This is an outstanding post on Energy Efficient 'Green Mortgages' by Jerry Rouleau.
Energy Efficient mortgages are extremely important for those of us promoting sustainable practices in real estate. The legacy EE mortgages from the Carter era left a lot of folks turned off.
But like Jerry says, there are some good programs out there. Green home buyers will benefit from taking advantage of an EE mortgage.
Education is key to expanding the green home morket. Let's all try to get the word out every chance we get that EE mortgages
BuilderRadio talks with Dave Porter, Porterworks.com
There is plenty of good training available on how to build and sell green homes. Builders and contractors have the NAHB Green Building Program; Realtors have their own NAR programs and EcoBroker. But, where do mortgage lenders go to bone up on green building so that they can adjust their loans to fit new energy-saving construction and retrofits?
Dave Porter has an answer. Dave spent years as Senior Vice President of one of the largest construction lenders in the country. He and his wife, Anna, also built their own award winning green home in Washington (www.GoingGreenAtTheBeach.com.) So, Dave is in a unique position to understand both sides of the issue. He and Anna started Porterworks to help lenders, appraisers and underwriters understand green construction and to provide specific training that Dave hopes will lead us closer to a true ‘green mortgage.’
“What has been missing specifically has been green training for lenders and appraisers. So, we have created a two-day ‘deep-dive’ class that goes through, from A to Z, what green building is. We go through the current changes on the Multiple Listings, the rating programs and systems, appraising and lending on green homes, the secondary market, and how to put it all together. There are two tests during the course, and at the end those that pass receive their designation as either a Green Lending Specialist or a Green Evaluation Specialist, depending on their discipline.”
Energy Efficient Mortgages
No matter what you might read, Porter confirms that, “there’s no such thing as a true ‘green mortgage.’ But energy efficient mortgages continue to exist. FHA, VA, Fannie Mae and Freddie Mac all have their renditions of energy efficient mortgages, and for retrofits there are energy improvement mortgages. And, with what I call the ‘normalization of lending’, there’s an important need to have as many tools as you can in your toolbox. We’re showing lenders where this is an opportunity to open upthe home buying power for consumers. And, frankly, it’s just the right thing to do.
Stop and look at lending for just a minute. It’s really crazy to think that a lender will look at your income and your debts and tell you how much of a house payment you can make. Whether you’re buying a house built in 1968 that bleeds energy, or a new, energy efficient Gold Certified green home never comes into the equation even though the difference in the utility costs is significant. So, I believe that lenders should be considering what I call ‘PITI-UM’ – principle, interest, taxes, insurance… and utilities and maintenance. I think that fundamentally there is a lesser risk if utility bills are lower.
Those programs exist. Unfortunately, very, very few buyers are being offered energy efficient mortgages. Either the lenders don’t know about them, which is most often the case, or they don’t care. But it’s an important tool, and it’s not going away. It’s a huge opportunity for lenders to get involved, do some good, and increase their income.”
That’s why Porter started his company; to make more lenders and appraisers aware of these programs so that they – and their customers – can take advantage of them. “There are new tools for appraisers that most of them don’t know about. I think appraisers want to appraise these home [giving credit for energy efficiency,] but they’re not aware how to do it. So it’s important that they get this training; this will help everybody.”
Energy efficient mortgages project the savings that a homeowner will realize in their utility bills (compared with a ‘standard’ home as measured by a HERS rating; your home must be tested) and applies that as income to the borrower. Each lender has slightly different criteria, but major most lenders offer some type of program.
Spread the Word
Currently, as Porter noted earlier, the biggest obstacle is that few people are aware that such programs exist. The training and certifications that his company offers is helping to build awareness, but more is needed. Porter would like to see builders and Realtors working together on a local level to create interest and awareness.
“Rally your home builders’ and Realtors associations to work together to get local MLSs to include check boxes on all listings to show green or energy star certifications. That will help get the evidence to the appraisers. It will also help track the performance of green homes. Initial research is saying that these homes perform very well, that they sell faster and for more money. If we can track that all the way back to prove that they perform better as loans, that will help in actually creating a true ‘green mortgage.’
In fact, there are areas where this is already being done. “Portland, OR; Seattle, WA; Travers City, MI and other cities and states already have such initiatives. And the National Association of Realtors actually has a resource page for MLS groups that want to add these features. So there are actually tool kits being built to help organizations spur this along.”
But, coming out of the mortgage industry, Porter puts the responsibility for promoting energy efficient mortgages squarely back on the lenders. This, though, is often an uphill battle. “Most of the time the reason that these are not being offered is that lenders see them as complex. They don’t understand them, so it’s easier to ignore them. Regardless, they are getting more popular.”
As big a boon as energy efficient mortgages might be to new construction, they could be an even bigger incentive for existing homeowners to remodel and retrofit green technologies.
“There’s a huge opportunity for retrofitting existing housing stocks,” says Porter. “Out of the 128 million existing homes, 95 million of them need energy improvements. And, already the Obama Administration‘s Recovery Through Retrofit: Middle Class Task Force Council on Environmental Quality is calling for improving energy efficient mortgages.”
As green homes continue to increase, energy efficient mortgages are a logical next step. “Talk about a stimulus package, this is like getting a stimulus check every year, and we don’t go into more debt as a nation! We’re relying less on foreign oil, it’s good for the economy, we use less of our precious resources, and people are saving money every month – money that can go back into the economy.”
Porterworks offers training classes for Green Lending Specialist and Green Valuation Specialist designations on a regular schedule. They also offer special classes for organizations, and will be offering their training in conjunction with IBS in Las Vegas.
Listen to the live interview at: http://builderradio.com/blog/?p=1131