Section 502

Environmental Matters

Guidance

Any environmental conditions or risks impacting 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). should be fully understood and considered in the underwriting.

502.01

Environmental Site Assessments

Requirements

You must comply with the Environmental Due Diligence Requirements (Form 4251), which include obtaining a Phase I Environmental Site AssessmentPhase I Environmental Site AssessmentEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. (Phase I ESA) of the entire PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .  The Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. must:

  • be performed per the instructions in Form 4251, including meeting the current requirements of ASTMASTMAmerican Society for Testing Materials E1527;
  • be prepared by an environmental professional as that term is defined in 40 C.F.R. § 312.10 (an Environmental Professional);
  • identify all environmental conditions and risks that may potentially impact resident safety, marketability, or value of 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). ; and
  • clearly identify how to properly mitigate those conditions and risks, including where applicable,
    • the Environmental Professional’s recommendations regarding additional investigation, or requirements of government authority or regulatory agency, or
    • action to remediate or abate any Recognized Environmental Condition (REC)/Controlled Recognized Environmental Condition (CREC), as those terms are defined in ASTMASTMAmerican Society for Testing Materials E1527.

If the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. identified any RECs/CRECs, you must obtain Fannie Mae's approval before Rate LockRate LockAgreement between you and the Investor containing the terms of the Lender-Arranged Sale or Multifamily Trading Desk trade of the Mortgage Loan and the MBS terms and conditions relating to the underlying MBS, if applicable, which may be documented via a recorded telephone conversation. .

Guidance

You may rely on a preliminary or draft Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. to obtain a CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. .

502.02

Lender’s Responsibilities

Requirements

You must:

  • Obtain all investigations recommended or indicated by the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
  • Conduct a thorough review and analysis of the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
  • Provide the Environmental Professional with all available prior Phase I ESAsPhase I ESAsEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. , investigations, and any relevant and readily available environmental materials.
  • Provide the AppraiserAppraiserPerson engaged to estimate a Property’s market value per USPAP. with any documentation from the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. that is necessary to accurately assess 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). market value.
  • Identify whether the state where 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). is located has an environmental “super-lien” statute and, if so, confirm that conditions on 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). are not likely to result in the imposition of such a LienLienLien, mortgage, bond interest, pledge, security interest, charge, or encumbrance of any kind. .
  • Disclose to Fannie Mae your knowledge of any actual or suspected environmental conditions affecting 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). , whether or not disclosed in the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .
  • Ensure that any required Operations and Maintenance Plans (O&M Plans) are obtained and located on the site throughout the loan term.
  • Assess the Borrower’sBorrower’sPerson who is the obligor per the Note. ability to carry out any O&M PlanO&M PlanRequired plan for remediating a Recognized Environmental Condition or Business Enivronmental Risk as described in Environmental Due Diligence Requirements (Form 4251). .  A 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. is ineligible for purchase if the BorrowerBorrowerPerson who is the obligor per the Note. or its agents are not financially or organizationally capable of satisfying the requirements of the O&M PlanO&M PlanRequired plan for remediating a Recognized Environmental Condition or Business Enivronmental Risk as described in Environmental Due Diligence Requirements (Form 4251). .
  • Evaluate the potential risk of loss and liability to 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). , the BorrowerBorrowerPerson who is the obligor per the Note. , you, or Fannie Mae posed by any
    • REC/CREC,
    • Business Environmental RiskBusiness Environmental RiskRisk of material environmental or environmentally-driven impact on the business or property associated with a Property or the past, current or planned use of a Property, including all “non-scope considerations” under current ASTM E 1527, asbestos or asbestos-containing materials, radon, lead-based…, or
    • other environmental condition, whether or not disclosed in the Phase I ESAPhase I ESAEnvironmental Site Assessment conducted per the current ASTM E-1527 standard and the resulting report. .

If you become aware of any REC/CREC, you must:

  • Obtain a Remediation Plan from the BorrowerBorrowerPerson who is the obligor per the Note. that
    • is prepared by an Environmental Professional, as required by Form 4251,
    • will protect the health and safety of the residents and bring 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). into regulatory compliance, and
    • includes a cost estimate and schedule for completing the work.
  • Add the estimated cost of the Remediation Plan to the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. requirement of the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .

Guidance

The amount funded into the Completion/Repair EscrowCompletion/Repair EscrowCustodial Account funded on the Mortgage Loan Origination Date for Completion/Repairs or capital improvements per the Loan Documents. on the Mortgage Loan Origination DateMortgage Loan Origination DateDate you fund a Mortgage Loan to the Borrower. should be at least 125% of the estimated cost of the Remediation Plan.

502.03

Environmental Indemnity Agreement

Requirements

You must consider revisions to the Environmental Indemnity Agreement (Form 6085) to protect you and Fannie Mae from liability associated with any REC/CREC (including the cost to investigate/remediate any such condition) and any violation of Environmental LawsEnvironmental LawsAll current federal, state, and local laws, ordinances, regulations, standards, rules, policies, and other governmental requirements, administrative rulings, court judgments, and decrees, and all amendments thereto, relating to pollution or protection of human health, wildlife, wetlands, natural… by the BorrowerBorrowerPerson who is the obligor per the Note. .  You must document your evaluation of potential revisions, including at a minimum, whether the following revisions are appropriate:

  • additional representation and warranty where the BorrowerBorrowerPerson who is the obligor per the Note. disclaims responsibility for any REC/CREC, if appropriate and accurate;
  • additional covenant(s) requiring
    • implementation of the Remediation Plan,
    • compliance with any Environmental Activity and Use LimitationsEnvironmental Activity and Use LimitationsLegal or physical restrictions or limitations on the use of, or access to, all or any portion of a site, facility, groundwater, soils, or other media at, on, about or under a site or facility to reduce or eliminate potential exposure to Hazardous Materials or to prevent activities that could… and/or institutional or engineering controls, and
    • maintenance of BorrowerBorrowerPerson who is the obligor per the Note. eligibility for applicable liability protection status;
  • specifically identifying any liability associated with the REC/CREC in the indemnification provisions; and
  • other terms and conditions as may be required based on Fannie Mae environmental counsel review.