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Properties with Energy Conservation Improvements

Flexibilities to match the borrower's financing needs.

Servicing Success Program

Freddie Mac supports our Sellers offering financing to borrowers who are planning energy efficient and renewable energy home improvements. We finance properties with such improvements through any mortgage product and property type eligible under our Single-Family Seller/Servicer Guide (Guide).

Our Guide requirements, together with the additional flexibilities specific to energy efficient features, are designed to help you meet the needs of borrowers looking for affordable financing for properties with energy-saving enhancements.

Mortgage Features

FeatureRequirements
Eligible Mortgages and Transaction Types
  • All eligible fixed-rate mortgages and ARMs.
  • Purchase and cash-out refinance transactions.
Property Types

All properties including manufactured homes and new construction.

Maximum LTV/TLTV
  • Maximum LTV ratios must comply with Guide Chapter 4203.4.
  • Up to 97% LTV or 105% TLTV for Home Possible Advantage®.
  • See Guide Section 4405.1 Energy Conservation Improvements, for detailed requirements on calculating the value used to determine the LTV/TLTV/HTLTV ratios in a purchase transaction.
Secondary Financing
  • Secondary financing, such as Home Equity Line of Credit is permitted.
  • Affordable Seconds® are permitted.
Additional Underwriting Flexibilities
  • No percentage restriction on the "as completed" value of energy conservation improvements to be financed.
  • Higher housing expense-to-income ratio and debt-to-income ratio (up to 45%) may be permitted for manually underwritten mortgages. See Guide Section 5401.1 for additional details.
  • In calculating the value used to determine the LTV/TLTV/HTLTV ratios, the purchase price may be the price paid by the borrower for the mortgaged premises plus the actual costs for the energy conservation improvements. The value is the lesser of this purchase price or the "as completed" appraised property value.
  • Borrowers may pay off a Property Assessed Clean Energy (PACE) obligation with the proceeds from a no cash-out refinance, provided the PACE loan is paid in full and the mortgage being refinanced is owned or securitized by Freddie Mac. See Guide Section 4301.8.
  • Borrowers may also use the proceeds from a cash-out refinance to finance energy efficient features or pay off any other debt including a PACE obligation. See Guide Section 4301.8.
  • Freddie Mac will purchase mortgages with PACE or PACE-like obligations provided these obligations are in a subordinate lien position.
  • A mortgage may be delivered prior to the completion of the energy improvements provided certain conditions are met. See Guide Section 5601.2 for requirements.
  • The appraiser must identify the energy-efficient features and make appropriate adjustments if the features affect the property's value or marketability. See Guide Section 5601.12 (p).
Delivery fees and requirements
  • No special add on fees related to energy efficient features.
  • Postsettlement delivery fees may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19 for details on applicable fees.
  • Refer to Guide Section 6302.23 for special delivery instructions for energy conservation mortgages and Section 6302.16(b)(ii) for a no cash-out refinance and the proceeds are used to pay off a PACE obligation.

Lender Benefits

Match the needs of your borrowers by taking advantage of our Guide requirements:

  • Finance energy efficient properties with any Guide product, property type and financing term up to 30 years to provide greater affordability for borrowers.
  • Offer more flexibility to your borrowers to finance energy efficient properties.
    • No maximum percentage of the "as completed" value of energy efficient features to be financed.
    • Higher debt-to-income and housing expense-to-income ratios for manually underwritten loans.
    • Secondary financing including Affordable Seconds allowed.
    • Our Guide permits either energy reports or appraisal indicating the efficiency.

Benefits for Your Borrowers

Our special considerations for energy conservation mortgages help your borrowers:

  • Qualify for greater purchasing power.
  • Finance the cost of energy improvements on their homes over the life of the loan.
  • Enjoy the benefits of an energy efficient home such as lower utility costs and increased home comfort.

Get More Information

  • Call your Freddie Mac representative.

Training Opportunities

Visit The Learning Center for live and recorded web conferences, access to classroom-style workshops and self-study tools – all designed to help you stay competitive, serve more borrowers and make it easier to do business with us.

The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.

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