Energy efficiency improvements could be factored into mortgage underwriting

Law that would establish guidelines for lenders previously died in committee

A bill aimed at encouraging home energy efficiency improvements by establishing underwriting guidelines for mortgage lenders that factor in cost savings for homeowners has been introduced — again — in the Senate.

S. 1106, the Sensible Accounting to Value Energy Act of 2013, is sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga. The bill — which has the support of many real estate industry groups — has been referred to the Senate Banking Committee, where a previous version of the bill introduced in 2011 died.

Green home image via Shutterstock.
Green home image via Shutterstock.

According to the Appraisal Institute, the bill “would instruct federal loan agencies to assess a borrower’s expected energy costs when financing a house. The U.S. Department of Housing and Urban Development would issue updated underwriting and appraisal guidelines for any loan issued, insured, purchased or securitized by the Federal Housing Administration or any other federal mortgage loan insurance agency.”

The bill’s primary features — an affordability test and a loan-to-value adjustment — would both be optional.

Borrowers with energy-efficient homes are significantly less likely to default, according to a study by the University of South Carolina Center for Community Capital.

Homeowners who have invested in energy-saving upgrades may have trouble getting fair value for their homes if those improvements are not recognized by buyers, appraisers and lenders. More than 200 multiple listing services provide “green fields”  that allow real estate agents to list a home’s green features.

What’s your take? Should a home’s energy-saving features be factored into mortgage underwriting?


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