Going Through a Phase?
Fannie Mae’s and Freddie Mac’s Phase i standards
are based on those of the american Society of Testing Materials (a STM), with some modifications.
For the Phase i and property-condition assess-
Areas of concern
ment, Fannie and Freddie require visual inspec-
tion of 10 percent of a property’s units, as well as
50 percent of any down units. These units should
be randomly selected and spread across the prop-
erty to allow for an accurate representation.
inspectors likely will observe each room
within the individual unit and may pay extra at-
tention to the water-supply piping, water heaters,
air supply and return vents, electrical wiring for
outlets and light switches, windows, and appli-
ances. in addition, the inspectors likely will view
the property’s exterior to note the overall con-
dition of the building and roofing, surrounding
drainage features, electrical transformers, and
asphalt parking areas or carports.
in addition to the apartment units, the inspec-
tors often observe the leasing offices, clubhouses,
pool areas and other property amenities.
Beyond the typical aSTM requirements for a
Phase i assessment, Freddie Mac and Fannie Mae
require addressing other concerns, including:
■■ RADON: This colorless, odorless gas is formed
via radioactive decay of radium atoms. according to the U.S. environmental Protection agency
(ePa), radon is the second-leading cause of lung
cancer in the U.S.
The ePa has divided the country into three radon zones. Zone No. 1 comprises areas that have
the highest potential for radon, with the average
predicted indoor radon concentration exceeding
the ePa action limit of 4 picocuries per liter. Zone
No. 2 has moderate radon potential and Zone No.
3 has low potential. view the map at epa.gov/ra-don/ zonemap.html.
Keep in mind, though, that the ePa has found
properties with elevated levels of radon in all
three zones. it therefore recommends site-specific
testing to determine radon levels. The zone map
also offers a valuable indication of the propensity
of radon-gas accumulation in structures.
Freddie and Fannie require that eSas determine if radon-gas accumulation is a potential
concern for a property.
Sampling may be required. environmental consultants vary widely on their method of sampling.
Some place canisters in a minimum number of
units, regardless of the ePa radon zone, while others only place canisters in Zone No. 1 areas.
The short-term test consists of setting out
small canisters containing charcoal and a metal-screen covering. These canisters should be placed
four to five feet off the ground and away from any
vents or open windows to allow for accurate results. They must be open for 48 to 96 hours and
then collected, properly sealed and returned to
the laboratory for analysis.
it is important that the apartment units selected for radon testing maintain “closed house”
conditions from 12 hours before the test until its
completion. This means having no open windows
for extended periods of time and only routine use
if the short-term test has results above the
ePa action limit, then a longer test — which can
range between three months and one year — is
required. if results are all below the action level,
no further assessment is required.
Sampling results will be included in the Phase i
report and typically include any recommendations
for additional testing or mitigation, if necessary.
■■ ASBESTOS: This material had been used commonly as an acoustic insulator, for thermal insulation, for fire proofing and in other building
materials. Because of the fibers’ microscopic size,
airborne friable asbestos can be inhaled — and may
result in a potential health risk. Continued exposure can increase the amount of fibers that remain
in the lungs. Over time, fibers embedded in lung
tissue may cause serious lung diseases including
asbestosis, lung cancer or mesothelioma.
The Occupational Safety and Health administration finds the installation of friable surfacing
material and thermal-system insulation unlikely
to contain asbestos-containing materials (aCMs)
in buildings constructed after 1980. Freddie and
Fannie require Phase i assessments to include an
opinion about the potential for aCMs at the subject property.
Fannie Mae considers materials from 1979 or
earlier to have potential aCMs; Freddie Mac, on
the other hand, leaves this determination to in-
if consultants suspect aCMs, they must collect
samples of friable material, which are materials
that can be crushed easily by hand. These include
pipe insulation and acoustic ceiling panels.
if consultants do not identify any friable or
damaged materials, Fannie and Freddie will ac-
cept managing the identified suspect aCMs
within an operations-and-maintenance program
implemented at the site.
Many states have licensing requirements for
collecting asbestos samples, so it is important
that the inspector have proper certification.
■■ LEAD-BASED PAINT: The residential Lead-Based Paint Hazard reduction act of 1992 — also
known as Title X — was designed to protect people
from exposure to lead in paint, dust and soil. Section No. 1018 of this law mandates the disclosure
of known information on lead-based paint and its
hazards before the sale or lease of most housing
built before 1978. Sellers, landlords and their agents
are responsible for providing this information to
the buyers or renters.
For properties built before 1978, Freddie Mac
gives borrowers the option to either:
1. Test for lead-based paint; or
2. Presume lead-based paint is present and
implement an operations-and-maintenance
program to manage the hazard in place.
regardless of borrowers’ action, environmental consultants must comment on the paint
condition for all properties built before 1978.
Lead-based-paint testing must meet Freddie
Mac’s minimum standards.
Fannie Mae, on the other hand, mandates
in-field screening of painted surfaces in buildings constructed before 1978, unless it gives the
lender a waiver. The waiver allows the lender
to assume that lead-based paint is present and
to implement an operations-and-maintenance
program. The in-field screening requirements
include testing representative painted surfaces
from 10 percent of units for a maximum of
30 samples. Continued on Page 49
Summer Gell is a principal with
Partner Engineering and Science,
an environmental- and engineering-consulting firm that focuses on environmental and engineering due
diligence. Her clientele includes dozens of national and regional lenders,
brokers, and developers. Throughout
her career, Gell has participated in more than 5,000 Phase
I environmental site assessments and is well-versed in due-diligence-reporting standards. Reach her at (214) 666-6800
On the Web:
Check out our recent Q&A with Michael C. May, Freddie Mac’s senior
vice president of multifamily sourcing: