Freddie Mac’s Smart Execution offers a more streamlined due diligence process for Conventional and Targeted Affordable Housing (TAH) Loans that are $15 million or less. Unlike the Small Balance Loan (SBL) program, this new program is available to all conventional loan servicers. The approach is not required, but it allows for faster, easier decisions and will reduce costs for customers. This report is a combination of a property condition assessment (PCA) and an environmental transaction screen (TSA) based on the most current ASTM guidance documents and Freddie Mac.
Like the Small Balance Loan (SBL) program, the Smart Execution requires a new report format based on the SBL form 1104 with additional analysis for units with sub-60 amp main disconnects, seismic analysis, asbestos, and radon. A Physical Risk Report will replace property condition assessments and environmental reports; however, should any environmental responses to the TSA questionnaire come back with a “yes” or “unknown” and the gap cannot be clarified, then further analysis must be completed by the consultant with the specific requirements following the Freddie Mac Environmental Phase 1 guidance documents. A reserve schedule is also required on all projects as part of this new program.
Using this new format, properties may be assessed by a single specialist, saving the customer time and money. The field assessor is required to have specific credentials based on the Freddie Mac PCA guidance document including a Bachelors and/or Graduate Degree in architecture or a related engineering field from an accredited institution, five or more years of experience in either architecture, engineering (structural, mechanical, or civil) and/or construction/cost estimating, three or more years of experience performing multifamily property inspections and two or more years conducting similar work for financial institutions. In addition, to be AHERA certified, one must have passed a 24-hour asbestos inspection course and have annual refresher courses where applicable.
The individuals responsible for the environmental portions of the report must have environmental expertise in relevant areas including: soil/ground water contamination, soil/ground water sampling, asbestos, PCB contamination, underground storage tanks, lead based paint, Federal, State and Local environmental and public health laws and regulations, and the development of operations and maintenance (O&M) plans. Environmental requirements are as follows:
This faster, simpler program offers a significantly reduced turnaround time: typically, ten business days versus the standard fifteen-day turnaround.