Fannie Who?

Fannie Who?

Learn how water and energy conservation can lead to better lending terms within our multifamily industry.

Fannie Mae and the Federal Housing Administration have come together to offer multifamily owners incentives for implementing green improvements on-site through Government-Sponsored Enterprises (GSEs).

The Fannie Mae Go Green Initiative was a movement that began in 2011, and it sparked up conversation within the multifamily industry only a few years ago in 2015. Fannie Mae launched their Green Preservation Plus Program In 2011, offering multifamily affordable housing properties lending incentives that met certain green criteria. The true popularity within the multifamily industry took off when the organization launched the Fannie Mae Multifamily Green Rewards program in 2015. By broadening the range of different types multifamily communities that could qualify for the conservation and efficiency incentives, Fannie Mae has given the apartment industry the chance to benefit from going green.

So, who cares about this? If you own or manage any multifamily property, you care about this. Going green isn’t just a marketing tactic anymore. Studies show that green properties are more valuable and benefit year-over-year from cost savings. How? According to McGraw Hill Construction, investing in green makes properties more valuable by virtue of lowered maintenance and energy costs. The return on investment from green building is rapid: green retrofit projects are expected to pay for itself in just seven years. Studies from McGraw Hill Construction and the U.S. Department of Energy prove that buildings with Leadership in Energy and Environmental Design (LEED) certifications report almost 20 percent lower maintenance costs than typical commercial buildings, and green building retrofit projects typically decrease operation costs by almost 10 percent in just one year.

Back to Fannie Mae. Any multifamily community that is five units or larger can reap the benefits of going green. And, multifamily properties have started to take notice. Interest in GSE green lending has increased dramatically since its inception just a few years ago.

Important to note, owners must apply for financing before making green updates to take full advantage of the pricing discounts.

Three Components of the Fannie Mae Go Green Initiative

Green lending programs are becoming so popular because it benefits multifamily owners and residents. When green improvements are made and the resident is paying the utility bulls, residents may see their utility bills decrease annually. A decrease in utilities may positively impact retention rates, higher occupancy and potentially higher rental rates. Owners can then benefit economically from lower loan coupons and higher loan proceeds.

There are many different programs targeting owners of existing multifamily owners who are ready to make green improvements. In this article, we will learn more about the Green Rewards Program, the Green Preservation Plus Program and the Green Building Certification Price Break Program. Though each of these programs has unique requirements and components, each program makes the borrower eligible for a 0.1 percent reduction in the all-in interest rate of the loan.

The Green Rewards Program

The more popular of the three programs, the Green Rewards Program can be applied toward all conventional and affordable multifamily communities with at least five units. The Green Initiative was built upon the general idea that lending incentives were made available to multifamily communities that could illustrate an increase in energy efficiency on property and a decrease in utility consumption for water, gas and/or electric. The Green Rewards Program provides an additional 5 percent of the loan by including up to 50 percent of the projected water and energy savings in the loan underwriting. If the property is able to demonstrate a 25 percent minimum reduction in property utility consumption after the conservation program is implemented. The conservation program for either energy savings or water savings must be conducted within 12 months of receiving this loan.

The Green Preservation Plus Program

This program directly impacts low incoming housing apartments. This program requires the energy and water saving improvements to equal at least 5 percent of the original mortgage loan amount. This program also allows access to borrowing the property’s equity amount equal to the investments in efficiency. Another incentive to reducing utility consumption per this program is a lowered debt service credit ratio for the borrower by up to 5 basis points lower than standard rates.

Green Building Certification Price Break Program

The final Go Green program we will talk about is the Green Building Certification Price Break Program. This program is geared toward properties that already have eligible green certifications and are refinancing or are being acquired.

This program reduces the all-in interest rate by .10 percent to any acquisition or refinance loan on a conventional or affordable property that has, as stated previously, an eligible Green Building Certification. A list of eligible Green Building Certifications can be found on the Fannie Mae website.

This Fannie Mae incentive recognizes the value of green building certifications, rewards owners for investing in their properties and supports the construction and retrofit of quality multifamily rental housing in the US.

So how do you qualify and get these borrowing incentives? Properties must illustrate an increase in utility efficiency and decrease in utility consumption. How do you that? Conservation!

Conservation programs exist for both water and energy. By implementing one or both of these kinds of programs, the necessary percentage of consumption reduction can be illustrated. For energy conservation, installing new LED lights, windows and sliders and HVAC systems will bring overall energy consumption down closer to the required 25 percent reduction. For water, retrofitted aerators in the kitchen and bathroom, new showerheads, diverters and internal toilet upgrades will lower consumption as well. Irrigation systems surrounding the property can also be fitted with a weather-based irrigation controller that controls and monitors watering.

The Go Green Initiative by Fannie Mae is a push toward increased efficiency in multifamily, and it allows property owners and management companies to take responsibility over utility usage. Now property owners and management companies can save water and energy and get rewarded for it, too.

Caroline Ferguson is the director of business development and marketing for Southwest Utility Solutions. She can be reached at You can learn more about Fannie Mae for multifamily at And, you can learn more about Southwest Utility Solutions at

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