The two giants of government-sponsored-enterprise multifamily lending, Freddie Mac
and Fannie Mae, along with the U.S. Department of Housing and Urban Development (HUD), are
in the process of updating the guidelines used by their network of lenders to assess the physical
condition of multifamily properties.
This is not surprising when you consider a certain statistic from the Harvard Joint Center for
Housing Studies: The average age of the U.S. multifamily housing stock as of 2012 is 38 years
and counting. Thus, property-condition assessment needs are very different now from they were
when Fannie Mae, Freddie Mac and HUD last defined them back in the 1990s. Add in the fact
that the commercial real estate market is still recovering from the financial crisis, and the resulting
pressure to get a full and accurate read on the risk of multifamily assets has intensified.
The latest of these three lending sources to update its requirements is Fannie Mae, with new
instructions for performing multifamily physical-needs assessments (PNAs) that took effect this
past February. Multifamily continues to be a favored asset class, so thorough study by qualified
property-condition assessment companies is important to avoid lending on a risky asset.
Principal analyst, EDR Insight
Illustration by Dennis Wunsch
By Dianne P. Crocker