SAVE Act Update

Home buyers purchasing energy-efficient properties could qualify for lager mortgages than their incomes would normally allow under a Senate bill reintroduced on June 6, 2012 with broad real estate industry support.

The measure would allow lenders to include projected energy savings from efficiency upgrades when measuring the borrower’s income against expenses and the value of the home against the debt.  In addition to giving borrowers larger loans in new purchases and refinancing, it could also lower their interest rates.

The government already promotes so-called-energy-efficient mortgages under a Department of Housing and Urban Development program.  But the proposed legislation would require lenders to take the projected energy savings into account when presented with a qualified energy report.  Decreasing the amount of energy a home uses increases the amount of dollars in the pockets of homeowners.

The bill was originally introduced in 2011 and although it attracted support from groups across a broad political spectrum – including the United States Chamber of Commerce and the Center for American Progress – it failed to gain approval.  The sponsor of the bill have broadened its appeal within the real estate industry, chiefly by eliminating provisions that could have penalized older, less efficient homes or those lacking a report based on estimated energy consumption.

In absence of a home energy report, which would come from an approved third-party inspector, the home’s energy use would not become a factor.  But lenders would provide applicants with information about the benefits of investing in energy-saving upgrades and counsel them on how they could go about doing this.

If passed the proposal could help close the gap, in addition to promoting energy conservation and construction jobs, generating $1.1 billion a year in saving for consumers by 2021.  Loan applicants could expect to gain about 5 percent more borrowing power on average.

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