The Harvard Joint Center for Housing Studies estimates that the average age of the nation’s current multifamily housing stock is 38 years. This opens a wealth of opportunities for making cost-effective energy upgrades to existing multifamily buildings, and the National Green Building Standard (NGBS) provides an affordable, practical, and now Fannie Mae–recognized path to accomplish that.
Fannie Mae is a key player in the financing of multifamily buildings, estimating the size of its multifamily portfolio at more than 3.8 million housing units valued at $193 billion. The Federal Reserve also reports that Fannie Mae accounts for 21.2 percent of the financing of multifamily housing. This makes Fannie Mae the nation’s largest single participant in the multifamily mortgage market.
Fannie Mae predicts that there will be a wave of refinancing soon resulting from maturing loans in its multifamily portfolio. It is projected that from now until 2016 there will be more than 13,000 multifamily loans that will mature and be eligible for loan refinancing. With today’s low interest rates it can be expected that many of these loans will be refinanced. This provides a near-term activity to encourage energy improvements at the time of loan refinancing.
To take advantage of this opportunity, Fannie launched its Multifamily Green Initiative. Its mission is to improve energy and water efficiency, enhance financial and environmental sustainability, and extend the useful life of all multifamily housing stock financed by Fannie Mae.
Central to the Multifamily Green Initiative is the Property Improvement and Expense Reduction (PIER), which focuses on the reduction of expenses through property improvements. Fannie Mae will modify the PIER to include Green Refinance Plus, a financing solution that provides capital for the upfront costs of implementing these investments at the time of refinance and acquisition of multifamily property. This will augment the underwriting process by adding a green mortgage, mortgage backed security (MBS) to lenders.
The other component of the initiative is to modify the Physical Needs Assessment (PNA) and the development of a green MBS, which Fannie Mae says would augment the underwriting process. A PNA is a third-party assessment of the physical condition of a property required for underwriting multifamily mortgages. Under the Multifamily Green Initiative, Fannie Mae’s PNA will be modified to include a “Green PNA,” which will assess the energy and water efficiency of the property. The Green PNA is now required for all properties participating in the Green Refinance Plus program or any other Fannie Mae financial product. Fannie Mae recognizes certification by the NAHB Research Center to the NGBS as applicable for its green MBS designation.