Our 8-year green journey together is going to get even greener in 2019! On Nov. 6, 2018 FHFA issued a press release redefining the 2019 Scorecard cap exclusion requirements for Green Financing and requiring the use of a third-party to collect and report energy and water performance data. Let me tell you how the Fannie Mae Multifamily business is integrating the new requirements, and delivering the best Green Financing execution in the market.
Green Rewards will continue to offer great financial incentives
Fannie Mae will continue to offer the best financial incentives for Green Financing in the market including: a lower interest rate than on non-Green loans; up to an additional 5 percent in loan proceeds; and a 100 percent free energy audit paid by Fannie Mae. To receive these Green Rewards benefits, borrowers must commit to property improvements that are projected to reduce the whole property's annual energy consumption by at least 15 percent, with an additional 15 percent consumption savings from a combination of energy and/or water savings. For example, a Green Rewards deal is eligible if the borrower commits to the property saving 15 percent energy and 15 percent water, or 18 percent energy and 12 percent water, or just 30 percent energy. By contrast, a deal where the property is projected to save 18 percent water and only 12 percent energy, or 30 percent water alone, will not be eligible for Green Rewards.
Deals can meet the new 2019 eligibility requirements
We analyzed Green Rewards deals delivered in 2018 to see how they might qualify under the 2019 requirements. The data shows that the Green Rewards deals you've delivered and have in the pipeline work well with the new requirements. Let's look at one such deal: Delivered in Q2 2018, this Green Rewards acquisition deal in Texas chose water-saving improvements for a total implementation cost per unit of $294, with 28 percent water savings and 1 percent energy savings. But the same property would qualify under the 2019 requirements with water-saving improvements, smart thermostats, and a lighting retrofit, saving 16 percent water and 16 percent energy with a cost difference of just $208 per unit. While it will be a shift for borrowers to think about energy savings, Fannie Mae is not shifting from its commitment to Green Financing -- we're still offering the best financial incentives in the market!
How to deliver Green Rewards deals under 2018 or 2019 eligibility requirements
We understand that you have Green Rewards deals in your pipeline. Here's how to determine if your live deal must meet the new 2019 eligibility requirements or can deliver under the 2018 requirements:
- Unexpired quotes dated prior to Nov. 19, 2018 for non-delegated deals will be honored regardless of whether the loan meets the 2018 requirements or the 2019 requirements.
- Applications issued prior to Nov. 19, 2018 for delegated deals that meet the 2018 requirement but not the 2019 requirements will become non-delegated. Fannie Mae will process pricing waivers entered by the lender at Green equivalent pricing for up to 60 days after the date of the loan application letter. Applications must be signed by Nov. 30, 2018, otherwise the loan must either meet the 2019 requirements or revert to non-Green pricing.
- Green Rewards mortgage loans delivering in 2019 that meet the 2018 requirements may need a Pricing Waiver and/or a Guide Waiver in DUS Gateway®. Work with your Fannie Mae Deal Team to determine whether a waiver is needed for your deal.
- All new quotes for non-delegated deals and new applications for delegated deals dated Nov. 19, 2018 or after will require the loans to meet the 2019 requirements.
- For other scenarios such as expired quotes and requotes, please contact your Fannie Mae Deal Team.
- A new Form 4099.H, required for all Green Rewards loans, will be released in early December 2018. All deals delivering under the 2019 requirements must use this new form.
Contact your Fannie Mae Deal Team to discuss the specifics of your deal and confirm which Green Rewards eligibility rule it must meet.
Fannie Mae launching new Energy and Water Reporting Service
Since we first launched Green Rewards in 2016, we have continuously rolled out improvements to our underwriting and loan delivery processes -- from streamlined HPB Report tools to new DUS Gateway functionality. Today we are proud to announce a major new service for our borrowers to streamline and simplify the reporting of energy and water performance data annually. We are excited to share that Fannie Mae has engaged a service provider, Bright Power, to collect utility bills at each Green Rewards and Green Building Certification property and generate insightful reports for the borrower and our lenders on the property energy and water performance. The same data will be provided to Fannie Mae to fulfill the borrower's annual reporting requirement. This great new service fully addresses FHFA's requirement in the 2019 Scorecard to have a third-party service collect energy and water data annually. Keep an eye out for more information on this exciting new service in the upcoming month.
This service comes right after our launch in October of new functionality in Fannie Mae data systems. This new upload process of HPB Reports for Green Mortgage Loan streamlines loan delivery, checking for errors and confirming successful uploads. The upload process also allows Fannie Mae to generate insights on the performance and value of the Green Book of Business that we communicate with you, our Borrowers and FHFA.
We are here to help you during this transition.
Your Fannie Mae Deal Team and the Green Financing Team are ready to assist you with any questions you may have on these changes.