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GreenCHOICE Mortgages® FAQ

Getting Started with GreenCHOICE Mortgages

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  1. What are Freddie Mac GreenCHOICE Mortgages®?

    GreenCHOICE Mortgages:

    • Provide lenders with a streamlined option to help borrowers finance eligible improvements for purchase or refinance transactions. Eligible improvements include energy and/or water efficiency improvements, health and safety improvements and resiliency and preventative improvements.
    • Help preserve homeownership affordability by supporting improvements that reduce utility costs.
  2. What flexibilities do GreenCHOICE Mortgages offer?

    GreenCHOICE Mortgages offer several important flexibilities, including the following:

    • Finances eligible improvements with an aggregate cost up to 15% of the as-completed property value.
    • Requires an energy report only if aggregate costs of basic eligible improvements exceed $6,500. (Note: For certain eligible improvements, alternative documentation may be obtained in lieu of an energy report.)
    • Allows a single closing on improvements and home purchase or refinance.
    • Lets the borrower pay off (or pay down) existing debt that financed the purchase/installation/repair/upgrade of eligible improvements as part of a refinance.
    • Provides the lender with a $500 credit on delivery to Freddie Mac.

    All Freddie Mac-approved lenders may deliver GreenCHOICE Mortgages. lt may be delivered to Freddie Mac without recourse before the eligible improvements are completed.

    For complete information on GreenCHOICE Mortgages, please review Guide Chapter 4606.

  3. Do GreenCHOICE Mortgage flexibilities apply to both purchase and “no cash-out” refinance transactions?

    Yes, these flexibilities apply to both purchase and “no cash-out” refinance transactions. GreenCHOICE Mortgages can be used in conjunction with most Freddie Mac mortgage offerings* and any property type eligible under the Freddie Mac Single-Family Seller/Servicer Guide.
    *Seller-owned converted mortgages, Construction Conversion and Renovation mortgages are not eligible.

  4. Can GreenCHOICE Mortgages be secured by manufactured homes?

    Yes, provided the improvements do not impact the structural integrity of the property.

  5. Is the GreenCHOICE Mortgage offering directly related to the CHOICEHome® or CHOICERenovation® mortgage offerings?

    GreenCHOICE, CHOICEHome, and CHOICERenovation are separate offerings that are part of our CHOICE family of mortgage offerings designed to provide solutions for making homeownership achievable and sustainable, whether it’s to finance renovations and repairs, energy-efficient improvements for example, or next-generation factory-built homes.

  6. Can CHOICERenovation® mortgages be originated in conjunction with the GreenCHOICE® Mortgage offering?

    Yes, CHOICERenovation® mortgages and GreenCHOICE Mortgages can be originated in conjunction with each other under Guide Section 4607.17(b). In such cases, Sellers will be eligible for the $500 credit for credit fees as outlined in Guide Exhibit 19 Credit Fees.

  7. How does the GreenCHOICE Mortgage offering benefit Sellers?

    These are among the opportunities that GreenCHOICE provides Sellers:

    • Increase loan originations.
    • Expand or enhance their product offerings.
    • Offer greater housing affordability for low and middle-income families:
      • Combine these flexibilities with our affordable products, such as Home Possible® mortgages.
      • Provide financing solutions to help pay for improvements that can significantly lower the borrower’s utility bills.
    • Save time with streamlined documentation.
       
  8. What does the GreenCHOICE Mortgage offering mean for Servicers?

    If applicable, Servicers must have processes in place to meet the special servicing requirements related to mortgages secured by properties with incomplete improvements.

  9. Can borrowers still pay off a PACE loan with the proceeds from a refinance transaction?

    Yes, borrowers may still pay off a PACE obligation with the proceeds from a “no cash-out” refinance and cash-out refinance, provided certain requirements are met, including that the PACE loan is paid in full. See Guide Sections 4301.4 and 4301.8.

  10. Does Freddie Mac allow the payoff of existing debt incurred by the borrower to finance energy-efficient improvements completed prior to the note date through a “no-cash out” transaction?

    Most energy-efficient improvements are financed with unsecured or secondary debt with higher interest rates and shorter terms than mortgage financing, resulting in higher monthly payments. To help homeowners take advantage of low mortgage interest rates and consolidate debt, Freddie Mac added the flexibility to GreenCHOICE to allow homeowners to pay off (or pay down) existing debt that financed the eligible improvements as part of a “no cash-out” refinance transaction.

  11. Why does Freddie Mac allow higher monthly housing expense-to-income and monthly debt-to-income ratios for manually underwritten GreenCHOICE Mortgages secured by energy efficient properties?

    It is anticipated that borrowers will spend less on their utility bills and, therefore, have more money available to pay for other monthly housing expenses.

  12. Does Freddie Mac have special requirements related to solar panels?

    Freddie Mac purchases mortgages secured by properties with solar panels. To learn more, start with our requirements for properties with solar panels in Guide Section 5601.4 . Solar panels are an eligible improvement for GreenCHOICE Mortgages.

  13. Can a second home or investment property secure a GreenCHOICE Mortgage?

    There is not an occupancy restriction; however, the transaction must be a “no cash-out” refinance or purchase transaction per Guide Section 4606.4.

This document and linked Additional Resources are not a replacement or substitute for the requirements in the Freddie Mac Seller/Servicer Guide (Guide) or your other Purchase Documents.