Introduction
This topic contains information on environmental hazard assessments, including:
- Overview
- Types of Environmental Hazard Assessments
- Acceptability of Consultants
- Phase I Environmental Hazard Assessment
- Phase II Environmental Hazard Assessment Description
- Who Should Complete the Phase II Environmental Hazard Assessment
- Phase II Environmental Hazard Assessment Report Forms and Requirements
- Kinds of Testing or Sampling Under Phase II Environmental Hazard Assessments
- Results of an Environmental Hazard Assessment
Overview
An environmental hazard assessment is required for condo and co-op projects if an environmental problem is identified by the lender through performance of its project underwriting or due diligence. If environmental problems are identified, the problems must be determined to be acceptable. Lenders should keep a copy of this assessment in the project review file.
Types of Environmental Hazard Assessments
The table below describes two types of environmental hazard assessments.
| Type | Performed by | Description |
|---|---|---|
| Phase I assessment (see E-2-02, Suggested Format for Phase I Environmental Hazard Assessments) | the lender or by someone employed by the lender | gathers information from various sources to evaluate the environmental soundness of the project. |
| Phase II assessment | a qualified environmental consultant | when required
|
Acceptability of Consultants
Fannie Mae reserves the right to notify lenders that a particular consultant is no longer acceptable. Fannie Mae also reserves the right to refuse to accept, at any time, any future environmental assessment, report, warranty, or certification from individual consultants, specific consulting firms, or specific branch offices of consulting firms.
Phase I Environmental Hazard Assessment
A Phase I assessment enables lenders to quickly determine whether adequate information exists to evaluate the environmental status of a property. A Phase I assessment is principally a screening process that focuses on reviewing the available documentation, interviewing people who are knowledgeable about the site operations, and inspecting the site, the building, and adjoining properties. Fannie Mae does not require a specific form for a Phase I assessment.
Any report that is thorough and professionally prepared will be acceptable. For a suggested format, see E-2-02, Suggested Format for Phase I Environmental Hazard Assessments.
Phase II Environmental Hazard Assessment Description
A Phase II assessment provides a more detailed review of the site. It includes specific physical sampling for each hazard that was not acceptable under the Phase I assessment, as well as a review of historical records. It determines the presence or absence of specific environmental liabilities (such as asbestos or leaking underground storage tanks) or quantifies the extent of an observed or suspected environmental liability (such as soil or groundwater contamination).
Who Should Complete the Phase II Environmental Hazard Assessment
The specialized nature of the investigations conducted under a Phase II assessment requires the knowledge and experience of a qualified consultant.
Lenders must use care in choosing firms to perform environmental hazard assessments. Lenders should confirm that the consultant it plans to use is not affiliated with the buyer or seller of the property or a firm engaged in a business that might present a conflict of interest. Lenders should also evaluate whether the consulting firm’s personnel have adequate and appropriate education and training to carry out the required duties.
Phase II Environmental Hazard Assessment Report Forms and Requirements
Fannie Mae does not specify an exact format for the consultant’s report. Any report that is thorough and professionally prepared will be acceptable.
The table below provides the requirements for the Phase II Environmental Assessment Report.
| ✓ | The consultant’s report for a Phase II environmental hazard assessment report must |
|---|---|
| include a full description of the sampling procedures | |
| include the laboratory results | |
| include the consultant’s recommendations | |
| follow all regulatory standards and good management practices at all times, especially when physical sampling and laboratory analysis are involved | |
include a certification in the report that:
|
|
| include the signature of an officer of the consulting firm that conducted the work |
Kinds of Testing or Sampling Under Phase II Environmental Hazard Assessments
Examples of the kind of testing or sampling that occur under a Phase II assessment include but are not limited to the following:
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investigating the status of any enforcement actions related to neighboring properties under the Superfund or Resource, Conservation, and Recovery Acts;
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testing for underground storage leaks;
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sampling and analyzing the soil;
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sampling and analyzing the groundwater;
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testing soil or facilities that are suspected as being contaminated by polychlorinated biphenyls; and
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sampling and analyzing bulk asbestos and developing related abatement and maintenance programs, if necessary.
Results of an Environmental Hazard Assessment
Lenders must evaluate the results of the assessment and determine if the conditions are acceptable to be remediated. Refer to B4-2.1-05, Unacceptable Environmental Hazards and B4-2.1-06, Remedial Actions for Environmental Hazard Assessments Below Standards .