As predicted by in April, discussions on energy-related mortgage innovations are on the move: Access to mortgage financing for energy- efficiency improvements is up for debate again in the U.S. Congress after two senators—Michael Bennet (D-Colo.) and Johnny Isakson (R-Ga.)—reintroduced the Sensible Accounting to Value Energy (SAVE) Act. Senator Bennet submitted a previous version of the bill in 2011, but it was not enacted.

The act allows federal mortgage loan agencies to consider a home’s energy efficiency and expected monthly energy bills when evaluating a homeowner’s ability to pay mortgage payments, according to Bennet’s website. Bennet and Isakson are planning to file the bill as an amendment to the Energy Savings and Industrial Competitiveness Act of 2013, introduced by Senators Jeanne Shaheen (D-NH) and Rob Portman (R-OH).

A study by the American Council for an Energy-Efficiency Economy and the Institute for Market Transformation (IMT) found that the SAVE Act should add 83,000 new jobs, mostly in construction, remodeling, and manufacturing, and generate $1.1 billion in consumer energy bill savings in 2020.

The bill has support from a broad coalition of real estate and trade groups such as the American Institute of Architects; Appraisal Institute; ASHRAE; Earth Advantage Institute; Green Builder Coalition;  Institute for Market Transformation;  International Code Council; National Association of Home Builders; National Association of Manufacturers;  National Association of Realtors; and  U.S. Green Building Council.

According to the IMT, the bill instructs the Department of Housing and Urban Development to update underwriting and appraisal guidelines for borrowers who submit a qualified home energy report. It is broken into three components: 

  • Debt-to-income adjustment. Under this provision, lenders must account for expected energy cost savings as an offset to other expenses in a debt-to-income mortgage qualifying ratio. If a homeowner does not provide a qualified energy report, the DTI will not be adjusted.
  • Loan-to-value adjustment. In calculating the loan-to-value ration, lenders would add the present value of expected energy savings when they are not already accounted for in a home’s appraisal report.
  • Consumer information. Lenders will inform loan applicants of the costs and benefits of energy efficiency efforts.

Click here to access a fact sheet on the SAVE Act from IMT.