You may have heard of the Sensible Accounting to Value Energy Act (SAVE Act S17373) and wondered exactly what it is. Here is a link for more information about the ACT.
The intent of the legislation is “to improve the accuracy of mortgage underwriting used by federal mortgage agencies by ensuring that energy costs are included in the underwriting process, to reduce the amount of energy consumed by homes and to facilitate the creation of energy efficiency retrofit and construction jobs.”
The SAVE Act directs the Secretary of Housing and Urban Development (HUD) to issue guidelines for all federal mortgage agencies, including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and any affiliates, to implement enhanced loan eligibility requirements, for use when determining the ability of a loan applicant to repay a covered loan, that account for the expected costs of energy at the property involved.
The act also directs the Secretary to issue guidelines for how covered agencies shall determine: (1) the maximum permitted loan amount based on the value of the property for all covered loans made on properties with an energy efficiency report and (2) the estimated energy savings for properties with such a report.
In addition, the act amends the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to require rules by the federal financial institutions regulatory agency and the Resolution Trust Corporation for real estate appraisals for federally related transactions to require that state-certified appraisers have timely access, whenever practicable, to lender information relevant to an appraisal of the energy and water efficiency or conserving improvements or features of property.
The act applies the requirement of state certified appraisers to transactions involving any real property on which the appraiser makes adjustments using an energy efficiency report.
According to GreenBuilder: “While not a magic elixir to cure all the ills of the green/sustainable building business, the Sensible Accounting to Value Energy (SAVE) Act sure feels like a step in the right direction towards changing the outdated mindset. Introduced by Senators Michael Bennet (D-CO) and Johnny Isakson (R-GA), this act has the potential to transform the way green homes are valued for lending and appraisal purposes.”
According to GreenBuilder the SAVE Act is a bill with no downsides—the associated costs are nominal, and everyone seems to win:
- Homeowners will be able to obtain loan reductions and higher resale values for high performance homes, encouraging energy improvements, and rendering cynic questions about payback periods for basic green upgrades moot.
- Builders will have the ability to recoup upfront investments that improve home performance through accurate and consistent appraisals, thereby providing incentive to construct enhanced structures and move away from poor decisions based solely on lowest upfront cost.
- After decades of inertness, lenders will be able to accurately project repayment risk, presumably enabling them to finally deliver on their elusive promise for green mortgages.
- Utilities will benefit from the reduction of demand on their already overtaxed infrastructure.
- The industry will receive a much needed shot in the arm from increased investments in energy upgrades, presumably resulting in growth and job creation for professionals and manufacturers alike.
- And the environment, possibly the biggest winner in this scenario, will finally finds its place on our collective balance sheet.
There is a long road between the SAVE Act’s introduction and enactment. It’s important that we do not sit idly by and let the Act languish in the bureaucratic morass of contorted Washington politics.