When HUD requires a Phase II on an FHA multifamily loan

Chapter 9 of the Multifamily Accelerated Processing (MAP) Guide, issued by the Department of Housing and Urban Development (HUD), gives two triggers for a Phase II Environmental Site Assessment (ESA) on a project seeking Federal Housing Administration (FHA) multifamily mortgage insurance: a recognized environmental condition (REC) in the Phase I, or HUD's own requirement. This page rests on the 2020 MAP Guide, revision of March 19, 2021. Mortgagee Letter 2026-04, the only later letter or notice whose title touches the chapter as of October 9, 2026, changes no section cited here.

Who the rule binds

The lender submits the Phase II with the pre-application or, where that stage is left out, the application for Firm Commitment. The guide recommends consulting HUD before preparing one (MAP Guide, 9.2.1.A, 9.4.2.B).
The Phase II assessor must be qualified as ASTM E1903-19 requires (MAP Guide, 9.2.4.A.2).
HUD decides. It may determine that a finding warrants a Phase II even where the environmental professional found no REC in it (MAP Guide, 9.4.1.A.6).

What it asks

When a Phase II is required:

A REC. A Phase II is required if the Phase I indicates a REC, which in the guide's Conclusions item includes a controlled REC (MAP Guide, 9.4.1.A.7, 9.4.2.C.1). The exception: the Phase I is enough to determine that corrective action is not feasible, and then HUD may reject the property (MAP Guide, 9.4.1.A.15).
HUD's own requirement. One is also required if HUD requires it, for reasons it describes to the lender. A Phase I that indicates an unacceptable risk under 24 CFR 50.3(i) is one; an unacceptable business risk is another (MAP Guide, 9.4.1.A.15, 9.4.2.C.2).
A historical REC (HREC). Where the Phase I indicates one, HUD may take the No Further Action (NFA) letter or like approval of the local, state, tribal or federal (LSTF) authority as completing the remediation, as consistent with current applicable LSTF standards, or may require a Phase II, further remediation or both (MAP Guide, 9.4.2.G).
Remediation under way. No Phase II is required where remediation is ongoing and the condition is not yet an HREC, if the Phase I preparer states that it should resolve any RECs and undecided issues and the remediation plan's preparer indicates that every Phase II requirement has been met. The LSTF authority's NFA, or the like, must still be submitted to HUD (MAP Guide, 9.4.2.M).
Obvious remediation. Where remediation will plainly be required, the Phase II may, if HUD approves, go inside the remediation plan's site characterization (MAP Guide, 9.4.2.D).

What the Phase II must show:

Extent. The Phase II need not characterize the site completely, but must reach the point of indicating where concentration and risk are greatest, with every REC from the Phase I and other hazards within HUD's policy considered. A limited Phase II is acceptable if it meets the same requirements (MAP Guide, 9.4.2.A).
Standard and format. ASTM E1903-19: the logic model of its Section 7, conceptual model and validation included, and the report format and table of contents of its Appendix X3.2 as X3.3 amends it (MAP Guide, 9.4.2.E, 9.4.2.F).
Vapor. Where it is determined that vapors could occur below on-site structures, existing or proposed, the Phase II shall include a Tier 2 vapor encroachment screen (ASTM E2600-15, Section 9) or a vapor intrusion assessment under LSTF policy or procedure, or go directly to Tier 4 mitigation (ASTM E2600-15, Appendix X7). A Tier 2 screen that finds a vapor encroachment condition requires one of the other two (MAP Guide, 9.4.2.H).
Conclusion. One of two: hazardous substances as the federal Superfund law (CERCLA) defines them, petroleum products, or other hazards HUD considers a risk under 24 CFR 50.3(i) exceed LSTF unrestricted criteria, with the chemicals listed; or none has been identified above those criteria (MAP Guide, 9.4.2.I).
Off-site contamination. The report must say whether there is a risk of it migrating onto the site: none known or perceived nearby, migration unlikely, or migration likely. If there is any, the preparer must describe the remediation under way and whether it has effectively controlled migration (MAP Guide, 9.4.2.J, 9.4.2.K).
LSTF requirements. The report must say how it conforms to those that apply and carry a detailed summary in common language (MAP Guide, 9.4.2.L).

What follows:

Remediation plan. Required if the Phase II concludes that hazardous waste or petroleum products exceed LSTF unrestricted criteria, or that off-site contamination, known or expected, is likely to migrate onto the site. The plan must require removal to those criteria, leaving no need for engineering or institutional controls or monitoring wells; where the LSTF authority finds that infeasible, HUD may accept incomplete removal to restricted residential levels under a Risk-Based Corrective Action (RBCA) or another accepted cleanup program (MAP Guide, 9.4.3.A, 9.4.3.B.5, 9.4.4.A, 9.4.5.A).
Off-site contamination the sponsor does not control. Where the Phase I or Phase II determines that it poses a risk to the site or the project's residents, the site is not acceptable unless that contamination is under an RBCA or another accepted program that meets every requirement of sections 9.4.3 and 9.4.5 (MAP Guide, 9.4.7).
Former landfills and dumps. A site over a former landfill or dump, for solid or hazardous waste, is not acceptable for development unless the LSTF holding management authority over the site approves it in writing for residential use, and its hazardous substances, petroleum and petroleum products have been removed completely or remediated to restricted residential standards (MAP Guide, 9.4.12).
Tanks. For an underground storage tank (UST) the LSTF does not regulate, one that holds or held hazardous waste or petroleum products, HUD will require an operations and maintenance plan and an integrity test, which the tank and its service lines must pass before HUD completes the environmental review. The plan must include periodic testing of both, and repair, maintenance and emergency response procedures. Propane USTs are excepted (MAP Guide, 9.4.1.A.13, 9.4.13).

What it means for the Phase I and the consultant

One trigger is the Phase I's own conclusion. The standard's Conclusions list the RECs and controlled RECs (E1527-21, 12.7), and it requires no recommendation of a Phase II (E1527-21, 12.8, 12.9).
Borings. Phase I and Phase II ESAs, with minimal associated soil borings, are among the site studies the guide says have no environmental impact. Ground disturbance beyond minimal borings is a choice-limiting action, barred until the review is complete (MAP Guide, 9.2.1.C.1).

What the rule says

HUD shall require the use of current techniques by qualified professionals to undertake investigations determined necessary.

24 CFR 50.3(i)(4), edition revised as of April 1, 2025

This page is general reference for environmental professionals. It does not review any project. The regulation is the authority, and the determinations of HUD or of the entity responsible for the review govern.