Of the mortgage loans insured by FHA/HUD in fiscal year 2009, about 3,000 or nearly $600 million in loan balances took into account the monthly utility savings achieved by incorporating energy-efficient features such as high-performance windows and heating systems. In other words, energy-efficient mortgages (EEMs).
That might seem like a lot—and, in fact, it represents a 146 percent increase over the previous year—but EEMs still account for less than 1 percent of the 3.2 million FHA-insured mortgage loans in 2009. A decade ago, the share of EEMs relative to all FHA loans was about 1.5 percent.
Meanwhile, almost 17 percent of single-family homes built in 2008 were Energy Star certified, and a recent McGraw-Hill Construction study (with NAHB and others) reported that 21 percent of builders expect to build 90 percent of their homes to a higher environmental standard.
So why aren’t EEMs taking a greater hold, especially now that green is nearly mainstream and a growing network of HERS raters is at the ready to verify the performance and utility cost savings required by FHA, Fannie Mae, and Freddie Mac to insure EEMs? “Primarily, it’s a lack or training and knowledge among brokers, originators, processors, and underwriters,” says Dave Porter of Porterworks in Stanwood, Wash. “And real estate agents haven’t embraced them because EEMs add paperwork and time, which adds risk.”
Porter, a former mortgage lender and broker (most recently with Countrywide), launched Porterworks to help educate the masses about EEMs. The company recently announced in-house GreenLending Specialist and GreenValuation Specialist designations for members of the home building, appraisal, and lending supply chain that can be attained through two-day, on-site classes offered nationwide. In August, he presented a webinar sponsored by the Appraisal Institute for its members. “The company was really born out of frustration,” he says, with the lack of activity, interest, and utilization of a program that’s been available since 1980.
That being said, there are pockets where EEMs are showing signs of greater life. “All of a sudden, it’s come up more often,” says Kenton Brown of Sente Mortgage in Austin, Texas, the unofficial birthplace of green building. Brown attributes interest specifically in the FHA’s 203k program for resales to buyers snatching up homes they can improve with mortgage funds instead of separate financing. He also says new FHA rules regarding limits—from a stagnant $8,000 to now 15 percent of the appraised value—have made the program more accessible. “It’s a cool little niche that most [in the mortgage lending industry] don’t know how to do.”
Learn more about markets featured in this article: Austin, TX.
