Skip to main content

How Are Freddie, Fannie, and HUD Responding to New Seismic Standards?

ASTM recently implemented changes to its standard for assessing seismic risk to buildings, which will impact both cost and turnaround times to perform seismic risk assessments.

ASTM International recently updated the E2026 Standard Guide and E2557 Standard Practice, the industry standards for assessing seismic risk to buildings. Updates to E2557 make some parts of the 2026 Guide mandatory, require a more detailed review of drawings for many assessments, and, in many cases, will require site observations to be completed by a licensed engineer who satisfies specific experience requirements detailed in the revised standard.

The key motivation behind the update was increased quality and consistency of reports. However, some of these changes will also increase the time and cost to complete reports, and will require borrowers to provide site access to yet another consultant for evaluation of the collateral.

Importantly, while the new standards more narrowly identify criteria for the evaluation of seismic risks, adoption is not mandatory and customization of scope remains an option. It is still possible to perform assessments to the old standard, though development of a customized scope of work might be a better long term option (for more, see here). How have agency lenders chosen to respond to the new E2026-16a Standard Guide and E2557-16a Standard Practice?

How Have Standards Been Adopted Across the Agency Space?

In addition to impacts to cost, ASTM’s requirement for an engineer with seismic experience to visit properties has limited the pool of qualified assessors, resulting in longer turnaround times for Probable Maximum Loss studies performed under the new standards. Since HUD already requires a more detailed seismic evaluation under ASCE 41-13, their requirements have not been impacted. Fannie Mae and Freddie Mac are planning revisions to address the new requirements.

Continue reading the GlobeSt blog here.