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What Lenders Need To Know About Fannie 2.0

Starting January 1, all loans securitized by Fannie Mae must adhere to the updated Fannie 2.0 guidelines.

Recent changes to Fannie Mae’s guidance for performing multifamily Property Condition Assessments—known as Fannie 2.0—went into effect on October 10, 2014. The changes aim to provide greater clarity and efficiencies and better align Fannie’s instructions with industry standards and practices: Fannie tightened certain regulations, while others were made less stringent to ease pressures on the pool of qualified assessors. The new guide is mandatory for all loans that are to receive Fannie Mae commitment after December 31, 2014. Some of the key changes that lenders should be aware of are summarized below.

Clarification of Language

In response to industry feedback, Fannie's multifamily credit and underwriting teams decided to clarify, simplify, and standardize language used in the standard to better reflect terminology used across the industry, including ASTM. For example, the former Physical Needs Assessment report ('PNA') will now be called a Property Condition Assessment Report ('PCA Report') to be more consistent with the industry as a whole.

Greater Emphasis on Third-Party Vendor Management

Requirements for the PCA consultant and field observer were clarified to open up the pool of assessors. However, the guidance places greater emphasis on lenders' careful management of third-party relationships. Specifically, Fannie is requiring closer scrutiny of PCA consultants' experience and education, and emphasizing the need for qualified consultants to "use professional judgment within the outlined scope of work".

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