Fannie Mae Green Financing

If you want to help the environment while saving a significant amount of money, Fannie Mae's Green Financing programs could be the perfect fit for your multifamily development.

Fannie Mae currently has three Green Financing programs:

• Fannie Mae Green Rewards
• Fannie Mae Green Building Certification Pricing Break
• Fannie Mae Green Preservation Plus.

Each Green Financing program is designed to provide a 0.10% interest rate discount to Fannie Mae multifamily borrowers, which can result in tens (or hundreds) of thousands in savings over the life of a loan. 

Launched in 2015, the Fannie Mae Green Rewards program allows borrowers to take out 5% more in loan proceeds by factoring in the water and power savings that they'll experience in the future. 

Fannie Mae Green Rewards program properties need to demonstrate that they'll save at least 20% on their energy and/or water costs in order to qualify. In comparison, the Green Preservation Plus program, which began in 2011, is focused on helping developers of multifamily affordable housing (MAH) properties by increasing LTV allowances up to 85% and allowing for lower DSCR ratios. For the Fannie Mae Green Preservation Plus program, green upgrades must equal at least 5% of the original loan amount.

Finally, the Green Building Certification Pricing Break is designed to give a 0.10% interest rate discount for Fannie Mae acquisition or refinance loans on buildings that have an up-to-date Green Building Certification. Like most other Fannie Mae loans, loans using Green Financing programs are fully assumable, subject to lender approval and a 1% fee. 

Sample Fannie Mae Terms for Green Financing in 2026

Size: Varies

Terms: Up to 30 years 

Amortization: 

• Green Rewards: Up to 30 years (interest-only options also available)

• Green Preservation Plus: Up to 40 years, 30 years for balloon loans

Interest Rates: 

• Green Rewards and Green Building Certification: Fixed- and adjustable-rate loans available

• Green Preservation Plus: Fixed-rate only

Maximum LTV: 

• Green Rewards and Green Building: Up to 80%

• Green Preservation Plus: Up to 85%

Minimum DSCR:

• Green Rewards: 1.25x for market rate properties, 1.20x for affordable properties

• Green Building Certification Pricing Break: 1.25x for market rate properties, 1.20x for affordable properties

• Green Preservation Plus: 1.15x

Recourse: Most loans are non-recourse with standard “bad boy” carve-outs 

Prepayment Penalty: Yield maintenance and other declining prepayment options available 

Occupancy Requirements: 85% physical occupancy 90 days before closing, 70% economic occupancy 

Commercial Space Limits: Commercial space must not exceed 35% of the net rentable area and 20% of the project's effective gross income

Eligible Properties

• Market-rate, affordable, senior, military housing, and cooperative properties all eligible

• Borrowers need to agree to target a minimum 25% reduction in energy or water use

Advantages

• 0.10% interest rate discount provided

• Larger loan sizes permitted (for Green Rewards and Green Preservation Plus)

• Competitive interest rates

• Most loans are non-recourse

• 30- 180 day rate locks available (early/extended rate locks are also available)

Disadvantages

• Requires third-party reports including an appraisal, property condition assessment, Phase I Environmental Assessment, and a High Performance Building (HPB) report (for Fannie Mae Green Rewards and Green Preservation Plus)

• $12,500 application deposit required

• $3,000 non-refundable processing fee required

• 1% loan origination fee required

• 2% good faith deposit due at rate lock (refundable at closing)

• Replacement reserves of $250/unit/year required

• Subordinate financing not allowed without written approval

Case Study: Going Green in Portland

David owns a 60-unit apartment complex located in Portland, Oregon. Looking to upgrade the property to be more energy-efficient and environmentally friendly, David explores Fannie Mae's Green Financing programs as a potential source of funding.

David is particularly interested in the Fannie Mae Green Rewards program. This program allows borrowers to take out 5% more in loan proceeds based on future water and power savings. David has calculated that his planned upgrades, which include installing solar panels and high-efficiency HVAC systems, will reduce energy consumption by at least 20%, a requirement for eligibility in the Green Rewards program.

David submits his application for the Fannie Mae Green Rewards program. His loan request is approved and he receives a loan with an attractive 0.10% interest rate discount, as part of Fannie Mae's commitment to promoting green initiatives. The loan term and amortization period extend to 30 years, with the loan being non-recourse, thus limiting David's personal liability.

With the funds secured, David proceeds with the planned upgrades to the apartment complex. The improvements not only make the property more appealing to prospective tenants but also significantly reduce the operational costs, thanks to the lower energy consumption. Moreover, the interest rate discount that came with the Fannie Mae Green Financing results in substantial savings over the life of the loan.

The success of David's venture showcases how Fannie Mae's Green Financing programs can be utilized by property developers to improve their properties' energy efficiency, enhance profitability, and contribute to environmental sustainability.

This is a fictional case study provided for illustrative purposes.