Properties with Energy Conservation Improvements
Flexibilities to meet the borrower's financing needs.
Freddie Mac supports our Sellers offering financing options to borrowers who are planning energy-efficient and renewable energy home improvements. We purchase mortgages secured by properties with such improvements through any mortgage product and property type eligible under our Single-Family Seller/Servicer Guide (Guide).
Our Guide requirements, including the additional flexibilities specific to energy efficient features, are designed to help you meet the needs of borrowers looking for affordable financing for energy-saving enhancements.
|Eligible Mortgages and Transaction Types
- All eligible fixed-rate mortgages and ARMs.
- Purchase transactions.
- "No cash-out" and cash-out refinance transactions.
All property types including manufactured homes and new and existing properties.
- Maximum LTV ratios must comply with Guide Section 4203.4.
- Up to 97% LTV or 105% TLTV for Home Possible Advantage® for purchase transactions.
- 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, such as Home Equity Line of Credit is permitted.
- Affordable Seconds® are permitted.
- In a purchase transaction, when calculating the value used to determine the LTV/TLTV/HTLTV ratio, 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 value.
- No percentage restriction on the "as completed" value of energy conservation improvements to be financed.
- Borrowers may also use the proceeds from a cash-out refinance to finance energy efficient features.
- Higher housing expense-to-income ratio and debt-to-income ratio (up to 45%) may be permitted for manually underwritten mortgages with verification of cost-effective improvements. See Guide Section 5401.1 for additional details.
- 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).
|Property Assessed Clean Energy (PACE) Obligations
- Borrowers may pay off a PACE or PACE-like obligation with proceeds from a cash-out refinance. See Guide Section 4301.8.
- Borrowers may pay off a 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.
|Properties with Solar Panels
- Freddie Mac will purchase mortgages secured by properties with solar panels provided they meet the eligibility requirements in the Guide. See Guide Section 5601.2(d) for details.
- Solar panels owned by the borrower must be considered in the appraiser’s opinion of the market value of the property. See Guide Section 5601.2(d) for details.
- Payment for solar panels subject to a lease agreement, power purchase agreement, or similar type of agreement may be excluded from the monthly DTI ratio provided certain conditions are met. See Guide Section 5401.2(b)(iii).
|Credit Fees in Price and Requirements
- No special add on fees related to energy efficient features.
- Credit Fees in Price 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 when the proceeds are used to pay off a PACE obligation.
Meet the needs of your borrowers by taking advantage of our Guide requirements:
- Finance energy efficient improvements 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 improvements.
- No maximum percentage of the "as completed" value of energy efficient features to be financed.
Benefits for Your Borrowers
Our special considerations for energy conservation mortgages help your borrowers:
- Enjoy the benefits of an energy efficient home, which may include lower utility costs and increased home comfort.
- Finance the cost of energy improvements on their homes over the life of the loan.
- Qualify for greater purchasing power despite higher debt-to-income and housing expense-to-income ratios for manually underwritten loans.
Get More Information
- Call your Freddie Mac representative.
- Visit the following pages for industry resources related to properties with energy efficient features:
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 other Pricing Identifier Terms.