The USGS has a website where Fannie Mae Sellers/Servicers and due diligence providers can quickly search a property location, but it can be a little confusing so I will review that during my webinar and we’ll also post instructions for searching for the peak ground acceleration on Partner’s website. According to Section 321 if the property has a 475-year PGA of 0.15g or greater it would be subject to a Seismic Risk Assessment assuming one of the seven risk factors exists at the property.
Webinar Reviewing Fannie Mae’s New Seismic Requirements
On Tuesday February 11th I’ll give a free webinar to review these and other changes to Fannie Mae’s seismic policy, review the peak ground acceleration in more detail and the process to look it up, discuss the basic concepts of seismic risk assessments, review the Fannie risk factors, offer advice for high level evaluation of a property to determine if seismic risk is going to be a significant factor in the transaction, and give examples of properties with significant seismic deficiencies. Click here to register.
Be sure to check out Partner Engineerings webinarDevelopment is Back! Mitigate Risk with Due Diligence NOW ON DEMAND for an in-depth look at the key engineering, environmental and energy due diligence items that can identify potential "fatal flaws" to a development or redevelopment project and help to prevent them. Click here to download.
About Partner Engineering and Science, Inc.
Partner Engineering and Science, Inc. (Partner) is a full-service environmental and engineering consulting firm completing projects nationwide. We specialize in evaluating properties in connection with real estate transactions, development or management.