When mortgage lenders consider whether or not to give a homeowner a loan, they look at a variety of factors like income, value of personal assets, taxes and property value. (At least, they do now after poor lending standards helped create the financial crisis.)
But underwriters are still completely ignoring another very important factor in valuing a mortgage: energy costs.
With the average homeowner spending around $2,000 on energy costs — more than on real estate taxes or home insurance, according to the Institute for Market Transformation — properly accounting for energy use can give American consumers a better picture of how much they’re using. That, in turn, can help homeowners make better choices about what kind of home to buy, and help them determine if they need an efficiency upgrade.
A new bill introduced in the Senate yesterday by a bi-partisan pair of Senators — Georgia Republican Johnny Isakson and Colorado Democrat Michael Bennet — will require mortgage providers to factor energy costs into mortgages. Called the SAVE Act (Sensible Accounting to Value Energy), the law would instruct the Department of Housing and Urban Development (HUD) to develop new guidelines for appraisal that include energy.
In addition to receiving accurate information that will help them with a purchasing decision, the SAVE Act would allow homeowners to finance energy efficiency retrofits through their mortgages.
The economic impact of the SAVE program could be huge. According to an analysis put together by the American Council for an Energy Efficient Economy and the Institute for Market Transformation, these simple guideline changes could help create around 83,000 net jobs and over $1 billion in energy savings over the next decade. All with no cost to the taxpayer.
Along with support from a bi-partisan team of Senators, the program is backed by dozens of leading real estate companies, business representatives and energy organizations — including the U.S. Chamber of Commerce.
“This is a welcome opportunity for bi-partisanship. We see a very broad coalition of supporters because it simply makes sense and could open up a lot of economic activity,” said Cliff Majersik, executive director of the Institute for Market Transformation in an interview with Climate Progress.
In a joint statement issued by Senators Isakson and Bennet, the two explained why they’re co-sponsoring the bill:
“It is rare to have such diverse interests come together, and that’s because this is a common-sense bill,” said Bennet. “The Save Act would help provide access to useful information about energy usage that home owners, buyers, appraisers and underwriters want and need. It would lead to more complete and accurate mortgage underwriting, would encourage investments in home energy improvements, create more than 80,000 jobs and lighten the load for Colorado families’ budgets.”
“As someone who has 30 years of experience in the resident 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,” said Isakson. “I place my support behind this bill because it has the potential to create jobs without any cost to taxpayers, and it will also improve mortgage underwriting in this country by including energy as a factor in the process.”
It’s nice to see such a broad coalition support a common-sense program like SAVE. But no mainstream publications have picked it up the news, or bothered to write on the program. Alas, this good piece of news seems to have slipped under the radar as media outlets continue to hammer away at Solyndra.