On November 6, 2018, FHFA announced that the multifamily lending volume cap for 2019 will once again be $35 billion. Besides the cap, FHFA also announced a new, "data-driven" approach to excluded affordable business that will focus on markets where renters are most cost-burdened. There are also new requirements regarding 2019 cap exclusions that impact our Green Rewards program.
New Green Rewards Eligibility Requirement
FHFA has indicated its continued commitment to Green Financing with the release of the 2019 Scorecard. If the deal meets these requirements, the deal is 100 percent excluded from Fannie Mae's cap in 2019.
Under the new eligibility requirements for Green Rewards deals property owners must commit to property improvements that are projected to reduce the whole property's annual energy and water consumption by at least 30 percent, with a minimum savings of 15 percent attributable to energy reduction. This means that a property could be projected to save, for example, 15 percent energy and 15 percent water, or 18 percent energy and 12 percent water, or just 30 percent energy. By contrast, 18 percent water and only 12 percent energy, or 30 percent water alone, will not be eligible for Green Rewards.
The new eligibility requirements work well with our Green Rewards structure and represent only an incremental change. Since water-saving property improvements also save energy through reduced need for hot water, some properties could reach the new eligibility threshold with water-saving improvements and the addition of some lower-cost energy-saving improvements like smart thermostats and LED lighting.
For example, this 2018 Green Rewards loan in Texas would still qualify under the 2019 requirements by adding smart thermostats and a lighting retrofit to hot water saving improvements such as low-flow bath and kitchen fixtures. These investments are projected to save a combined total of 32 percent in consumption savings-16 percent from energy and 16 percent from water.
For details on how your in-process deals will be managed during the transition from the 2018 Scorecard requirements to the 2019 Scorecard requirements, please contact your Fannie Mae Deal Team.
Loans on affordable units in cost-burdened renter markets
In addition, FHFA has announced a new process by which it will designate markets where units affordable to cost-burdened renters at certain area median income levels will be excluded from the cap. They have developed a data-driven approach to ensure that exclusions from the cap are focused on markets where renters are most cost-burdened and will result in less variation in market designations over time.
We are working with FHFA to understand how to operationalize this guidance, but don't anticipate that it will have a material impact. We will share more information as it becomes available.
To learn more, check out the press release and expect more updates as these important changes are implemented.