Key takeaways
At Fannie Mae, an SEL of 20% or less is acceptable, an SEL greater than 20% goes to its Multifamily Insurance team for mitigants, and any building greater than 40% means the loan cannot be delivered. At Freddie Mac, an SEL-475 of 20% or less needs no earthquake insurance, greater than 20% and up to 40% requires it, and greater than 40% requires a seismic retrofit before the mortgage is submitted. Both agencies apply the SEL test to each building, not to the property as a whole. Building stability is a separate test, and a stability problem changes the outcome even when the SEL is low.
On this page
- The 0.15g screen comes first
- What Fannie Mae does at 20% and 40%
- What Freddie Mac does at 20% and 40%
- Side by side
- What the insurance must look like
- Retrofit, reserves and getting insurance removed
- Building stability is a separate test
- SEL, SUL and PML: which number counts
- How CMBS and HUD differ
- Practical notes
- Questions
The 0.15g screen comes first
Both agencies start with the site, not the building: a USGS peak ground acceleration of 0.15g or more at the 10% in 50 years level.
At Fannie Mae, the lender assesses seismic risk before Rate Lock from the PGA at the site (Section 505.01). A PGA of 0.15g or more is High Seismic Risk. The lender then completes Form 4099.C and obtains an SRA if a Structural Risk Factor is identified. A loan cannot be delivered where PGA is 0.15g or more and the property has an unreinforced masonry building that has not been seismically retrofitted, or a building on a slope exceeding 30 degrees.
At Freddie Mac, a PGA of 0.15g or more places the property in an Elevated Seismic Hazard Region, and an SRA is required (Section 64.2). The PGA is computed on the USGS tool at 10% in 50 years, using Site Class D (259 m/s) for properties in California, Nevada, Oregon and Washington. Below 0.15g, no SRA is required.
More detail: Fannie Mae seismic requirements, Freddie Mac seismic requirements and Level 0, Level 1 and Level 2 assessments.
What Fannie Mae does at 20% and 40%
Fannie Mae accepts 20% or less, sends anything higher to its Multifamily Insurance team, and refuses delivery above 40%.
Section 505.03 sets the acceptable case. Seismic risk is acceptable when all income-producing Improvements, and non-income-producing Improvements that support amenities, have an SEL of 20% or less and meet the current building stability requirements of ASTM E2026. The same subsection sets the hard line: the lender must not deliver a loan secured by a property having any Improvements with an SEL greater than 40%. The test is building by building.
Between those lines, Section 505.05 applies. For any Improvement with an SEL greater than 20%, or with a building stability issue, the lender "must contact Multifamily Insurance to determine acceptable mitigants". The Guide lists a seismic retrofit sufficient to resolve all stability issues and reduce the SEL of all Improvements to 20% or below, and earthquake insurance under Section 502.04.
The same subsection adds a sentence borrowers should read before planning to buy coverage and move on: "Earthquake insurance does not mitigate seismic risk."
The Guide publishes no formula for the band between 20% and 40%. Outcomes are set case by case, after the lender makes contact. Where a law or ordinance requires a retrofit, the SRA must describe a proposed retrofit plan and its costs (Section 505.04).
The SRA itself is a Level 1 assessment dated within 12 months before the Commitment Date. It meets ASTM E2026 and ASTM E2557, reports SEL and SUL at 10% in 50 years, and complies with Form 4099.C, including Form 4093 structured data and a narrative (Section 505.02).
What Freddie Mac does at 20% and 40%
Freddie Mac's rule is a published table: no insurance at 20% or less, insurance above 20% and up to 40%, retrofit before submission above 40%.
Sections 64.14 and 31.9(b)(1) set three bands for a building with no stability concern:
- SEL-475 of 20% or less: earthquake insurance is not required.
- Greater than 20% and up to 40%: earthquake insurance is required and a seismic retrofit is optional. If a retrofit brings the SEL-475 to 20% or less, insurance is no longer required.
- Greater than 40%: the affected building must have a seismic retrofit before the mortgage is submitted.
Stability overrides the table. A building with a stability concern and an SEL-475 at 40% or below is ineligible for purchase until a seismic retrofit is completed, unless Freddie Mac approves otherwise.
The two tests use different ground motions. The SEL-475 is the mean loss from the 475-year return period earthquake (Section 64.1). Building stability is evaluated at building-code ground motion, not the 475-year motion (Section 64.9). A building can pass one test and fail the other.
The report level follows the risk factors in Section 64.2(c). Level 0 applies if none of the listed factors is present. Level 1 applies if any is present or cannot be ruled out. Examples include a weak or soft story, 8 or more stories, reinforced concrete built before 2000, wood frame built before 1960, and wood frame built before 2000 with tuck-under parking.
Side by side
The numbers match; the consequences do not.
Both agencies draw their lines at 20% and 40% on the SEL, building by building. Freddie Mac attaches a fixed consequence to each band. Fannie Mae fixes the two ends and settles the middle with the lender.
| Item | Fannie Mae | Freddie Mac |
|---|---|---|
| Screen | PGA 0.15g or more, then Form 4099.C; Level 1 SRA if a Structural Risk Factor is found | PGA 0.15g or more requires an SRA; Level 0 or Level 1 by risk factors |
| SEL 20% or less, stable | Acceptable | Insurance not required |
| SEL greater than 20%, up to 40% | Lender must contact Multifamily Insurance; the Guide lists retrofit to 20% or below and earthquake insurance as mitigants | Insurance required; retrofit optional |
| SEL greater than 40% | Loan cannot be delivered | Retrofit before submission |
| Stability issue | Lender must contact Multifamily Insurance | Ineligible until retrofit, unless Freddie Mac approves |
| Coverage when required | At least 100% of Insurable Value | At least 100% of the building's Insurable Value |
| Deductible ceiling | Greater of 7.5% of Total Insurable Value or the 501.02B maximum | $50,000 or $100,000 by value, or 7.5% of Total Insurable Value |
| Report age | Within 12 months before the Commitment Date | Within six months before the underwriting package; inspection within 30 days before the report |
| Who hires the engineer | The lender obtains the SRA | The lender; the borrower must not retain or direct the consultant |
Reviewed against the Fannie Mae Multifamily Guide effective September 28, 2026 and Freddie Mac Multifamily Seller/Servicer Guide Chapters 31 and 64 as updated August 25, 2026.
- Low: 20% or less. Fannie Mae: acceptable. Freddie Mac: insurance not required. The building must also be stable.
- Middle: greater than 20%, up to 40%. Fannie Mae: lender contacts Multifamily Insurance. Freddie Mac: insurance required.
- High: greater than 40%. Fannie Mae: loan cannot be delivered. Freddie Mac: retrofit before submission.
What the insurance must look like
When either agency requires earthquake insurance, the policy must cover at least 100% of insurable value, and the deductible is capped near 7.5% of total insurable value.
Fannie Mae's terms apply only "if required by Fannie Mae" (Section 502.04). Coverage must be at least 100% of Insurable Value. The deductible may not exceed the greater of 7.5% of Total Insurable Value or the maximum in Section 501.02B, and the business income waiting period may not exceed 15 days. Earthquake insurance may be required while a property is being retrofitted, and the Guide is direct about delay: "If retrofitting is required and not completed within the agreed timeframe, you must not accept earthquake insurance as a substitute."
Freddie Mac requires coverage of at least 100% of the Insurable Value of the building, in effect since the October 21, 2025 bulletin (Section 31.9(b)). The deductible limit depends on how the policy is written. For specific limits it is $50,000 where the property's Insurable Value is under $10 million, $100,000 at $10 million or more, or 7.5% of Total Insurable Value. For blanket limits it is $250,000 or 7.5%. The insurer must be rated at least A- by AM Best (Section 31.4).
If you need the SEL for a placement or for a loan's insurance condition, see our PML report for earthquake insurance.
Retrofit, reserves and getting insurance removed
A retrofit that brings every building to 20% or below is the route both agencies name for clearing the condition.
At Freddie Mac, a required retrofit is a Priority Repair. The lender holds a Repair Reserve of at least 125% of the estimated cost, and the work must be completed within 12 months after the Origination Date (Section 64.14). After a retrofit brings the SEL-475 to 20% or less and addresses stability, the Seller/Servicer may ask Freddie Mac to discontinue or reduce the earthquake coverage by submitting a new SRA (Section 31.9(b)(3)).
Fannie Mae names the same target, a retrofit that resolves stability issues and reduces every Improvement to 20% or below, but Section 505 states no retrofit reserve percentage. Where a law or ordinance already requires a retrofit, the SRA must describe the proposed retrofit plan and costs (Section 505.04).
Building stability is a separate test
A low SEL does not help a building with a stability problem.
At Fannie Mae, a building stability issue sends the loan to Multifamily Insurance in the same way an SEL greater than 20% does (Section 505.05). At Freddie Mac, a stability concern at an SEL-475 of 40% or below makes the property ineligible for purchase until a seismic retrofit is completed, unless Freddie Mac approves otherwise.
SEL, SUL and PML: which number counts
Both agencies test the SEL, the mean loss at the 475-year ground motion, and ask for the SUL beside it.
Freddie Mac's Guide uses SEL-475 in place of the older term PML and defines it as the mean loss from the 475-year return period earthquake (Section 64.1). Fannie Mae requires both SEL and SUL at 10% in 50 years (Section 505.02) and tests the SEL against its lines. ASTM E2026 defines how the number is produced. The lender or insurer decides what number is acceptable.
Fannie Mae's Guide cites ASTM E2026 and E2557 without an edition year. Freddie Mac's Guide names the 2016a editions and any successor standard. Our reports are prepared to the current edition, ASTM E2026-24. More on the two standards: ASTM E2557 vs. E2026.
How CMBS and HUD differ
CMBS lenders use a similar 20% line with no 40% line, and HUD uses a different test.
CMBS loan documents typically use a 20% PML or SEL trigger on a 475-year basis and require earthquake insurance in an amount not less than 100% of the PML. HUD's multifamily MAP Guide uses an ASCE 41-13 life-safety seismic review, not an SEL percentage. For life companies and banks, the threshold is set by each lender's policy.
Practical notes
Three details catch deals late: the report's age, who hired the engineer, and one weak building in a multi-building property.
- Report age. Fannie Mae requires the SRA dated within 12 months before the Commitment Date. Freddie Mac requires it within six months before the full underwriting package is delivered, with the Level 1 site inspection dated within 30 days before the report date.
- Who hired the engineer. At Freddie Mac the Seller/Servicer retains and directs the consultant: "The Borrower must not retain or direct the Consultant", though the borrower may pay (Section 64.3). Freddie Mac does not approve consultants (Section 64.12).
- One weak building. Both agencies test each building. One older building greater than 40% can stop a property where every other building passes.
Questions
Does Fannie Mae require earthquake insurance above 20% SEL?
Not automatically. Above 20%, the lender must contact Fannie Mae Multifamily Insurance to determine acceptable mitigants, and the Guide lists earthquake insurance as one of them, alongside a retrofit to 20% or below. The Guide also states that earthquake insurance does not mitigate seismic risk.
Does Freddie Mac?
Yes, for a building with no stability concern and an SEL-475 greater than 20% and up to 40%. Coverage must be at least 100% of the building's Insurable Value. Greater than 40%, a seismic retrofit is required before the mortgage is submitted.
Is the test applied per building?
Yes. Fannie Mae requires every income-producing Improvement, and those that support amenities, to have an SEL of 20% or less, and bars delivery if any Improvement is greater than 40%. Freddie Mac applies its bands to the affected building.
Is the threshold the SEL or the SUL?
The SEL. Both agencies test the SEL at the 475-year ground motion. Fannie Mae requires the SUL to be reported beside it.
Which ASTM edition applies?
Fannie Mae's Guide names ASTM E2026 and E2557 without a year. Freddie Mac's names the 2016a editions and any successor standard. We prepare our reports to ASTM E2026-24, the current edition.