Freddie Mac Changes: What’s Happening Both Now and Later

Here is a summary of the changes announced at last week’s seller/servicer conference that pertain to Freddie Mac PCA and ESA reports, as we have clarified them with Freddie Mac:

Effective this week:

Conventional and Target Affordable loans with a balance under $15 million (not SBL), will now qualify under the new “FRED” program. For you anagram aficionados, FRED stands for Fast, Reliable, Easy Decisions. The FRED program also applies to assumptions and supplemental loans with an unpaid balance under $15 million.

This program will roll out a new, combined environmental and physical risk report that is similar in scope to the current SBL Report (with the 1104 format) but it will require radon sampling using the same protocols as the current Phase 1 ESA guidelines. If you are not familiar with the SBL format, it is an abbreviated physical risk evaluation combined with an environmental transaction screen, with business environmental risks also evaluated.

The new form is not released yet, but its release is pending.

GRS Group is well positioned to provide this work; the work will be similar to the SBL format, and we have prepared over 1,800 projects under the Freddie Mac SBL program since 2015.

Short term, in the next week or two:

Here is a link to the FRED Program announcement. Again, the Freddie Mac Guide has not yet been updated – meaning the program is officially a “go” but we do not yet have the format Freddie Mac is looking for us to provide. Here is how we will help:

• If you get a request which qualifies for this program before the form is issued by Freddie Mac, you should call your GRS | Corteq representative to discuss your available options.
  • Borrowers should be informed that the form is not ready yet from Freddie, so we cannot yet move forward with the work.
  • A call to GRS Group can help to discuss the option(s) that will work best for your timing and site-specific needs in the short term.
• Upon release of the form, GRS | Corteq is positioned to provide the reports as quickly as possible.

Longer term, items to keep your eye on:

Another announcement made at Freddie Mac’s conference last week would better qualify as what we would call a “coming attractions” category. Meaning, these changes are forthcoming, but a timeline has not been announced:

• Moisture Management Plans (MMPs) will only be required if there is a history of moisture intrusion or mold.
• Transformer O&Ms will only be required on property-owned transformers installed prior to 1979.
  • This approach is in line with the “old way” we handled PCBs and eliminates the need to follow up/wait on utility confirmation of PCB content on the majority of properties with on-site transformers).
• ACM O&Ms will only be required if there have been friable suspect materials identified (if identified, then we still have to go through the same testing protocol as normally done)
• There are some changes in the way StabLok panels, Galvanized piping, and Aluminum wiring will be underwritten, but that will not affect our handling of the issues in the course of our PCAs. Seller/servicers will need to discuss with Freddie Mac how it will affect underwriting once the changes are effective

GRS Group is prepared to fulfill your reporting needs under the FRED program, please reach out to discuss these changes more.

About GRS Group

GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions. 

Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance.  We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.