Fannie Mae, on February 6, 2015, announced it will offer lower interest rates on loans made on certified energy efficient multifamily buildings. In an effort to further incentivize property owners to improve the energy performance, and therefore the quality and affordability of multifamily housing, Fannie will grant a 10 basis point reduction in the interest rate of a multifamily refinance, acquisition or supplemental mortgage loans. To qualify, properties must be certified under LEED, EPA’s Energy Star or Enterprise’s Green Communities criteria. Fannie Mae will securitize all loans financed under this lower interest rate as Green Bonds, which will be an attractive option for socially responsible investors to expand their portfolios.
This new program would cut a 4% market interest rate to 3.9%. The savings are significant: interest payments for a qualifying 30-year $10m loan would be reduced by $95,0000 over a 10 year term. The incentive applies to new and existing buildings, and is a part of Fannie’s Multifamily Green Initiative that “provides financing to invest in energy and water-cost saving improvements that lower utility costs, improve the quality of housing and lower risk.” The new mortgage discount is expected to encourage a huge number of multifamily owners to not only build green, but to invest in retro-commissioning of existing buildings in order to qualify for the price cut.
Building Green Is Getting Easier and Cheaper
Fannie’s new program is just one more financial motivation for multifamily owners to pursue energy efficiency and green certifications for their buildings. There are an increasing number of green building and energy disclosure regulations, market forces are starting to reward sustainability and numerous funding and rebates programs are available that offset the costs associated with implementing energy efficiency measures to the extent that they often pay for themselves. As a result, more and more commercial property owners are opting to invest in measures to obtain LEED, Energy Star or other certifications that recognize buildings that are designed, maintained and operated to be highly energy efficient and promote renewable energy.
The financial argument for improving the energy efficiency of a building continues to gain strength: these buildings typically have reduced operational and maintenance costs, improved tenant attraction and retention, and greater asset value. Increasingly, tax and interest breaks like Fannie Mae’s new program provide an additional incentive to commit to green building improvements and/or systems.
In announcing Fannie Mae’s commitment to the lowered interest rates, Jeffery Hayward – Fannie Mae’s Executive VP for Multifamily said the organization, which is the nation’s biggest provider of multifamily loans, is leading the way in providing financial rewards for energy efficiency in buildings. “We clearly see the value in the triple bottom line of ‘certified green buildings’: financial benefits of lower operating costs for owners and tenants, social benefits of better-quality housing for renters, and environmental benefits for everyone.”
The USGBC agreed, stating that: “LEED buildings have been proven to have lower monthly energy and water costs, leaving more disposable income for families and creating healthier and more comfortable indoor environments for occupants.”
Fannie Mae Rewards LEED-Certified Multifamily Properties with a Lower Interest Rate
Washington, D.C. (Feb. 6, 2015) – The U.S. Green Building Council (USGBC) announced today that Fannie Mae will reward multifamily properties with a green building certification, such as LEED, with a lower interest rate. USGBC’s LEED green building rating system is one of several recognized certifications including ENERGY STAR® and Enterprise’s Green Communities Criteria.
For these certified properties, Fannie Mae is now granting a 10 basis point reduction in the interest rate of a multifamily refinance, acquisition or supplemental mortgage loan. For example, if the market interest rate is 4 percent on the multifamily loan, the new rate is 3.9 percent with this pricing break. On a $10 million dollar loan amortizing over 30 years, the owner would save $95,000 in interest payments over a 10-year term.
“This is a great demonstration of leadership from Fannie Mae, and the partnership between the multifamily finance industry and the green building industry,” said Rick Fedrizzi, CEO and founding chair, USGBC. “This is real money and an incentive to not only build green but also for existing buildings to achieve certification. For the first time, Fannie Mae multifamily lenders will be able to reward building owners for their better buildings.”
“Fannie Mae is leading the way in financing by offering new lower interest rates for green building certified multifamily properties,” says Jeffery Hayward, executive vice president for multifamily, Fannie Mae. “We clearly see the value in the triple-bottom line of certified green buildings: financial benefits of lower operating costs for owners and tenants; social benefits of better quality housing for renters; and environmental benefits for everyone. Our lenders are ready with financing solutions to help multifamily owners make their properties more energy and water efficient for today and for the future.”
All loans financed under this lower interest rate will be also securitized as a Green MBS, growing the total volume of Green Bonds in the market for socially responsible investors to include in their portfolios. Fannie Mae is the leading provider of multifamily financing in the U.S., with a portfolio valued at more than $200 billion.
LEED buildings have been proven to have lower monthly energy and water costs, leaving more disposable income for families and creating healthier and more comfortable indoor environments for occupants. In a study from the U.S. Department of Energy it was reported that LEED buildings are estimated to consume 25 percent less energy and 11 percent less water, have 19 percent lower maintenance costs, 27 percent higher occupant satisfaction and 34 percent lower greenhouse gas emissions.
For more information on Fannie Mae’s Multifamily Green Initiative, please see www.fanniemaegreeninitiative.com.
Fannie Mae Energy and Water Efficiency Financing
The Fannie Mae Green Initiative provides financing for apartment buildings and cooperatives to invest in energy and water-cost saving improvements because these improvements lower utility costs, improve the quality of housing and lower risk.
As of July 2014, the Green Initiative has:
- Provided multifamily owners Green Financing Loans: Green Preservation Plus and M-PIRE
- Securitized $130M+ loans as Green MBS
- Launched the 1 to 100 ENERGY STAR® Score for Multifamily Properties
- Created the High Performance Building Module, a Multifamily Energy Audit Report
About Our Green Initiative
Fannie Mae Multifamily Mortgage Business (MMB) launched the Green Initiative 2010. The Fannie Mae Multifamily Green Initiative’s mission is to improve the energy and water efficiency, to enhance the financial and environmental sustainability, and to extend the useful life of the U.S.’s multifamily housing stock.
We provide multifamily mortgage financing to apartment buildings and cooperatives to finance debt and energy and water efficiency property improvements. We also serve the multifamily market by integrating energy and water efficiency considerations, such as underwriting projected energy savings and tracking actual energy reductions, into the standard underwriting, asset management and securitization processes of multifamily assets.
For more information email the Fannie Mae Multifamily Green Initiative Team.
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- USGBC: Greenbuild 2014 Interview with Chrissa Pagitsas
- Transforming Multifamily Housing: Fannie Mae’s Green Initiative and ENERGY STAR for Multifamily
- Training on how to benchmark and how to use Portfolio Manager
- Is EPA developing a score for multifamily buildings?
- EPA and Fannie Mae Collaborate on Energy Rating System
- Fannie Mae Expands Green Preservation Plus
- Affordable Housing Community Cuts Energy Costs by 20% with Help of Fannie Mae’s Green Program
- Multifamily ENERGY STAR Rating System Set to Debut This Year
- How Fannie Mae is Changing its Green MBS Programs
Research and Analysis
The Green Initiative provides leadership in the multifamily industry by offering Green Financing loans for smart property improvements and delivering innovative tools that measure and capture the value of energy and water efficiency.
An in-depth look at how Fannie Mae’s Multifamily housing mission and financing process integrates naturally with green building and energy and water efficiency principles.
Read the original article here.
By Drew McCreery | National, GlobeSt.com |