Fannie Mae’s Green Rewards Program Puts Green Back in Property Owner’s Pockets

Posted on Oct 18, 2023 by Scott MacPherson

Fannie Mae’s Green Rewards program incentivizes borrowers to undertake energy and water efficiency improvements at multifamily properties. The program is available nationwide to both conventional and affordable multifamily property loans, with a term between 5 to 30 years, and helps to lower property utility costs while increasing loan proceeds made available to borrowers.

Additionally, owners will benefit from a reduced interest rate on the loan. The Green Rewards interest rate may be up to 10 basis points lower than a typical, non-Green Rewards loan. The interest rate reduction may also be applied to newly purchased buildings with an existing Green Building Certification.

During the underwriting process, Fannie Mae will have an engineering inspection done at the property, and will provide a free Energy and Water Audit Report to the borrower.

Through this inspection and report, engineers will identify items that may be switched out for more energy efficient options. These items usually include shower heads and toilets with reduced water flow; Energy Star certified HVAC systems; solar panels; and LED lighting in building common areas.

The underwriting team will factor in the property owner’s and tenant’s potential energy and water savings(75% of the owner-projected and 25% of the tenant-projected) into the Underwritten Net Cash Flow, and will lower the interest rate for the loan.

Underwriting will also recommend more funds, up to 5%, in additional loan proceeds be made available to the borrower at closing.  For a first lien or supplemental mortgage, a portion of those proceeds must be used to undertake the green upgrades. For a second supplemental mortgage, all of the additional loan proceeds must be used toward efficiency improvements.

At closing, the borrower will be provided a loan agreement with a schedule of all green repairs and their associated deadlines, which must be followed to maintain the lowered interest rate in the Green Rewards program. Around the time the green repairs deadlines come due, Fannie Mae or the associated servicer will send out an inspector to verify that the green repairs are in place. Typically, a borrower has up to 12 months to complete the green upgrades.

In the event the repairs have not been completed within the allotted timeframes, your portfolio manager will work with you to set updated repair deadlines, and will request documentation in the meantime demonstrating to Fannie Mae that you’ve ordered/purchased the green items and taken at least some steps toward finishing the green repairs.

Once all green repairs are completed and verified by inspection, the property owner must report their Energy Star score annually throughout the term of the loan, allowing the lender to track the progress of their program and its effects on multifamily properties.

The energy savings; reduced interest rates; and additional loan proceeds, the Green Rewards Program is highly beneficial to property owners and their tenants, and can significantly increase cash flows for property owners. If you have any questions about the Green Rewards Program or a new loan you are considering, please feel free to reach out to me at or (972) 435-4339.