
On December 12, 2024, Freddie Mac released updates to Chapter 62 of its Multifamily Seller/Servicer Guide, enhancing Property Condition Reports (PCRs) to better address safety, compliance, and operational integrity in multifamily properties. These changes clearly define repair categories, reinforce accessibility and fair housing standards, and refine reporting practices. Below, we explore the purpose of PCRs and highlight the key updates.
Purpose of Property Condition Reports
Property Condition Reports (PCRs) are vital for Freddie Mac’s multifamily lending, providing a thorough assessment of a property’s physical state and compliance with regulatory standards. Core elements of PCRs include:
- Detailed Evaluations: Analysis of essential systems like roofs, HVAC, plumbing, and electrical to ensure structural integrity and functionality.
- Repair Classifications: Identifying Critical Repairs (urgent safety and structural issues) and Priority Repairs (to be addressed within 90-365 days), while Routine Maintenance under $3,000 is managed by the borrower.
- Accessibility Compliance: Emphasis on ADA and FHA standards, with recommended upgrades to enhance accessibility.
- Capital Needs Forecasting: Planning for future repairs and replacements, preserving property value over the loan term.
These comprehensive assessments allow Freddie Mac to confidently issue Letters of Commitment or accept rate-lock applications while ensuring that multifamily properties meet strict quality and safety standards.
Key Updates in December 2024
- Streamlined Repair Categories
• Operational Repairs Removed: The Operational Repair category has been eliminated, simplifying repair classifications.
• Critical Repairs: Immediate risks to safety, structural integrity, or habitability must be resolved before closing.
• Priority Repairs: Deficiencies requiring action within 90 days (PR-90 Repairs) or 365 days to prevent further deterioration.
• Routine Maintenance: Items under $3,000 per repair are considered part of standard property upkeep and no longer classified unless neglect causes escalation. - Enhanced Accessibility Compliance
• Strengthened emphasis on ADA and FHA compliance, requiring consultants to document non-compliance and recommend achievable upgrades for older properties.
• Accessibility-related deficiencies must align with federal standards to improve equity for tenants with disabilities. - Form 1105 Refinements
• Standardized Reporting: Continues to ensure consistent summaries, repair breakdowns, and capital needs projections over the loan term.
• Enhanced alignment of repair classifications and cost estimates to clearly define evaluations.
Why These Updates Matter
Freddie Mac’s December 2024 updates reflect a commitment to maintaining the highest standards for multifamily property evaluations. Key benefits include:
- Proactive Risk Management: Freddie Mac’s emphasis on addressing Critical Repairs before closing and Priority Repairs within 90-365 days directly supports proactive risk management. This ensures immediate safety risks and potential future issues are handled promptly, reducing the chance of long-term liabilities.
- Improved Accessibility and Fair Housing: The stronger focus on ADA and FHA compliance reflects Freddie Mac’s efforts to ensure properties are inclusive and accessible. Requiring consultants to document non-compliance and recommend achievable upgrades aligns with improving equity for tenants and reducing legal risks.
- Enhanced Transparency: The refinements to Form 1105 and the streamlined repair classification system provide clearer, more standardized reporting. This ensures consistency across assessments, making it easier for stakeholders (borrowers, Seller/Servicers, consultants, and Freddie Mac itself) to understand property conditions and necessary actions.
- Preservation of Property Value: By requiring detailed inspections of building systems, capital needs projections, and actionable repair timelines, Freddie Mac is ensuring that properties remain functional and marketable throughout the loan term. This focus on addressing critical and priority issues safeguards long-term asset value.
Freddie Mac’s refined PCR requirements promote safer, more accessible multifamily properties while mitigating risks for lenders and borrowers alike. By streamlining repair categories, enhancing accessibility standards, and clarifying Routine Maintenance responsibilities, these updates reinforce Freddie Mac’s dedication to excellence in property evaluations.
How Moran Consultants Can Help
Navigating these updated requirements can be complex, but Moran Consultants is here to help. Our due diligence services ensure that your property condition reports meet Freddie Mac’s new standards, providing you with clear insights and proactive solutions. Whether you need a thorough compliance review, capital planning, or guidance on accessibility upgrades, our expert team is ready to assist. Give us a call today to learn how we can support your next project.