Senators Michael Bennet and Johnny Isakson (GA) have reintroduced a bill — Sensible Accounting to Value Energy Act (the SAVE Act) — that requires lenders to take a home’s energy savings into account when considering a loan applicant’s eligibility for federally backed mortgages. The bill enjoys support from a wide coalition of supporters ranging from the National Association of Homebuilders to the Natural Resources Defense Council.
The SAVE Act would update underwriting and appraisal guidelines for borrowers who submit a home energy report when applying for a loan. The bill has two significant requirements: 1) If an energy report shows that a home has lower monthly energy costs than the average home in the area, the lender would be required to consider that savings an offset to the borrower’s other monthly expenses when calculating the person’s debt-to-income ratio and 2) It requires lenders to consider the value of energy savings in calculating the loan-to-value ratio if not accounted for in the home .
According to data provided by Bennet’s staff, relatively modest energy saving measures could cut the average family’s energy bill in half. Put toward a 30-year mortgage with a fixed rate of 4.375 percent, that extra cash could equate to about $20,000 in extra buying power as it relates to purchase price.
Homebuilders support the bill because they are often required by code to include energy-efficiency upgrades. However, those upgrades aren’t always accounted for when a person is deciding between purchasing a new home versus an older one that might be less expensive but also less efficient.
Lenders still are dealing with the increased regulations and processes imposed by Dodd-Frank. They question whether another layer of regulation in the process is a good thing or if it’s really needed given other energy saving programs that are already available to consumers.
Bennet and Sen. Johnny Isakson, R-Ga., reintroduced the SAVE Act last summer after it failed in the previous session of Congress. It was included as part of a larger energy bill package introduced last month that could see a vote later this year.