For many Americans, owning energy efficient homes is just a dream. While the idea appeals to many, the cost of installing energy efficient equipment can be expensive, and as a result, unavailable to the majority of Americans.
But appraisers and underwriters constantly overlook energy efficient features, and this tends to discourage homeowners from installing these features entirely. All of this has the potential to change for the better, if the SAVE Act is implemented.
The SAVE Act was introduced just last month, on June 6th, 2013 by Senators Bennet (D-Colo.) and Isakson (R-Ga.), and is supported by a combination of business, real estate, energy, and environmental groups. Its main objective is to make energy cost savings a firm element in the underwriting evaluation, and has the potential to make energy efficient living more affordable and available to the general public.
Through this piece of legislation, the accuracy of mortgage underwriting used by our federal mortgage agencies would increase phenomenally. Fannie Mae, Freddie Mac, and the Federal Housing Administration would all be required to incorporate energy efficiency into their underwriting policies.
All that the buyer or homeowner would need to do is submit a qualified home-energy report for the energy savings to be taken into account. If the SAVE Act is put into action, guidelines will be available to the public via the Department of Housing and Urban Development.
A Path to Better Underwriting
While they are usually larger than real estate taxes and homeowners insurance, utility bills are continuously ignored and left out of mortgage underwriting. Underwriters usually reject the adjustments largely because they fail to understand them, and as such are overly cautious with them. In fact, some underwriters even insist on ignoring the adjustments.
Part of a Larger Plan
This legislation is also a part of a larger energy bill, which is still awaiting action. This particular bill would be beneficial to borrowers by making it necessary for lenders to factor in energy cost savings.
By doing this, an adjustment would be made on the borrowers debt-to-income ratio, potentially resulting in a larger loan amount. This bill would also make it necessary for lenders to add the value of projected energy savings toward a home’s value, if the appraiser has not already done so.
The innovative SAVE Act, if put into action, would help rejuvenate some of our economy’s hardest hit sectors. Average-income homes would then be able to qualify for lower mortgage financing for their cost effective energy improvements. Homeowners would also be given the opportunity to recover their cost of efficiency investments
Further Benefits of the SAVE Act:
• No cost to tax payers
• Removal of an impediment to home energy efficiency from the federal mortgage policy
• It will increase business and job growth with a newfound for construction and manufacturing
• Lower utility bills for American households
• Expand the accessibility and affordability of energy efficient homes
• Appeals to a broad, diverse coalition
The SAVE Act would be a step forward not just for the environment, but also for our country’s commitment to conservation and energy efficiency. Better federal mortgage underwriting would be enabled, and utility bills for households across the country would be lowered as a result.