On Thursday, the Senate decided that home buyers who purchase energy-efficient properties can qualify for larger incomes than they would have previously been allowed. The decision comes with broad real estate industry support.
The decision would allow lenders to estimate potential energy savings due to efficiency upgrades when measuring the borrower’s income against expenses and the value of the home against the debt. The measure might end up lowering interest rates to boot.
A Republican and a Democrat Senator partnered to push the bill through the Senate, believing that consumers should get credit for energy–saving construction materials, materials that are routinely undervalued. Consumers who qualify for the loan might end up gaining up to 5% more borrowing power.
The bill will apply to loans backed by federal agencies that deal with approximately 90% of all new US mortgages.
Under a Department of Housing and Urban Development (HUD) program, the US government already promotes energy-efficient mortgages, but the new legislation requires lenders to account for the projected energy savings which determining the mortgage threshold for an individual consumer.
Proponents of the bill believe that the measure will lessen energy consumption, augment the market for conservation upgrades and ultimately reduce greenhouse gas emissions.
HUD created the Energy Efficient Mortgage (EEM) in the mid-1990s. To say that the government “promotes” energy efficient mortgages would be misleading; it made them available. In any community, take a survey of real estate and mortgage professionals, and recent home buyers, and query them on their knowledge or awareness of the availability of the EEM. I submit that the response would be so small as to be insignificant.
There is no incentive to the real estate or mortgage professional to promote the EEM.