--- title: "Lender Requirements for Property Condition and Phase I Reports" description: "What Fannie Mae, Freddie Mac, HUD and SBA require for property condition and environmental reports: standards, report age, repairs, reserves." url: https://calibre.multisites.ai/guides/lender-requirements-property-condition-environmental-reports publisher: Calibre Commercial Inspections phone: "+1-208-305-6245" email: Schedule@CalibreCBI.com --- Guide # What lenders require for property condition and environmental reports Reviewed October 13, 2026 / 8 min read The short answer Each lender program names its own standard, report age, and repair rules. Fannie Mae uses Form 4099 for PCAs and Form 4251 for Phase I reports. Freddie Mac uses a Physical Risk Report. HUD uses a CNA in its e-Tool. SBA uses a tiered environmental process. Confirm the current rule in writing. A lender does not only want a report. It wants a report that meets its own written rules. Those rules cover the standard, the form, the age of the report, who may prepare it, and what happens to the repairs the report finds. This guide summarizes the rules of four programs: Fannie Mae multifamily, Freddie Mac multifamily, HUD multifamily (FHA), and the Small Business Administration (SBA) 7(a) and 504 programs. These are the programs Calibre’s clients ask about most. Conventional bank loans, CMBS loans, and life company loans set their own rules. Ask each lender. Rules change. Each section names the source and its date or section. Check the current text before you order a report. ## The six things every lender decides 1. Which standard or form the report must follow 2. Who may prepare it, and what independence or insurance is needed 3. How old the report may be at closing 4. What the lender does with immediate repairs 5. How the lender sets replacement reserves 6. What happens when an environmental report finds a problem Ask for all six in writing at the start of the deal. ## Fannie Mae (multifamily) **Property Condition Assessment.** Fannie Mae’s Multifamily Guide, Part II, Chapter 4, covers PCAs, repairs and reserves. - _When:_ Before the Commitment Date, the lender must complete a PCA for each property. A supplemental loan that meets the streamlined underwriting rule is an exception. (Section 404.01) - _Form:_ The PCA must comply with Form 4099, and the lender must order all applicable PCA modules. (Section 404.03) - _Age:_ A PCA report that includes an HPB module must be dated as of the site visit and be less than six months before the Commitment Date. A PCA report without an HPB module may be dated up to 12 months before the Commitment Date. In that case, a site visit must occur within 90 days before the Commitment Date, and the lender must confirm there has been no material adverse change. (Section 404.02) - _Consultant:_ If the PCA consultant does not meet the education, certification or training that Form 4099 requires, the lender must find the consultant qualified on other grounds and attach a description to the final PCA. (Section 404.03) **Repairs.** The Guide sets timing by repair type. (Section 405) - Life safety repairs: for an acquisition, within 60 days after the loan origination date. In other cases, before the loan is delivered to Fannie Mae. (Section 405.03) - Critical repairs: within six months after origination, or sooner if the PCA consultant recommends it. - Repairs needed for ADA or Fair Housing compliance, or to resolve code violations: treated as critical and due within six months. - Deferred maintenance and items of note: within 12 months after origination. - Short-term replacement of capital items: by the date the PCA consultant recommends. This may be later than 12 months. - The Guide says the repair escrow should be at least 125% of the estimated cost of required repairs. That is guidance, not a requirement. The lender may choose not to fund the escrow in full if it finds the borrower has the financial capacity, and it must then get written assurances. **Replacement reserves.** The lender must obtain a PCA on Form 4099 to set the minimum reserve. The reserve should equal or exceed anticipated costs, adjusted for inflation, for the period from origination to the sooner of two years after the loan maturity date or 12 years after origination. (Section 406.01) The Guide also sets funding rules by loan tier and acquisition status (Section 406.02). Read it for your loan. **Environmental.** Section 504.01 requires the lender to comply with Form 4251, including a Phase I ESA to the current ASTM E1527 standard. Form 4251 says the Phase I date must not be more than 180 days before the loan origination date. It also lists the AAI parts that must be done or updated within 180 days before origination: interviews, lien searches, government records review, visual inspections, and the environmental professional’s declaration. Other AAI parts must be done within one year. Form 4251 also covers radon testing for most properties. If the Phase I recommends a Phase II, the Form says the lender must obtain and evaluate it. ## Freddie Mac (multifamily) Freddie Mac’s Multifamily Seller/Servicer Guide splits the topics into two chapters. **Environmental (Chapter 61).** The environmental report must be dated within six months before the full underwriting package goes to Freddie Mac. The environmental assessment methodology in Chapter 61 references ASTM E1527-21. The Seller/Servicer picks the consultant and is solely accountable. The Guide says Freddie Mac does not approve environmental consultants. The chapter tells the Seller/Servicer not to accept any claim that a firm is approved or qualified by Freddie Mac. The Guide also covers specific topics such as storage tanks, asbestos, lead-based paint, mold, radon, and an “environmental superlien” disclosure. **Property condition (Chapter 66).** Freddie Mac calls its report a Physical Risk Report. Key points from Chapter 66: - The report must be dated within six months before the full underwriting package goes to Freddie Mac. - The site inspection and the supporting environmental database report must be dated within 30 days before the report date. - The report must identify Critical Repairs and Priority Repairs with cost estimates. - The report must project capital needs over the term of the loan plus two years, to a maximum of 12 years, and set the replacement reserve. - The report must cover water intrusion and mold, problem materials, readily observable code and accessibility issues, and seismic factors for properties in an elevated seismic hazard region. - The consultant must note any deviations from the Guide and from the most recent versions of ASTM E2018 and E1528. Chapter 66 includes the consultant qualification rules (Section 66.18). Read it before you hire. ## HUD / FHA multifamily (MAP) HUD’s Multifamily Accelerated Processing (MAP) Guide requires a Capital Needs Assessment (CNA) in HUD’s CNA e-Tool for many programs. HUD says the e-Tool supports 25 programs across its asset development, asset management, and asset recapitalization offices. The MAP Guide lists the CNA as required for applications under Sections 220, 221(d)(4), 223(a)(7), 223(f), 231 and 241(a), and for RAD. The CNA must be completed not earlier than 180 days before the Firm Commitment application. A prior CNA may be accepted if it is dated not more than three years before the application. The Needs Assessor must have education, credentials and field experience that fit the property. HUD’s MAP Guide says the qualifications must not be less than those in ASTM E2018-15. The Needs Assessor must have no identity of interest with the lender or borrower. For repairs, HUD requires critical life safety repairs before endorsement. Critical accessibility repairs are to be completed as soon as possible. Non-critical repairs may be deferred past endorsement but must be completed within 12 months of endorsement, with an extension of up to six more months if the Regional Center or Satellite Office Director approves. See [the full CNA guide](https://calibre.multisites.ai/guides/hud-capital-needs-assessment-map-rad-usda). ## SBA 7(a) and 504 loans SBA’s SOP 50 10 sets the rules for 7(a) and 504 lenders. SBA’s page lists SOP 50 10 8.1, published September 25, 2026 and effective October 1, 2026. Section A covers environmental policies. Key points: - SBA requires an environmental investigation of all commercial property that secures a loan. The type and depth vary with the risk of contamination. - For a 7(a) loan, failing to follow the environmental policy may result in denial of SBA’s guaranty. - Reports must be dated within one year of the date SBA issues the loan number. - All transaction screens, Phase I and Phase II ESAs must be done by an environmental professional and come with a reliance letter in the SOP’s Appendix 5. - The environmental professional must meet the definition in 40 CFR 312.10 and carry at least $1 million in errors and omissions insurance, and must be impartial. **The tiered steps.** SBA tells the lender how to start the investigation: - If the property’s use matches a NAICS code on SBA’s list of environmentally sensitive industries (Appendix 6), the investigation must start with a Phase I, whatever the loan amount. - Gas stations (NAICS codes starting with 457) start with a Phase I and follow Appendix 7. - Otherwise, for a loan of up to and including $250,000, the investigation may start with an Environmental Questionnaire. - For a loan above $250,000, it must start with at least an Environmental Questionnaire and a Records Search with Risk Assessment. - If the Records Search shows anything other than low risk, the lender must get a Phase I. - A Phase I must follow the current ASTM standard, currently E1527-21. For SBA’s purposes, a Phase I dated within one year of the loan number is acceptable for review. SBA notes that parties may still want to follow EPA’s 180-day timing to protect their legal position. - If a Phase I concludes more investigation is warranted, the lender must follow the environmental professional’s recommendations or ask SBA’s Environmental Committee for an exception. - Dry cleaners on the property, current or former, require a Phase I followed by a Phase II. The Phase II must be done by an independent environmental professional who is a licensed professional engineer or professional geologist with at least three years of relevant experience. Properties with known contamination or ongoing cleanup cannot be approved or disbursed unless the risks are minimized to SBA’s satisfaction. SBA’s SOP, as read, does not require an ASTM PCA. Lenders may require a property condition report under their own credit policy. Ask the lender. (The SOP text was searched for “property condition” and “E2018” with no result.) ## What this means for your order - Ask the lender for its written requirements before you hire. Do not rely on the broker’s summary. - Make sure the report names the standard the lender names. - Check the report age limits against your closing date. Build in time for a refresh. - Check the consultant qualification rules. Some programs set education, certification, or insurance terms. - Plan the repair funding. Fannie Mae’s guidance of 125% for repair escrows, and HUD’s 12-month rule, affect cash needs at closing. - Do not assume one report works for two lenders. Calibre’s [third-party loan servicing](https://calibre.multisites.ai/cre-services/third-party-loan-servicing) and [Capital Needs Assessment](https://calibre.multisites.ai/cre-services/capital-needs-assessment) pages describe its lender-side work. Calibre’s [Phase 1 ESA service](https://calibre.multisites.ai/cre-services/esa-environmental-site-assessments) and [PCA service](https://calibre.multisites.ai/cre-services/astm-property-condition-assessments) cover the report types. [Request a proposal](https://calibre.multisites.ai/request-proposal). ## Frequently asked questions How old can a property condition assessment be for a Fannie Mae loan? Under Fannie Mae's Multifamily Guide, Section 404.02, a PCA report that includes an HPB module must be less than six months before the Commitment Date. A report without that module may be dated up to 12 months before, if a site visit occurs within 90 days of the Commitment Date and there is no material adverse change. Check the current Guide. What does Freddie Mac call its property condition report? Freddie Mac's Multifamily Seller/Servicer Guide calls it a Physical Risk Report (Chapter 66). It must be dated within six months before the full underwriting package goes to Freddie Mac. The site inspection and environmental database report must be dated within 30 days before the report date. Does Fannie Mae require a Phase I ESA? Yes. Section 504.01 of the Multifamily Guide requires the lender to comply with Form 4251, including a Phase I ESA to the current ASTM E1527 standard. Form 4251 says the Phase I date must not be more than 180 days before the loan origination date. Does the SBA require a Phase I ESA? It depends on the property and loan amount. SBA's SOP 50 10 requires some form of environmental investigation for commercial property that secures a loan. A Phase I is required, for example, for properties that match SBA's environmentally sensitive NAICS list, for gas stations, and where the Records Search shows more than low risk. Does Freddie Mac approve environmental or property condition consultants? No. Chapter 61 of the Freddie Mac Guide says Freddie Mac does not approve environmental consultants. The Seller/Servicer selects the consultant and is solely accountable. What happens to the repairs a Fannie Mae PCA finds? The Guide sets timing by type. Life safety repairs are due within 60 days after an acquisition loan originates. Critical repairs are due within six months. Deferred maintenance is due within 12 months. Short-term capital replacements follow the PCA consultant's recommended date. How long does a HUD capital needs assessment stay valid? The MAP Guide edition read says the CNA must be completed not earlier than 180 days before the Firm Commitment application. A previously completed CNA may be accepted if dated not more than three years before the application. Check the current MAP Guide and your Regional Center. Can I use one report for two lenders? Not safely. Each program has its own standard, form, age limit and consultant rules. Ask each lender whether it will accept a report ordered for another party and whether it needs a reliance letter. ## Sources - [Fannie Mae Multifamily Guide, Part II, Chapter 4 (Sections 404 to 406)](https://mfguide.fanniemae.com/node/4031) - [Fannie Mae Multifamily Guide, Environmental Matters (Section 504)](https://mfguide.fanniemae.com/node/4591) - [Fannie Mae Form 4251, Environmental Due Diligence Requirements (2023 redline)](https://mfguide.fanniemae.com/system/files/09-22-23-09-48-19-AM/Form%204251%20%28Redline%29.pdf) - [Freddie Mac Multifamily Seller/Servicer Guide, Chapter 61](https://mf.freddiemac.com/docs/chapters/mf_guide_ch_61.pdf) - [Freddie Mac Multifamily Seller/Servicer Guide, Chapter 66](https://mf.freddiemac.com/docs/chapters/mf_guide_ch_66.pdf) - [HUD MAP Guide](https://www.hud.gov/sites/dfiles/OCHCO/documents/4430GHSGG.pdf) - [HUD CNA e-Tool](https://www.hud.gov/hud-partners/multifamily-cna) - [SBA SOP 50 10 landing page](https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs) - [40 CFR 312.10 (environmental professional definition)](https://www.ecfr.gov/current/title-40/section-312.10) - [40 CFR 312.20 (timing)](https://www.ecfr.gov/current/title-40/section-312.20) Lender guides and standards change. Confirm current requirements with your lender and counsel. This guide is general information, not legal advice. ## Ready for your next inspection? Tell us about the property and your timeline. We will scope the right report and send a proposal. [Request a proposal](https://calibre.multisites.ai/request-proposal) [(208) 305-6245](tel:+12083056245)