Fannie Lowers Rates for Green-Certified Multifamily Properties

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.