Freddie Mac Joins Green Financing Movement

Earlier this week, Freddie Mac released a new green financing offering known as the Multifamily Green Advantage℠ .  This offering aims to provide a “flexible, cost-effective” option to finance resource-efficient multifamily properties by offering discounted loan pricing to borrowers who commit to assessing or improving the asset’s energy or water performance. To be eligible for the Green Advantage, borrowers must perform a Green Assessment to identify specific energy efficiency and water conservation measures. Based on the findings of this assessment, discounted interest rates and additional loan proceeds will be provided to borrowers. Freddie Mac will reimburse the borrower up to $3,500 for the cost of the assessment used for the approved loan. Program Specifics Borrowers may choose one of two paths with the Multifamily Green Advantage offering: Green Up or Green Up Plus (see here ).  The Green Up option requires borrowers to order a Green Assessment, which is a straight-forward property analysis that identifies energy and water conservation measures. Borrowers who commit to making improvements based on the findings of this assessment are eligible to increase their loan amount, as Freddie Mac will underwrite up to 50%  of the projected owner-paid cost savings.  With the Green Up Plus option, borrowers are required to order a Green Assessment Plus, which is a more detailed property analysis based on an ASHRAE Level II Energy Audit.   Freddie Mac will underwrite up to 75% of  the projected owner-paid cost savings for borrowers who  commit to implementing measures identified in the report.   Both options require the implementation of measures that reduce owner-paid energy or water consumption by at least 15% and give borrowers up to two years to complete the improvements.  Both options also include energy benchmarking requirements, which require property energy and water usage be recorded in the EPA Portfolio Manager® before closing, as well as annually until two years after the project is completed. Eligibility Freddie Mac states that properties built over 20 years ago are ideal candidates for the Multifamily Green Advantage offering. Tax-credit properties coming out of their compliance period which have not undergone any major rehab to their energy and water systems will also yield significant benefits. Freddie Mac also offers discounted loan pricing for properties with an affordable housing component that are already Green Certified through ENERGYSTAR , LEED , GreenPoint Rated or one of several other industry-standard green building certifications. In order to participate in the either Green Advantage offering, borrowers will need to engage an accredited green consultant to evaluate the property’s energy and water data and provide recommendations through energy and water conservation measures (EWCMs).  Partner Energy is currently one of four consultants approved to provide the Freddie Mac Green Assessments. More details about consultant requirements and assessment Scope of Work can be found here . The Industry-Wide Push toward Green Building With the release of the Multifamily Green Advantage, Freddie Mac is following in the footsteps of Fannie Mae and HUD who have previously established similar green programs that reward borrowers for increasing energy and water efficiency as well as achieving green building certifications. (see more on HUD’s MIP Reduction here , and Fannie Mae’s Multifamily Green Initiative here ) By incentivizing green property upgrades through beneficial loan terms, these green financing programs aim to establish a new paradigm of financial, social, and environmental goals.  Indeed, for those in the multifamily industry the argument for investing in energy efficiency measures continues to gain strength.  There are a growing number of green building and energy disclosure regulations, and market forces a beginning to directly reward sustainability (because tenants increasingly demand green living and working spaces).  And the establishment of rebate programs and interest breaks like those offered by Freddie Mac, Fannie Mae, and HUD now provide an additional financial incentive to commit to greener building and operating practices. Read more about the new Freddie Mac Multifamily Green Advantage offering.

Drew McCreery

Tony Liou