The Senate is currently considering a bill that would modify mortgage underwriting standards to include energy efficiency for all home loans backed by FHA, Fannie Mae, Freddie Mac, or other federal agencies. Introduced by Michael Bennet (D-Colorado) and Johnny Isakson (R-Georgia), the Sensible Accounting to Value Energy (SAVE) Act would force lenders to take into account a home’s energy costs when calculating a homebuyer’s debt-to-income ratio.
Current mortgage industry standards consider insurance, property taxes, interest, and even homeowner association fees when determining a homeowner’s ability to make monthly payments. Under the proposed legislation, the monthly savings from an energy-efficient home would allow the borrower to purchase a more expensive home without an increase in monthly payments.
Energy costs are typically the second highest cost of home ownership after mortgage payments. The SAVE Act would help home buyers afford the slightly higher upfront cost of an energy-efficient home, benefiting the homeowner and the environment without any additional government spending.
Another key clause of the SAVE Act requires the valuation of energy efficiency in home appraisals. Proponents of the legislation claim this will encourage homeowners to make energy-efficient improvements to existing homes and help builders of energy-efficient homes receive a fair market price that reflects a home’s energy savings.
A study by conducted by the American Council for an Energy-Efficient Economy (ACEEE) and the Institute for Market Transformation (IMT) estimates that the legislation would save homeowners $1.1 billion in energy costs and create 83,000 construction sector jobs by 2020.
For more information, visit the Alliance to Save Energy website.
