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Energy Efficient Mortgage

Fannie Mae and NAHB Announce Environmental Partnership

$100 Million Initiative Tied to Green Building

June 10, 1999

Fannie Mae and National Association of Home Builders Announce Environmental Partnership; $100 Million Initiative will Test and Develop Mortgage Financing Product Tied to Green Building Criteria with Builders and Lenders

WASHINGTON, DC - Fannie Mae (FNM/NYSE), the nation's largest source of financing for home mortgages, and the National Association of Home Builders (NAHB) today announced an environmental partnership that will recognize the growing interest in environmentally-responsible construction methods and help further these efforts nationwide. As part of this new initiative, Fannie Mae and NAHB will begin working with home builders, lenders, and other community partners to test and develop a menu of mortgage financing products based on environmentally efficient "green building" criteria.

As part of the partnership, six pilot cities have been identified where local home builder associations and Fannie Mae Partnership Offices can work together to develop green building initiatives which emphasize the efficient use of resources, such as energy and water, in the design, construction and operation of homes. These six cities are: Atlanta, GA; Columbus, OH; Albuquerque, NM; Denver, CO; Los Angeles, CA; and Seattle, WA. Fannie Mae is also providing an additional $100 million for investment in environmental product initiatives that test new housing finance products, support local green builder efforts, and develop creative solutions to environmental issues with community partners in these cities.

"The basis for this partnership is the growing need to introduce more creative home financing methods to support a wide range of construction activities related to green building initiatives underway across the country," said Fannie Mae Chairman and CEO, Franklin D. Raines. "Our research in this area reveals new market demand for resource-efficient homes."

"Building homes in a more environmentally-efficient manner is the most important change the housing industry is going to make in coming years," said NAHB President Charlie Ruma. "This new partnership with Fannie Mae is going to help put environmental building at the forefront of the housing industry."

One of the goals of the Fannie Mae/NAHB Partnership is the development of a comprehensive menu of environmental mortgage options that would allow the consumer to capture the benefits of environmentally-responsible construction - including lower operating costs, reduced maintenance and increased durability. The environmental partnership will help local home builder associations and other community partners promote environmentally-responsible construction methods and materials, or "green building" as it has come to be known.

NAHB is already at work defining and promoting green building practices. Recently, 400 industry leaders attended the first National Conference on Green Building in Denver, which focused on integrating environmentally-responsible building practices into day-to-day builder operations. NAHB is now planning the second conference for Spring 2000. In addition, a number of local home builder associations have implemented, or are in the process of developing, green building programs that ask builders to meet various environmental standards for land development, building materials, waste management, energy and water efficiency and more.

"More builders and home buyers are making the connection between environmental quality and the value and performance of their homes," said Liza Bowles, president of the NAHB Research Center.

The Research Center, which is also working with Fannie Mae on the development of the environmental mortgage product, recently finished work on A Guide to Developing Green Building Programs to assist local home builder associations, local governments and others develop effective, successful green builder programs.

"Lenders, appraisers, and investors need to recognize the enhanced value in housing that comes from environmentally-efficient building practices so that buyers are given credit, for example, for reduced energy expenses," said Ruma. "Financing that provides incentives for buyers, builders and lenders to practice green building is the next step in the green building arena."

Currently, Fannie Mae has several environmental initiatives underway. The company recently revised its Energy Efficient Mortgage pilot by providing an underwriting variance that recognizes the added value of energy efficiency and translates the monthly energy savings into additional mortgage funds. Revisions include: eliminating the requirement for additional money down, thus allowing 100% financing of the energy improvements; recognizing multiple rating methods and prescriptive programs to determine the energy efficiency of a home; and allowing sample ratings of like-built properties for new construction projects, thus reducing the "per house" cost for energy ratings.

GMAC Mortgage is one of the lenders already involved in recognizing energy efficiency as part of the loan evaluation process. "We recognize that there is a growing demand from families that want a home built in a resource-efficient way," said Mike O'Brien, president of GMAC Mortgage. "We are looking for ways to update and enhance our product menu and are looking foward to continuing our work with Fannie Mae in this area."

Fannie Mae is also developing a new mortgage product, the Location Efficient Mortgage (LEM), that recognizes home-buyer savings resulting from the purchase of a home located in a densely populated community served by efficient public transportation. Seattle, WA and the Bay Area of California are the first areas of the country targeted for participation.

"While home buyers are growing more environmentally-conscious and builders are responding to environmental concerns by building their homes more efficiently, a financing mechanism that provides an incentive for green building for buyers, builders and lenders is needed," Raines added.

Fannie Mae is a federally chartered, shareholder-owned company and the nation's largest source of funds for home mortgages. It has committed to provide $1 trillion in targeted lending for ten million homes by the end of the decade. The targeted lending will serve low- and moderate-income families, minorities, new immigrants, residents of central cities and other underserved areas, and people who have special housing needs. Over the past 30 years, Fannie Mae has provided $2.5 trillion in mortgage financing for over 30 million families.

Style Usage: Fannie Mae's Board of Directors has authorized the company to operate as "Fannie Mae," and the company's stock is now listed on the NYSE as "Fannie Mae." In order to facilitate clarity and avoid confusion, news organizations are asked to refer to the company exclusively as "Fannie Mae."