How Ekotrope, Fannie Mae, and PEG are Innovating the Mortgage Market with the Single-Family Green MBS
The HERS Index is breaking into the new homes mortgage market as part of a program launched by Fannie Mae, PEG, and Ekotrope. The Single-Family Green Mortgage-Backed Security (MBS) is a monumental step in innovating green finance and encouraging both the production and investment in energy efficient housing.
The Single Family Green MBS presents an immense opportunity and a major paradigm shift that now allows us to analyze the value stream of not just owning an energy efficient home, but financing it as well. This comes at a critical time as some builders have moved away from building beyond code due to changing criteria, increased stringency, and material shortages. This program aims to encourage builders to “build green” by helping them increase the value of their projects, while also enabling more consumers to qualify for mortgage financing.
How the Program Came About:
In late 2019, Fannie Mae approached PEG, a mechanical engineering firm that is one of the largest HERS raters in the country and has been awarded ENERGY STAR Partner of the Year for the past 8 years, to analyze the best pathway for starting this program. They decided that the ENERGY STAR Certification for New Homes was the most appropriate baseline for assessing homes because of its globally distinguished standard for energy efficiency as well as its achievement of 20% improvement in efficiency on average. Furthermore, ENERGY STAR requires verification by trained and certified Home Energy Raters
After the initial pilot with builders from Lennar Homes, Horton Homes, and NVR, PEG and Fannie Mae discovered that there were some challenges with the manual processing of homes, requiring tedious work that could be prone to error, especially on a larger scale. That is when Ekotrope became involved in the process. Ekotrope developed an API between Ekotrope RATER and the database management system that Fannie Mae uses to verify homes. The database holds information about the home, including:
Data certification
The builder
HERS score
Whether the home is certified for ENERGY STAR 3.0 or 3.1
Square footage of the home
The API was finalized a few months ago and since then about 5,300 homes have been submitted to the program.
In light of the successful pilot, Fannie Mae is now offering a 37.5 basis point discount on ENERGY STAR mortgages for the builders and lenders participating in the Green MBS program. This is an enormously impactful addition to the Fannie Mae program and something that can massively shift participation in the ENERGY STAR Certified New Homes program.
Fannie Mae, PEG, and Ekotrope are excited at the prospect of monetizing the value of energy efficient homes on such a large scale. If you are a builder or rater interested in participating in this innovative program, the steps for doing so are simple- and it comes at no cost to you.
How to Participate:
For Builders:
The simplest path for builders to participate is to ask their rater to authorize Ekotrope to share their home data with the database. Even builders who work with a variety of lenders can participate in this program. We see this program as a way to enable you to meet your own ESG goals, increase the value of your projects, and go beyond the expectations of investors.
For Raters:
If you’d like to participate, simply reach out to us at info@ekotrope.com. One of our experienced engineers would be happy to walk you through this simple process. We encourage you to share this information with your builders and help them to see the fiduciary benefits of being a part of this program.
For more information, you can visit the Fannie Mae Single Family Green MBS website or watch Ekotrope’s own CEO Ziv Rozenblum and Senior Vice President of PEG, Matthew Cooper, dive into the details of the program in our RESNET presentation.
