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Fannie Mae Revises Green Mortgage Loan Program
Practical Law Legal Update w-008-5123 (Approx. 4 pages)
Fannie Mae Revises Green Mortgage Loan Program
by Practical Law Real Estate
| Published on 26 Jun 2017 • USA (National/Federal) |
Fannie Mae recently revised its Green Mortgage Loan Program procedures by delegating to lenders the authority to review and approve Green Building Certifications and High Performance Building (HPB) reports to improve the speed and processing of loans. The changes, which took effect on May 22, 2017, also include releasing updated instructional Forms 4099, 4099H, and an updated job aid on how to register, quote, close, and deliver a Green Loan.
The Fannie Mae Green Mortgage Loan Program Overview
The Fannie Mae Green Mortgage Loan Program provides financial incentives to borrowers investing in multifamily buildings to finance improvements in energy and water use efficiency. Fannie Mae offers several Green Mortgage financing programs, including Green Rewards, Green Preservation Plus, Green Building Certification Pricing Break, and Commercial Property Assessed Clean Energy (C-PACE), all of which offer substantial reductions in the all-in interest rate, are securitized as Green Mortgage Backed Securities, and require demonstrable savings in the consumption of energy and water.
Green Mortgage Loan Program Changes
HPB Report delegation
An HPB Report is a protocol for conducting energy and water audits required for Fannie Mae Green Rewards and Green Preservation Plus Mortgage Loans. Lenders were previously required to obtain Fannie Mae approval of the HPB Report or Green Building Certification prior to locking in the interest rate. As a result of the recent program changes:
- Lenders having received eight or more HPB Reports or Property Condition Assessment (PCA) Reports containing an HPB module now have the authority to approve an HPB Report prepared by a pre-qualified HPB consultant.
- Lenders now have the authority to approve Green Building Certifications, which are reports prepared by Fannie Mae-approved vendors that certify property improvements that target reductions in energy and water use.
- Fannie Mae approval of the HPB Report is only required if the Lender is not yet qualified to approve the report or the HPB Consultant is not pre-qualified.
HPB Report Scoring and Pre-Qualified HPB Consultants
HPB Report Scoring
Lenders are now required to score each HPB Report as follows:
- 1 – No questions: Approval as-is.
- 2 – Minor issues or clarifications required before approval.
- 3 – Major issues or multiple revisions required before approval.
Lenders must score an HPB report as a “1” before locking in an interest rate or before it can be submitted to Fannie Mae for approval for an HPB Consultant not yet identified as pre-qualified.
Pre-Qualified HPB Consultants
An HPB Consultant is pre-qualified if Fannie Mae has reviewed and scored five HPB Reports from the consultant that are scored as a “1”.
The HPB Reports may be commissioned by different lenders.
Updated Forms
Fannie Mae updated the following instructional forms concerning the HPB Report to clarify and enhance the reliability of the HBP reporting process:
Practical Implications
Fannie Mae’s revisions to the Green Mortgage Loan Program promise to simplify and streamline the loan application and approval process by entrusting the selection of vendors and the approval of required energy and water audits to its lenders.
For more information on green building initiatives, see: