In Nova’s March newsletter, Greg Murphy, Vice President of Nova’s Capital Markets Group, commented on the recent changes at Fannie Mae and Freddie Mac. Since that time, the new Freddie Mac PCR requirements (Freddie Mac Multifamily Seller/Servicer Guide, Chapter 14) were released on April 30th, 2015. Of significance are a new repair category, revisions to electrical system requirements, and a new Form 1105. These are further discussed below.
New Priority Repair Category
A new category of Priority Repair was introduced, PR-90. Any Priority Repair that represents an imminent Life Safety Hazard to tenants or any uncorrected Priority Repair that is the cause of ongoing substantive damage to the asset must be identified on Form 1105, Property Condition Assessment, as a PR-90 repair, meaning that this work is to be completed as soon as possible. PR-90 Repairs must be targeted for completion within 90 days after the Origination Date.
Revision to Electrical System Requirements
Guidance on Problematic Materials was revised to include additional discussion on the site electrical system. The minimum service acceptable to each unit remains at 60 amps; however if the property has been successfully operating at a service less than this threshold, the Borrower has the option of retaining a licensed electrician or electrical engineer to complete a load analysis based on the most current National Electrical Code (NEC) guidelines (see Article 220 of the NEC). The borrower must provide the complete results of this analysis to the Consultant for evaluation and inclusion in the PCR.
The use of tamper-resistant (S-type) fuses is now an approved method of overload protection. The Consultant is required to determine the adequacy of the installation and associated components, and whether an upgrade to circuit breakers is warranted. Although not seen in newer construction, fuse boxes are commonly observed in older affordable properties. If your business involves Affordable or LIHTC deals, Nova recommends that clients have the borrower get a jump on this analysis for affected properties prior to completing the PCR.
To accommodate these new requirements, Form 1105 has been updated. Ensure your consultants are using current versions of these forms.
A complete copy of the requirements is available from www.allregs.com.
Capital Markets Group Manager
Nova Consulting Group Inc.