FREDDIE MAC has taken a big step toward offering a green rehab mortgage through a partnership with nonprofit lender Community Preservation Corp. (CPC).

The organizations recently announced a $1 billion green financing initiative to offer construction and mortgage loans to multifamily owners pursuing energy-efficient upgrades and retrofits. Half of the funds come from Freddie Mac.

The question of how lenders account for energy-efficient upgrades in their underwriting has never been answered, but this pilot program may point the way. “We talk a lot about it, but we've never done anything about it until now,” says Mike May, senior vice president of McLean, Va.-based Freddie Mac's multifamily division.

The biggest problem holding lenders back is a lack of reliable data. While upgrading an HVAC system or replacing windows leads to cost savings, lenders pause when underwriting any additional NOI in the absence of clear metrics.

But this pilot program will monitor the long-term effects of green retrofits to measure their efficiency in conserving heating fuel and electrical and water usage. A resulting green mortgage product is still far off since it will take awhile for the numbers to be compiled, but the data collected by CPC will be the basis of Freddie Mac's efforts to offer a green mortgage product in the future.