Two US Senators, along with a bi-partisan coalition of supporters from real estate and home building, business, and energy and public policy, want to amend existing legislation to make energy-efficiency a key part of the loan underwriting process.
Originally introduced by Senators Michael Bennet (D-Co.) and Johnny Isakson (R-Ga.) on June 6th, The SAVE Act [Sensible Accounting to Value Energy - S. 1106] is proposed legislation that would instruct federal loan agencies to assess a borrower’s expected energy costs when financing a house.
According to the Legislative Factsheet, better information about a homeowner’s monthly expenses will, at no cost to taxpayers or the current deficit, enable better mortgage underwriting, reduce utility bills for American homeowners, provide affordable financing for home energy improvements and spark job creation in the housing industry.
Further, current federal underwriting and appraisal practices do not fully consider the value of energy efficient features. This makes it increasingly difficult for moderate and middle-income homeowners to finance the upfront cost of efficiency improvements, even though the features will save them money over time. With no government subsidy or mandate, the SAVE Act would strengthen federal underwriting policy, help finance energy efficient homes and retrofits, and create vitally needed jobs in local markets.
Now, the SAVE Act has been attached to another Energy Efficiency bill.
Last week, Senators Bennet and Isakson introduced the SAVE Act legislation as an amendment to S.1392, the Energy Savings and Industrial Competitiveness Act of 2013.
In a press release, the Senators said the legislation would encourage sellers to make home energy efficiency investments in their homes to attract future homebuyers interested in reduced energy costs. Additionally, the amendment will benefit the home construction industry, which will be able to better offer affordable, energy-efficient properties.
The amendment will allow federal mortgage loan agencies to consider a home’s energy efficiency and expected monthly energy bills when determining the homebuyer’s ability-to-pay monthly mortgage payments. According to the press release, the amendment could save homeowners more than $70,000 over the life of a 30-year mortgage.
“As someone who has more than 30 years of experience in the residential real estate industry and who has lived through multiple recessions, I understand that recovery in the housing market and job creation in the construction sector is pivotal to getting our economy back on track,” Sen. Isakson said.
“The SAVE Act will encourage investments in energy-efficient homebuilding and help create thousands of jobs. I look forward to working with Senator Isakson to pass this amendment and bring this commonsense idea to our home lending practices,” Bennet added.
Aimed at encouraging greater investment in insulation and other forms of home energy efficiency, the SAVE Act will require lenders to account for energy saving costs when calculating monthly mortgage payments.
If enacted, lenders for Fannie Mae, Freddie Mac and the Federal Housing Administration would have to take into account how much a borrower pays for electricity and gas when determining if he or she could meet the monthly mortgage payment.
The Legislative Factsheet also notes that the average homeowner costs include $909 for homeowners insurance or 16 percent, $2,043 or 37 percent for property tax and $2,511 or 46 percent for energy annually (based on 2010 numbers). The senators claim the legislation would also clear borrowers to finance cost-effective home energy upgrades as part of a mortgage.