Effective July 27, 2021, the COVID-19 related Temporary Property Inspection Protocols applying to physical Property assessments were updated, including:

• conducting Green Rewards Verification inspections using alternative inspection approaches;
• removing delegation to order a Property Condition Assessment (PCA) or Engineering Assessment for Loss Mitigation purposes; and
• obtaining Fannie Mae’s approval when required.

You, or a Non-Employee or Outside Party per the Program Rules, must:

• complete the MBA Standard Inspection Form;
• only access the Property if it is safe to do so; and
• proactively coordinate all aspects of the due diligence process to limit the number of on-site or virtual visits.

For Small Mortgage Loans, you may allow a non-employee to perform your site inspection if you document the use of a non-employee in your Transaction Approval Memo.

Compared to on-site inspections, virtual visits may require more documentation and time.

Limited On-Site Interior Access

Reports that may be completed with limited on-site interior access to occupied units include:

• your site inspections (MBA Standard Inspection Forms);
• Property Condition Assessments (PCAs);
• Phase I Environmental Assessments (Phase I ESAs);
• Phase II Environmental Assessments (Phase II ESAs);
• Level 1 Seismic Risk Assessments;
• Green Rewards - High Performance Building Reports (HPB Reports); and
• Green Rewards Verification inspections.

You must contact [email protected] if you cannot conduct a Green Rewards Verification inspection using an alternative inspection approach.

If you are unable to complete a standard Property assessment due to COVID-19 Limitations, you may consider alternative inspection approaches for visual inspections of occupied units.

Appraisals

For any COVID-19 Limitations, the appraiser should consider:

• the best Property inspection approach; and
• multiple information sources for interior Property conditions to enhance the reliability and credibility of the Appraised Value.

For any alternative inspection approach, you must

• discuss it with the appraiser, and
• approve its use.

If the appraiser uses an alternative inspection approach:

• The Appraisal must document:
  • all appropriate Extraordinary Assumptions;
  • the level of inspection completed;
  • who completed the inspection;
  • any reliance on sample units viewed as representing all units; and
  • all information sources used to determine the Appraised Value.
• You must:
  • describe the alternative approach in the Transaction Approval Memo; and
  • explain any data gaps.

Every PCA and Phase I ESA prepared for Fannie Mae must comply with the applicable ASTM standard:

• ASTM E2018-15 for the PCA; and
• ASTM E1527-13 for the Phase I ESA. 

Given certain limitations to internal access to occupied units, you may consider the following alternative inspection approaches:

• Virtual Walkthrough:  Perform the Property walkthrough using Zoom, FaceTime, WebEx, or other technology that allows the inspector to remotely view the Property.
• Video/Image Capture:  Provide the inspector with video or images from onsite tenants, property manager, or maintenance personnel per the inspector’s specifications.
• Documentation:  Collect documentation from the property manager or Borrower addressing any data gaps per the ASTM, USPAP, Guide, and this Supplement.

Data gaps may result from limited Property access.  For example, an inspector may be unable to

• enter occupied units, and
• inspect the function of unit
  • plumbing,
  • electrical, and
  • HVAC components. 

Data gaps may require documentation to

• reflect what was observed through images or video, and
• describe mitigants for items that were unable to be fully inspected using alternative approaches. 

In addition to other ASTM standard-specific requirements, a PCA/ESA vendor must:

• clearly identify and explain each data gap in the PCA Report or Phase I ESA, including those related to the inability to perform an in-person interior site inspection;
• document the available information consulted for the assessment to address the data gap;
• describe the impact of the data gap on the ability of the PCA/ESA vendor to assess the Property condition;
• for a Phase I ESA, specifically state whether any data gap is a “significant data gap” that could affect the ability of the Environmental Professional to identify recognized environmental conditions or Business Environmental Risks at the Property; and
• provide a recommendation, cost estimate, and implementation schedule for addressing any data gap when COVID-19 Limitations cease, including items that were deferred and need to be inspected later.

You must submit the transaction for Pre-Review if:

• for a Seniors Housing Mortgage Loan, you are considering using an alternative inspection approach;
• for a Green Rewards Mortgage Loan, insufficient units are available to comply with Form 4099 unit sampling; or
• for any Mortgage Loan:
  • the entire Property interior is unavailable for your inspection, PCA, Appraisal, Environmental Assessment or Seismic Risk Assessment; or
  • you, the PCA Consultant, or the Environmental Professional have no on-site access to the exterior or interior of the Property.

For Pre-Review Mortgage Loans, you must:

• document any alternative inspection approach in DUS Gateway;
• describe the alternative inspection approach; and
• explain why it is needed.

For any required Property inspection, you:

• may consider the below alternative inspection approaches; and
• must document any limiting conditions in the report.

Additionally:

• you must monitor the status of all previously and newly identified Life Safety and Critical Repair Items; and
• if COVID-19 Limitations impacted the completion of Life Safety or Critical Repair Items, you must
  • consult with the local building/health authorities to determine if deferral is appropriate, and
  • contact Fannie Mae Portfolio Risk Management.

You may use alternative inspection approaches, including photos and videos by

• on-site management,
• maintenance personnel,
• tenants, or
• robots.

Validate completion of:

• Completion/Repairs per Schedule 6 of the Multifamily Loan Agreement or Completion/Repair;
• Required Replacements per Schedule 5 of the Multifamily Loan Agreement or Replacement Reserve Agreement; or
• Casualty Repairs per Part V, Chapter 4: Asset Management: Loan Document Administration, Section 414.04: Required Casualty Loss Property Inspection.

The above alternative inspection approaches may be used. In lieu of a full verification inspection, you must exercise sound credit judgment in determining:

• if all Completion/Repairs, Required Replacements, and/or Casualty Restorations were completed satisfactorily; and
• whether to release escrowed funds.

You:

• are delegated to release funds per the Guide and the Loan Documents;
• must document evidence of completion supporting the decision, such as information gathered through alternative inspection approaches;
• may consider requiring escrowed funds to be retained until after the required work is physically verified; and
• must monitor any Property with Completion/Repair open work items in the MAMP per Section II.C - Monitoring Completion/Repairs.

You must:

• comply with:
  • Part V, Chapter 4: Asset Management: Loan Document Administration, Section 408.03I: Green Rewards Efficiency Measure Verification; and
  • Part V, Chapter 4: Asset Management: Loan Document Administration, Section 408.03E: Processing Borrower Requisitions, except for each Green Rewards Efficiency Measure disbursement, the Efficiency Measure is not required to be reported as:
    • compliant on the Green Rewards Verification Inspection Form (Form 4221); or
    • noncompliant, and Fannie Mae has approved and closed the remediation in DUS Property Monitor;
• use alternative inspection approaches for Efficiency Measures in occupied units; and
• comply with COVID-19 Limitations for Efficiency Measures in common areas and vacant units.

Must

• comply with Uniform Standards of Professional Appraisal Practice (USPAP),
• meet all government regulations in effect as of the date performed, and
• be performed by a state-licensed or state-certified appraiser.

If COVID-19 Limitations impact the ability to conduct a compliant Property Appraisal, you must

• contact the assigned Fannie Mae Asset Manager to discuss proposed alternative approaches, and
• comply with
  • Part II, Chapter 2: Valuation and Income, Section 201.02: Appraisal; and
  • the Loss Sharing Addendum to the  Master Selling and Servicing Agreement.

The PCA Consultant must:

• only include components physically inspected in the estimated cost to cure observed deficiencies; and
• not determine demand amounts based on alternative inspection approaches.

After the Mortgage Loan Origination Date, PCA required every

• 5 years for an MAH Property, or
• 10 years for all other Properties.

You may instruct the PCA Consultant to conduct a PCA with a reduced scope of work (i.e., resulting in a PCA Report stating limitations on the scope of work required by Form 4099, such as only reviewing building exteriors, or not viewing occupied units), if:

• no default exists under the Loan Documents; and
• the Property’s most recent inspection:
  • occurred within 18 months of the post-Origination PCA’s original due date;
  • indicated a Property Condition Rating of “1” or “2”; and
  • no documented Deferred Maintenance or Life Safety items remain outstanding.

For any other Property, the PCA Consultant must conduct a full PCA, but may use the above alternative inspection approaches if it will not limit the scope of work required in Form 4099.

For acceptable, well-documented reasons, Fannie Mae will consider further due date extensions.