Mortgage Information

There is an emerging market force towards energy efficient homes. From Florida to Alaska mortgage lenders are increasingly using energy mortgages to make homes more affordable and poising their companies to capture this new market trend.

What is an energy mortgage? An energy mortgage is a mortgage that credits a home's energy efficiency in the home loan. There are two types of energy mortgages:

Energy Improvement Mortgage - Finances the energy upgrades of an existing home in the mortgage loan using monthly energy savings

Energy Efficient Mortgage - Uses the energy savings from a new energy efficient home to increase the home buying power of consumers and capitalizes the energy savings in the appraisal

In 1995 the Residential Energy Services Network (RESNET) was formed as a partnership between the national mortgage industry, Energy Rated Homes of America, and the National Association of State Energy Officials.

The ability to leverage a home buyer's investment in energy efficiency increases the number of qualified home buyers and increases the purchasing power of the consumer. A recent analysis by the Environmental Protection Agency confirmed that energy efficient mortgages can have a dramatic impact on increasing the opportunities for home ownership. The analysis found that an average of 6.8% more families would be able to qualify for a mortgage through an energy efficient mortgage.

Another study published in the Appraisal Journal documented that the market value of a home increases $20 for every $1 decrease in the annual energy costs. According to a recent analysis by the Pacific Northwest National Laboratory building a home to exceed the Model Energy Code would result in an annual savings of $170 to $425. Applying these findings to the analysis published in the Appraisal Journal would equate to an increased home market value of between $4,250 to $10,625.

Fannie Mae, Freddie Mac, FHA and VA have adopted special underwriting guidelines to make financing energy efficiency less burdensome. The energy mortgage guidelines for each secondary mortgage market can be accessed below:

	Fannie Mae Energy Mortgage Program Fannie Mae - RESNET Agreement on Energy Report for Fannie Mae Energy Mortgage Products Summary of Fannie Mae Energy Efficient Mortgage Program PDF 24KB Comparison Chart of Fannie Mae Energy Efficient Mortgage Products PDF 44KB Example of Fannie Mae Energy Efficient Mortgage Fannie Mae Allowable Variance Between Projected and Final Ratings PDF 40KB Assumed Note Rate
	FHA Energy Mortgage Program Summary of Program Example of FHA Energy Mortgage FHA Energy Mortgage Guidelines
	Veterans Administration Energy Mortgage Program Summary of Program VA Energy Mortgage Guidelines VA EEM Example
	Freddie Mac Support for Energy Conservation Summary Energy Addendum

The Environmental Protection Agency has a web page dedicated to Energy Efficient Mortgages. To view the page click here.

The Environmental Protection agency has a listing of ENERGY STAR Homes lenders that will under write energy efficiency mortgages. To download the listing click here. If you are a lender and would like to become an ENERGY STAR Lender Partner click here.

Home Energy Ratings: The Key to Energy Mortgages

Home energy ratings provide a standard measurement of a home's energy efficiency. Ratings are used for both and new and existing homes. The rating report will include all of the information that you need to underwrite an energy mortgage including the calculation of the monthly energy savings and present value. It makes it easy for a lender!

Thought must be used in choosing a rater to work with. As in any trade, all raters are not the same. Raters have different experience, training and skills. You should not select a rater based solely on price. The following are issues to consider when choosing a home energy rater to work with:

• Find out what are the basic services the rater provides. RESNET has adopted a Rating Standards of Practice to define this.
• Determine what training and experience the rater has to meet your needs. In addition to receiving a rating score, will your customer require design assistance, HVAC sizing calculations, or construction crew training? Be sure you know that the rater's skills meet your needs.
• With litigation, make sure that your rater carries proper insurance coverage. RESNET has arranged to provide affordable and comprehensive general liability and professional liability insurance coverage for raters. Make sure that the rater you hire is properly insured.

Choosing a RESNET rater member means that you are selecting someone you can trust to objectively provide you with a comprehensive analysis of the home's major energy systems and components.

RESNET rater members are trained and have demonstrated technical proficiency and have committed to maintain and improve their technical proficiency through continuing education.

Members are committed to conducting ratings in accordance with the RESNET Rating Standards of Practice; abiding by the RESNET Rating Code of Ethics, and disclose any financial interest in the home being rated. Through their membership to RESNET, member raters demonstrate their commitment to technical and ethical quality.

A home energy rating from a nationally accredited home energy rating program is necessary for an energy mortgage. The mortgage industry in cooperation with RESNET and the National Association of State Energy Officials have adopted a national accreditation standard for home energy rating systems. For a listing of accredited home energy rating programs in your visit click on:

• National Registry of Accredited Home Energy Rating Systems