The exciting news in residential green building is that the Federal National Mortgage Association, commonly known as Fannie Mae, is providing incentives, including lower interest rates for multifamily properties with a green building certification.

There are an untold number of incentives for green building, including policies at the local, state and federal government levels, however, even in toto they are of limited efficacy.

But Fannie Mae’s new incentive of 10 basis points off any loan for properties with a green building certification has the potential to be a game changer.

Fannie Mae, founded in 1938, is a government sponsored enterprise that has been a publicly traded company since 1968. Its purpose is to expand the secondary mortgage market with securitized mortgages. And while Fannie Mae has had green initiatives since 2010, they have previously been of limited scope. The NYC M-PIRE product is only available in New York City and the Green Preservation Plus program provides extra proceeds for green improvements and repairs only to affordable properties, resulting in both of those very good incentives only being available for an extremely limited number of properties.

Fannie Mae’s green initiatives mission is “to improve the energy and water efficiency, to enhance the financial and environmental sustainability, and to extend the useful life of the U.S.’s multifamily housing stock.”

This new pricing break program does just that. It is available for refinance, acquisition and supplemental loans. And eligible properties are conventional multifamily, affordable and co-ops nationwide.

The pricing incentive of 10 basis point off is very real. (A basis point is one hundredth of a percent. For example, 10 basis points is the same as a 0.1%.) There is no minimum or maximum loan size. And the maximum loan to value is up to 80%.

The property must possess a valid, current third party green building certification. The list of acceptable certifications from the Fannie Mae website are:

EarthCraft, Greater Atlanta Home Builders Association & South Face
ENERGY STAR for Multifamily
ENERGY STAR for Qualified Multifamily High-Rise, EPA
Green Communities, Enterprise Community Partners
Green Globes, Green Building Initiative
GreenPoint, Build It Green
Home Energy Rating System, RESNET
LEED, US Green Building Council
National Green Building Program, National Association of Home Builders (NAHB)

While USGBC issued a press release about this new initiative some days ago, it is significant that green building can be much more than only LEED.

Beyond the benefits to owners of these multifamily properties that have a green building certification, the arguably larger benefit of this initiative is Fannie Mae’s sale of the bundled “green” mortgage backed securities. This is huge as it serves to standardize and expand the emergent green secondary financing market in the U.S. (.. think green bonds). Each of those third party certifications is required to satisfy those environmentally conscious investors who will purchase the green securities.

Fannie Mae’s lower interest rates may not be the “in” response to climate change dystopia, but green mortgage backed securities, getting a big boost by this initiative, will be a key source of financing for green building that will save the planet.