December 16, 2017 – This is an update to our previous article on this topic based on new information from Freddie Mac sent out to Sellers/Services this past week.
Last week, the Federal Housing Finance Agency (FHFA) put out with a press release regarding the lending caps for Freddie Mac and Fannie Mae for 2018. The new lending cap is $35 billion, representing a 4% reduction from the 2017 cap of $36.5 billion. As in the past year, the green initiative programs from Fannie Mae (Green Rewards) and Freddie Mac (Green Up) will remain excluded from this cap.
However, in order to gain this exclusion, the new directive requires a projected savings of 25% as opposed to the previous requirements of 15% or 20% depending on the program.
Seems straightforward, right? Well, things got a bit confusing as the two agencies appeared initially to have divergent approaches to this directive. This hinged on a reading of the FHFA 25% directive as requiring savings of from EITHER water or energy or a reading that required 25% from water AND energy.
In their provider conference call this past week, Fannie Mae confirmed that the new 25% requirement would be applied to EITHER water or energy savings. That is, you can’t combine water savings measures or energy savings measures to hit the 25% minimum requirement. They specifically view this as a step forward in the program and a way to get providers and applicants to think a bit more seriously about the water or energy savings from this program.
Following some initial confusion of Freddie Mac’s response to the FHFA directive, they have also announced that qualification for their program will also require a minimum of 25% savings in EITHER water or energy. In addition to this change, Freddie Mac has also removed the minimum age of eligible properties as well as removing the minimum borrower investment (they had a $350/door investment requirement).
So when does this all go into effect? For both Fannie Mae and Freddie Mac, the answer is “Right Now”. If you are anywhere before completion of underwriting, even if the site inspection is complete and you are already working on the calculations, the savings goal is 25%.
Confused? Need some direction? Want to understand the borrower benefits of these green initiatives?
Please be in touch and the GRS team will be happy to assist you.
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