Fannie Mae and the Federal Housing Administration have revised a risk sharing agreement on refinancing affordable multifamily properties, allowing apartment owners to receive additional funds for renovations and upgrades that increase energy efficiency.
"This program kills two birds with one stone: it preserves our affordable housing stock and it helps finance upgrades that will save energy and money over the long haul," said Housing and Urban Development secretary Shaun Donovan.
HUD estimates that under the "Green Refinance Plus" program apartment builder owners could refinance up to $100 million of multifamily loans over the next 12 to 18 months. The average loan size is expected to range from $3.5 million to $5 million.
Fannie and FHA started the risk sharing effort 15 years ago. But the program is limited to older multifamily properties that originally relied on low-income housing tax credits.
The default risk is split at 50/50. Under the revised program, FHA will take 5% of the top-line risk and Fannie will increase the size of the loan by $150,000 to $250,000 for renovations. Debt-to-service ratios have been loosened to accommodate larger loans.
"This is a way of trying to create more energy efficiency in these older properties in the absence of pure public subsidies," said FHA deputy assistant secretary Carol Galante.
FHA also has a risk sharing agreement with Freddie Mac. Now that Fannie has signed on, "it won't be surprising to me if Freddie was interested in having the same conversion," she said.
