'Green' mortgage ups purchase power

A friend of mine, Phil Hall, is editor of Secondary Marketing Executive magazine, one of the more esoteric trade publications dealing with the secondary market for mortgages.

On a more prosaic level, however, Hall has become a very passionate supporter of something called the Energy Efficient Mortgage, or EEM. Sometimes called the "green mortgage," it is a type of mortgage that credits a home's energy efficiency in the mortgage itself.

In Hall's words, "With this product, borrowers are able to add energy-efficiency installations as part of a mortgage while extending the debt-to-income qualifying ratios. Thus the borrower can qualify for a larger loan amount on a home with superior energy efficiency."

What, you never heard of the EEM? Don't worry you're not alone. In fact, it's like a top-secret government program; just where do we hide our nuclear waste or where in the White House was former Vice President Dick Cheney's office?

While not quite as old as Cheney, the EEM has been around for a couple of decades. Back in 1992, Congress mandated a Federal Housing Administration pilot demonstration of EEMs in five states and then three years later, the pilot was expanded as a national program. Unfortunately, like an old bureaucrat, it sits in some obscure corner of the government waiting and waiting to serve our country.

And this really ruffles Hall. "You can't hear of something if it is not promoted," he exclaims. "From what I gather, the industry has done NO job in promoting the availability of the product. It has been around for many years, but I'm not aware of any financial service entity that goes out of its way to tell people it has this product or the ability to originate this product."

Hall doesn't just blame the mortgage bankers -- the state housing finance agencies also have EEMs in their product lineup, but they are also not publicizing that fact.

EEMs are out there -- you just have to be aware of them. For example, I tapped into the Energy Star Web site and it listed these subheads for EMM:

• Conventional EEM: offered by lenders who sell loans to Fannie Mae and Freddie Mac.

• FHA EEM: allows lenders to add 100 percent of the additional cost of cost-effective energy-efficiency improvement to an already approved mortgage loan (as long as the additional costs do not exceed $4,000 or 5 percent of the value of the home, up to a maximum of $8,000, whichever is greater).

• VA EEM: The Department of Veterans Affairs EEM is available to qualified military personnel, reservists and veterans for energy improvements when purchasing an existing home. ...CONTINUED

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