U.S. Senators Michael Bennet (D-CO) and Senator Johnny Isakson (R-GA) introduced the Sensible Accounting to Value Energy (SAVE) Act today to establish more practical mortgage lending processes, encourage investments in energy efficient homebuilding and create an estimated 83,000 construction jobs. The Senators plan to file the legislation 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), should that legislation receive Senate floor consideration in the future.
The SAVE Act allows federal mortgage loan agencies to consider a home's energy efficiency and expected monthly energy bills when determining the homeowner's ability to pay monthly mortgage payments.
The average homeowner spends more than $2,500 each year on energy costs, more than on either real estate taxes or homeowners insurance, but energy costs are not taken into account when determining the cost of a home loan. On average, these energy costs amount to more than $70,000 over the life of a 30-year mortgage.
The SAVE Act would address this blind spot, giving a more complete picture of the costs of homeownership and providing a better understanding of the benefits of energy efficient investments for the home. Energy efficiency upgrades can reduce a home's energy bill by 30% or more. The SAVE Act is expected to result in $1.1 billion in energy savings, money that homeowners can put back into the economy.
In addition, according to a study from The American Council for an Energy-Efficient Economy and the Institute for Market Transformation, the SAVE act is predicted to create 83,000 new jobs in construction, renovation and manufacturing by 2020 as homeowners begin renovating their homes to be more energy efficient. This legislation would let families finance home energy upgrades as a part of their mortgage.
"In this day in age in Washington it is rare to have a bill with such a diverse group of supporters. This broad coalition has come together because we can help homeowners, create jobs, and strengthen our commitment to preserving our environment in one bill," said Bennet. "Monthly energy bills constitute a major expense for families and the SAVE Act will help them make more informed decisions when purchasing a home and provide them with a better understanding of how much they can save by investing in energy efficiencies for their home."
"As someone who has more than 30 years of experience in the resident real estate industry and who has lived through multiple recessions, I understand that recovery in the housing market and job creation in the construction sector is pivotal to getting our economy back on track," said Isakson. "I place my support behind this bill because it has the potential to create jobs, and it will also improve mortgage underwriting in this country by including energy valuation as a factor in the process."
The SAVE Act works in three ways to promote energy efficiencies and help homeowners pick the home that's right for them. If a qualified energy report is provided, then lenders will account for expected energy cost savings as an offset for other expenses when determining a borrower's ability to afford the monthly mortgage. Lenders will also add the present value of energy savings when calculating the loan-to-value ratio which helps determine the risk of a loan. The bill imposes no requirements on homeowners. Participation by homeowners is completely voluntary; they are not required to submit an energy report.
Lenders will also inform loan applicants of the cost savings and benefits of investing in energy efficiencies and talk to them about resources available to help them improve the energy efficiency of their home. As consumer demand to invest in energy efficiencies for the homes rises, new construction and remodeling jobs will be created.
The bill has support from a broad coalition of real estate, business, building trade and conservation groups, including: Alliance to Save Energy, American Chemistry Council, American Council for an Energy-Efficient Economy, American Institute of Architects, American Public Gas Association, Appraisal Institute, ASHRAE, Center for American Progress, Center for Neighborhood Technology, Consumer Federation of America, E2 Environment Entrepreneurs, Earth Advantage Institute, EcoBroker, Efficiency First, Energy Program Consortium, Environmental Defense Fund, Green Builder Coalition, Institute for Market Transformation, International Association of Certified Home Inspectors, International Code Council, International Economic Development Council, Johns Manville, Leading Builders of America, National Association of Home Builders, National Association of Manufacturers, National Association of Realtors, National Association of State Energy Officials, National Electrical Manufacturers Association, Natural Resources Defense Council, Network, Inc. (RESNET), Structural Insulated Panel Association, The Real Estate Roundtable, The Residential Energy Services, U.S. Chamber of Commerce and U.S. Green Building Council.
Leaders from the diverse coalition weigh in to share their support for the SAVE Act:
"Congratulations to Senators Bennet and Isakson on this important step. A recent study of more than 70,000 mortgages found that mortgages on energy efficient homes were 32% less likely to be in default," said IMT Executive Directory Cliff Majersik. "The study provides strong evidence that the SAVE Act is good credit policy and would help protect lenders and taxpayers from the risk of mortgage default. The SAVE Act is an important complement to other lending reforms made in the aftermath of the mortgage crisis."
"New homes are built to be significantly more energy efficient, and that saves money," said Rick Judson, Chairman of the National Association of Home Builders. "This legislation will help home buyers realize the value of those savings when they qualify for a mortgage. I hope this bill will also create a stronger demand for energy-efficient housing.
"This smart, bipartisan bill helps homeowners, the economy, and the environment," said Franz Matzner, associate director of government affairs at the Natural Resources Defense Council. "It empowers homeowners and lenders to make better decisions about energy use so people who buy homes can afford to live in them. It will create good construction and manufacturing jobs. And by reducing wasted energy it cuts dangerous pollution that harms our families and communities. This bill is yet another example of how the energy we save as a nation benefits everyone."
"Robust real estate markets need accurate property valuations and The SAVE Act is an important step forward in valuing energy and water efficiency in commercial and residential buildings," said Jeffrey D. DeBoer, President and CEO of The Real state Roundtable. "We support the leadership of Senators Bennet and Isakson to help ensure that all stakeholders in the appraisal process have the information they need to value high performance buildings. This bill will help advance the important role that energy efficiency can and should play in America's real estate."
"We strongly support the SAVE Act because it would require the use of qualified, competent appraisers," said Appraisal Institute President Richard L. Borges II, MAI, SRA. "We also are pleased that it would help ensure that appraisers have access to data needed to analyze the effects of energy-efficient home improvements in the marketplace."
"This is a great day, not just for insulation manufacturers and suppliers and proponents of greater energy efficiency, but for homeowners, realtors, consumer advocates, contractors, retrofitters, business leaders, and environmental champions -- in fact, every American," stated Kate Offringa, CEO and President of the Council of North American Insulation Manufacturers Association. "We all want to save energy, lower monthly utility costs, create manufacturing and construction jobs, enhance the value of our homes, and create a stronger market for mortgage underwriting -- and that's the aim of the revamped and thoroughly bipartisan SAVE Act."
"With these underwriting and appraisal reforms in place, we believe it is possible to significantly increase the energy efficiency of new homes over the next decade while retaining affordability for our customers. This truly is a win-win-win opportunity for our customers, the economy and our environment," said Ken Gear, CEO of Leading Builders of America.