502.06

Content

502.06A

Unit Selection

Operating Procedures

When selecting units:

  • The inspector, not the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager, must select and inspect the interior of:
  • If substantial physical concerns exist, the inspector may inspect more than the maximum number of units per Part V, Chapter 5: Surveillance, Section 502.03: Property Inspection Protocol.
  • If a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). has Non-Contiguous ParcelsNon-Contiguous ParcelsMultiple parcels of land securing a Mortgage Loan that do not share common boundaries or that are separated by dedicated or private streets that are major arterials. or scattered sites, on each parcel or site:
    • inspect all buildings;
    • allocate the number of units to inspect in the same proportion as the total PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). units; and
    • randomly select the units to be inspected.
502.06B

Photos

Operating Procedures

You must submit at least the minimum number of photos per Part V, Chapter 5: Surveillance, Section 502.03: Property Inspection Protocol with the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection form.  The photos must include views and captions of the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code).

  • signage,
  • frontage,
  • site office and clubhouse (if applicable), 
  • amenities,
  • typical building front,
  • apartment interior,
  • major building systems,
  • deferred maintenance and life safety items,
  • extraordinary repair or capital expenditure items, and
  • all critical or substantial issues per the inspection report.
502.06C

Interviews

Operating Procedures

Except for walk-around inspections, you must interview the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager and other on-site staff to:

  • ascertain the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). condition and performance; and 
  • confirm all life safety and deferred maintenance items per the most recent PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection were corrected.
502.06D

Market Analysis

Operating Procedures

You must evaluate: 

  • the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code).  neighborhood, submarket, and market to determine material shifts in economic and real estate conditions; and
  • competitive properties to determine any changes in the Property'sProperty'sMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code).  competitive position since 
    • initial underwriting, or 
    • the most recent PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection.
502.06E

Collateral Analysis

Operating Procedures

If the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). needs repairs or maintenance:

Step Activity You must...
1 Notify BorrowerBorrowerPerson who is the obligor per the Note.
  • Within 45 days after the inspection date,
    • identify the repair or maintenance issues,
    • include any photos, and
    • direct the BorrowerBorrowerPerson who is the obligor per the Note. to timely complete the work.
  • Use Form 4830 if the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection rating is 3, 4, or 5.
2 Follow Up
  • Follow up to ensure the BorrowerBorrowerPerson who is the obligor per the Note. responded and the work was successfully completed.  If not:
  • Use Form 4831 or Form 4832 if the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection rating is 3, 4, or 5.
3 Set Rating

Set the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection overall rating to 4 (or 5 depending on the severity or other existing issues) if:

 

  • 10% or more of the units are down for any reason; or
  • there is casualty damage equal to 
    • 25% of the current UPBUPBUnpaid Principal Balance , or
    • $1 million.

Guidance

Setting the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). inspection rating to 4 or 5 does not:

  • add the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. to Fannie Mae’s WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. ;
  • require an Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. ; or 
  • require Replacement ReservesReplacement ReservesCustodial Account the Borrower funds during the Mortgage Loan term for Replacements. reinstatement if the rating is the result of a casualty loss unless you
    • identify other performance issues that increase credit risk, or
    • expect insufficient funds or insurance proceeds to restore the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). to its original condition.
502.06F

Life Safety Issues

Requirements

If a third-party inspector identifies any PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). issues that would be rated 3, 4, or 5 per the “Life Safety” section of the Fannie Mae Assessment Addendum of the MBAMBAMortgage Bankers Association Standard Inspection Form, the inspector must notify you within 3 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. after completing the inspection.