The American Society of the International Association for Testing and Materials (ASTM) has recently adopted new standards for seismic risk assessments. The old standards, ASTM E2026-07: Standard Guide for Seismic Risk Assessment of Buildings and ASTM E2557-07: Standard Practice for Probable Maximum Loss (PML) Evaluations for Earthquake Due-Diligence Assessments, have been replaced with ASTM E2026-16a: Standard Guide for Seismic Risk Assessment of Buildings (“Guide”) and E2557-16a: Standard Practice for Probable Maximum Loss (PML) Evaluations for Earthquake Due-Diligence Assessments (“Practice”). The new standards are broader and further reaching and provide for varying levels of evaluation, starting with a simple screening at Level 0 to a more extensive engineering evaluation at Levels 2 or 3.
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The “Guide” provides specific approaches on conducting seismic risk assessments of buildings. The “Practice” is a voluntary standard providing requirements for the evaluation of earthquake damage risk and is adequate for use by other entities which include, but are not be limited to, those making equity investments, lending, and financial transactions, including securitized mortgage lending by mortgage originators, loan servicers, underwriters, rating agencies, and purchasers of bonds secured by the real estate.
The new ASTM standards are now in effect, though adoption will likely vary by entity requesting the evaluation. Typically, a new ASTM standard is adopted within three to four months after going into effect. However, Fannie Mae and Freddie Mac will likely take longer to adopt the new standards. Neither has issued a statement on when they will adopt them. It is important to note that the entity requesting the seismic assessment can still specify reports be prepared to the old standards (-07) or the new standards (-16).
The most significant changes to the new standards consist of a separate building stability evaluation, a separate site stability evaluation, new field assessor requirements, new senior assessor requirements, and new levels of investigation.
Building Stability: Beyond providing the Scenario Expected Loss and Scenario Upper Loss (previously referred to as Probable Maximum Loss), the new standards require a building stability analysis to determine if the building will remain stable when subjected to ASTM-guideline ground motions. It should be noted that the City of Los Angeles has ordinances in place that require building owners to retrofit buildings with a soft story condition or non-ductile concrete moment frame buildings. The city has currently identified 13,500 properties that require such retrofitting. The City of San Francisco has also identified 5,109 properties that contain soft story conditions and require retrofitting. The new standard does not speak to these newly adopted city ordinances.
Site Stability: The new ASTM standards require a separate site stability analysis. This separate analysis was mainly adopted to provide users with more information on a property’s overall seismic risk. Previously, a Scenario Expected Loss or Probable Maximum Loss estimate less than 20% was considered to be sufficient. However, this rating did not take into account whether the building was located in an area with a high liquefaction potential or a high landslide potential, both creating site instability. These two issues which were not addressed in the old ASTM-07 standard report. The new ASTM-16 standard report will now address site stability, giving the user more information on the property’s overall seismic risk.
Field Assessor Requirements: The new standards require more intensive qualifications of the field assessor. The field assessor must be a licensed engineer with one or more of the following qualifications: ten years of structural engineering building design, five years of seismic design and building analysis, or two years of seismic risk assessment of buildings. These requirements also depend on the level of investigation and/or documents provided (i.e., structural drawings, etc.). There are provisions that allow deviation from the field assessor requirements which include the availability of structural drawings and/or whether the building meets ASCE 41 benchmark criteria (ASCE 41-13, Table 4-6, Benchmark Buildings).
Senior Assessor Requirements: The new standards also require more intensive qualifications of the senior assessor. The senior assessor must be a licensed engineer with one or more of the following qualifications, depending on the level of investigation and/or documents provided: ten years of structural building engineering, five years of seismic design and buildings analysis, or three years of seismic risk assessment of buildings.
Levels of Investigation: The new standards provide four levels of investigation (Levels 0, 1, 2, and 3). Level 0 is a simple screening assessment providing the greatest uncertainty. Level 1 is recommended by the ASTM for real estate due diligence transactions. Level 2 and 3 investigations are exhaustive engineering evaluations and are much costlier. These are not typically utilized for real estate due diligence transactions.
All in all, the new ASTM standards for Level 1 assessments will require more qualified personnel performing site visits, will require more qualified personnel writing reports, will provide further information on the property’s total overall seismic risk, and will provide more accurate results. However, users should be aware that these new ASTM-16 reports will cost more due to higher assessor qualifications and greater time performing assessments.
Nova is positioned to provide reports that meet the new ASTM standard. Contact your Nova representative or a member of our sales team for more information.
Update
On September 1, 2016, Freddie Mac updated its Seller / Servicer guide to incorporate the most current ASTM Standard Guide E2026-16a and ASTM Standard Practice E2557-16a. Effective immediately, all engagements requiring a Seismic Risk Assessments made through their conventional and Small Balance Loan (SBL) financing programs must adhere to the recently updated ASTM standard.
Author: Greg Gavasse, MSSE, P.E. Cal-Quake Engineering, Inc.
