Based on new information from Freddie Mac, an update to this article has been published and is available here.
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, here’s where things seem to get a bit confusing as the two agencies appear to have divergent approaches to this directive.
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.
In my personal e-mails with the leaders of the Freddie Mac program (and in others that have been forwarded to me from some lenders), they have stated that the 25% can be achieved as a COMBINATION of both water and energy savings measures. This approach will certainly make it easier for properties to qualify for the initiatives. However, it clearly still reaches the goal of reducing water and energy usage, which is really the main goal of these programs.
To add another wrinkle to this divergence of opinions, let me also add that there are those in the industry who believe that Freddie Mac is going to change their stance to be in line with Fannie Mae’s interpretation of this directive. However, until I hear otherwise, we have to proceed with the interpretations as we were told thus far from each agency.
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 | Corteq team will be happy to assist you.
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