See What An Expert Has To Say About Fannie Mae’s New Green Financing Program
Fannie Mae recently unveiled its Green Financing program, which encourages property owners to make their properties more energy and water efficient by providing incentives to owners of green multifamily properties if they meet the government-sponsored enterprise's requirements.
To get a sense of how these new green financing initiatives will affect the industry, we sat down with Hunt Mortgage Group senior managing director and chief production officer Bill Hyman, who leads Hunt’s production platform and oversees Hunt Mortgage Group’s financing activities for conventional multifamily properties.
The Offerings
There are several offerings currently on the table for qualified properties.
Fannie's Green Rewards, for example, provides additional loan proceeds and preferential pricing to multifamily property owners who make their properties greener. The program, which can be used with any Fannie Mae loan, offers a pricing discount and up to an additional 5% in loan proceeds.
To qualify, Bill (pictured) says you need to demonstrate a capital plan to reduce energy usage or water usage by at least 20%, which Hunt then reviews during the due diligence process. If approved, you'll be awarded the pricing discount. The loan can be upsized by underwriting up to 50% of the anticipated utility cost savings.
In a very similar vein, there's Fannie's Green Preservation Plus, which helps owners transform their aging affordable housing into smart long-term investments. With flexible loan terms, owners can access extra loan proceeds for property improvements that prevent deterioration and cut energy and water waste, all while keeping the property still affordable.
Finally, there's Fannie's Green Building Certification Pricing Break, which awards pricing discounts to property owners who have received a recognized certification from one of the seven official green agencies, such as LEED or Energy Star, before the loan closes.
Fannie's confident that its new offerings will provide borrowers access to a broader MBS investor market. Bill says the Green MBS is designed to attract socially responsible securities investors to the multifamily industry.
All of these programs come with the life-of-loan servicing and a delegated risk-sharing model that's the hallmark of the Fannie Mae DUS program, providing certainty of execution, faster decisions and quicker loan closings.
The Appeal
Bill says Fannie Mae is taking an industry-leading position with its new Green Financing programs, and that's appropriate as it's a GSE. Not only does he expect the initiative to be successful and further reward borrowers to make sure their properties are sustainable, but Bill believes it'll also be a boon for borrowers who already have the capital and capabilities necessary to make a green property.
"Green certification's for folks who have already developed a green property," he tells Bisnow. "The green rewards benefits are specifically geared towards owners who are putting together capital plans on existing apartment stock, and can provide additional capital to pay for green upgrades. It’s not just a loan pricing break.”
The Impact
While Fannie Mae’s Green Financing programs are a new piece of the puzzle for lenders and borrowers to consider, Bill says, he doesn't think the programs will have a large impact on overall lending standards. Sustainability won't become as fundamental to a good deal as good fundamentals, which will "always trump other considerations."
“What good is a green building if it ends up being overleveraged and can’t meet its obligations?” he asks.
Still, he admits, there are some areas where they will be very useful. Older housing stock, for example, is in desperate need of upgrading, and these programs could open the door to making properties more environmentally friendly and loans less burdensome.
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