Recent changes to Fannie Mae’s guidance for performing multifamily Property Condition Assessments – known as Fannie 2.0 – went into effect on October 10 2014. The changes aim to provide greater clarity and efficiencies and better align Fannie’s instructions with industry standards and practices: Fannie tightened certain regulations, while others were made less stringent to ease pressures on the pool of qualified assessors. The new guide is mandatory for all loans that are to receive Fannie Mae commitment after December 31, 2014. Some of the key changes that lenders should be aware of are summarized below:
Clarification of Language
In response to industry feedback, Fannie’s multifamily credit and underwriting teams decided to clarify, simplify and standardize language used in the standard to better reflect terminology used across the industry, including ASTM. For example, the former Physical Needs Assessment report (‘PNA’) will now be called a Property Condition Assessment Report (‘PCA Report’) to be more consistent with the industry as a whole.
Greater Emphasis on Third Party Vendor Management
Requirements for the PCA consultant and field observer were clarified to open up the pool of assessors. However, the guidance places greater emphasis on lenders’ careful management of third party relationships. Specifically, Fannie is requiring closer scrutiny of PCA consultants experience and education, and emphasizing the need for qualified consultant to “use professional judgment within the outlined scope of work”.
• Fannie Mae no longer needs to be listed as additional insured on the PCA consultant’s insurance certificate (although the lender must still be listed)
• Templates were simplified, and more detailed guidance is provided on recommended formats intended to improve efficiencies. For example, Fannie is requesting that templates and schedules be provided in Excel format to allow for data extraction (there has also been talk of an excel template being created to allow for improved mapping and connectivity)
• Revisions were made to guidance regarding Structural Risk Evaluations Questionnaires, which are not required for properties located in an area with less than a 10% probability of having a Peak Ground Acceleration that exceeds .15 in a 50 year period. The list of critical components that must be evaluated for properties with high seismic risk was also updated.
• The Estimated Useful Life (EUL) tables issued in the 4099.F form have been elaborated on with additional systems included. This will provide for more standardization of reports across vendor lines.
• Data and Document review is now recommended instead of required as items in the past have not been available for Consultant review for any number of reasons.
• The lender-required 4262 (Property Assessment Form) has now been included within the report should a specific lender require it as part of its assessment scope of work.
The full updated document can be found here and is part of the 4099 series.