June 02, 2011

 

On May 31, HUD Secretary Shaun Donovan announced Green Refinance Plus, a joint Federal Housing Administration (FHA)/Fannie Mae program for owners of existing rental housing properties to refinance into new mortgages that include funding for energy- and water-saving upgrades, along with other needed property renovations.  Under the program, FHA and Fannie Mae will share the risk on loans to refinance rent-restricted projects while permitting owners to borrow additional funds to make energy saving improvements to their properties. 
              
Green Refinance Plus is intended to refinance expiring mortgages on Low Income Housing Tax Credit and other affordable properties and to lower annual operating costs by reducing energy consumption.  Fannie Mae and HUD anticipate approximately $100 million in initial refinance volume with an average loan amount of $3.5 to $5 million.  FHA will insure up to an additional 4-5 percent of the loan amount, or an average of approximately $150,000 to $250,000 per loan, to provide additional loan funds to pay for property improvements that save energy and water costs for owners and tenants, such as energy efficient windows and Energy Star appliances, as well as other needed property renovations.
              
Property owners will be able to select the energy efficiency upgrades that make the most economic sense for their properties.  Borrowers will obtain a “Green Physical Needs Assessment” completed by a qualified provider.  This assessment identifies property improvements that both reduce energy and operating costs and will help borrowers make rehabilitation choices that will give them the greatest energy savings for their investment.
              
Beginning next month, Fannie Mae and its participating lenders will begin accepting applications to refinance owners’ debt as well as improve the energy efficiency of their properties.  Green Refinance Plus is an enhancement of the Fannie Mae/FHA Risk-Share program, begun in the 1990s.  It will provide funding for the refinance, preservation, and energy efficient retrofits of older affordable multifamily housing properties, including those that are currently in Fannie Mae’s or FHA’s portfolios.  This program allows for lower debt service coverage and higher loan-to-value ratios to generate extra loan proceeds for property rehabilitation and energy-efficient retrofits. 
              
For more information, please contact Ellen Lurie Hoffman.