Glossary

Agency Green Financing (Green Rewards / Green Advantage)

Also known as: Fannie Mae Green Rewards, Freddie Mac Green Advantage

Pricing incentives -- a reduced interest rate, extra loan proceeds, or both -- that Fannie Mae (Green Rewards) and Freddie Mac (Green Advantage) offer when a borrower commits to water- and energy-efficiency improvements or documents an existing green building certification.

Fannie Mae's Green Rewards and Freddie Mac's Green Advantage programs reward multifamily borrowers for reducing a property's water and energy use: a borrower can qualify either by holding a recognized green building certification (e.g. ENERGY STAR, LEED) or by committing to specific efficiency improvements (funded, in part, by extra loan proceeds the program makes available) projected to cut consumption by a set threshold. In exchange, the lender offers pricing that's better than the conventional program's -- a reduced interest rate, additional loan proceeds sized off the post-improvement NOI, or both -- plus in some cases reduced third-party reporting requirements (e.g. an Energy and Water Audit that substitutes for a portion of standard due diligence). This is the concrete, dollars-and-cents version of the abstract 'green premium' concept: an actual rate and proceeds benefit tied to specific, underwritten efficiency commitments.