July 27, 2021

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Mortgage News

One year in – Fannie’s Green MBS program looks set to stay

One year after launching the Green Mortgage Backed Security (MBS) program for single family homes, Fannie Mae is celebrating several milestones.

A total of $ 167 million in bonds were issued for single-family homes newly built to an ENERGY STAR rating of 3.0 or higher. It turned out that the markets are ready to buy these MBS faster and at slightly higher prices for underlying properties that are at least 20% more energy efficient than a regular house built according to code. Fannie Mae has also been named ENERGY STAR Partner of 2021 by the EPA and the Department of Energy. Following this news, Arthur Johnson (pictured), vice president of single-family capital markets at Fannie, takes a moment to celebrate before pushing the program back on.

“A year later, we are very pleased with the way this program has gone,” said Johnson. “We started slowly to make sure we had the right infrastructure and a well-informed framework. This year has shown that we really had everything we needed and that we could continue to grow with this infrastructure. We have now brought in more lenders and have been able to issue more geographically diverse securities that investors have liked. We have been able to maintain our pace of issuing at least one security a month, which has shown the investing community that we are committed to this and that we have more confidence in the market. ”

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Johnson noted that a year later, Fannie began learning about the appetite for these securities in the capital markets and the extent to which home builders wanted a point of sale for these environmental certifications. He hopes the program has highlighted the cost effectiveness of an energy efficient home among borrowers and shows them that if they cut their utility bills, they can make a higher mortgage payment or use that capital for other purposes.

This growth is against the background of increasing environmental, social and governance (ESG) investment interest in the United States over several years. More and more investors are following a conscious mandate when using their capital. Johnson believes these green MBS are particularly attractive to investors who are new to ESG investing and who are already familiar with how Fannie structures their securities. With third party verification to ensure the environmental impact of these securities, these investors can feel confident that what they are buying fulfills the E part of their ESG mandate.

Johnson now expects further growth in the program. As the number of builders grows and more builders work to or above ENERGY STAR standards, Johnson is confident that their pipeline of green MBS properties will grow. Additionally, he noted that they are also considering programs to retrofit homes to meet high environmental standards. Right now, her biggest focus is building a supplier base to keep the pipeline of newly built green houses going.

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As the brokers look at this news and the fact that it at least looks like green MBS will stay here, Johnson insisted that a number of opportunities could open up to them.

“I think the assumption is that this only applies to commercial mortgages, but also to refis,” said Johnson. “Realtors should look to refis for this type of property as our focus is on attracting borrowers to these homes. We know they are healthier and cheaper thanks to lower utility costs. “