Freddie Mac Support for Energy Conservation

Program Summary

Although Freddie Mac doesn't have a branded "energy efficient mortgage", all of its single-family mortgage products give borrowers the option to finance energy conservation improvements and qualify for larger loan amounts based on the calculated energy savings.

Specifically, Freddie Mac's Seller/Servicer Guide says "an energy-efficient property results in lower utility charges, allowing the owner to apply more income to housing expense. If higher ratios are used, the lender must provide in the mortgage file the calculation and source documentation used to derive the dollar offset allowed due to lower utility charges." Source documentation can include the appraisal report indicating the energy efficiency of the property, or Form 70A, Energy Addendum (Residential Appraisal Report), or an established home energy rating system (HERS®).

In addition, the Freddie Mac Seller/Servicer Guide:

  • Permits the lender to add the cost of energy conservation improvements to the purchase price of the house when setting the terms of the mortgage. The appraisal must state the estimated market value after completion of the improvements and be supported by a satisfactory completion certificate.
  • Requires the lender to set up and control escrow accounts (up to 10% of the original mortgage amount) in the borrower's name to cover the cost of improvements that are not completed before the lender delivers the mortgage to Freddie Mac.
  • Requires all of the improvements to be satisfactorily completed within 120 days after the mortgage's delivery to Freddie Mac. The lender certifies satisfactory completion by having the property inspected.

Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to support homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible more than 50 million times, ensuring financing for one in six homebuyers and more than four million renters.

For more information visit the company's website at freddiemac.com.