Fannie gets CICERO certification for its single-family green bonds

Fannie Mae, the largest issuer of green bonds in the world, said on Monday it received an endorsement from CICERO Shades of Green for its mortgage-backed securities that are the first containing loans backed by single-family homes that are energy efficient.

Fannie Mae has issued over $40 million of the MBS since the first bond was created on April 22 to commemorate the 50th anniversary of Earth Day, the company said in a statement. The bonds contain mortgages backed by newly constructed single-family homes with ENERGY STAR certification.

On average, the homes backing the loans in the MBS are 20% more efficient than single-family homes built to code, Fannie Mae said. CICERO is a global provider of green ratings for bonds.

“We’ve heard from investors that there is greater demand than there ever has been for investments that are socially responsible,” said Renee Schultz, Fannie Mae’s senior vice president of capital markets.

In the multifamily market, Fannie Mae has issued $75 billion of green MBS since 2012 backed by either green-certified properties or properties targeting a reduction in energy or water consumption, the company said.

Before April, “we hadn’t really carved out something like that in the single-family space,” Schultz said. “This is the first step in that direction, and this is just the beginning.”

The mortgages carry the same interest rates as loans that aren’t backing energy-efficient homes, she said.

“It would be great if there was so much demand on the investor side” that rates in the future could be lower than non-green mortgages, she said.

So far, the bonds have contained mortgages originated by the lending units of D.R. Horton and Lennar, two of the nation’s largest homebuilders. But Fannie Mae plans on expanding, Schultz said.

In addition to meeting investor demand, there is a growing interest among homeowners for energy-efficient homes, said Chrissa Pagitsas, a Fannie Mae vice president.

“We’re all spending more time at home now,” Pagitsas said. “This is really about a homeowner buying a home that’s going to work best for them at a lower cost.”

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