Real Estate News with Terri Taydus, GRI, CNA

Could Lenders Start Factoring in Energy Costs?

November 2nd, 2011 11:44 AM by Taydus Taydus


Rising utility bills can greatly affect a home buyer’s ability to afford a house, sometimes even more so than property taxes or home owner’s insurance. As such, a new bill introduced in the Senate is calling on lenders to start taking into account a home’s energy costs in standard mortgage underwriting—right along with principal, interest, taxes,
and home owner’s insurance.

The bipartisan bill, SAVE Act (Sensible Accounting to Value Energy) would require the three major mortgage agencies—Fannie Mae, Freddie Mac, and the Federal Housing Administration—to factor energy costs into every loan they insure, guarantee, or buy. To gather
estimated costs of energy bills on a home, lenders would gather data from previous utility bills or from an Energy Department survey database.

The bill also calls on the mortgage agencies to instruct appraisers to raise their property valuations when energy efficiency savings on a home can be shown. The higher value could then be used by a buyer to justify a higher loan amount if needed.

Source: “Mortgage Lenders Could Soon Take Homes’ Energy Costs into Account,” (Oct. 30, 2011)


I find this interesting.  I can understand how they would be able to use energy bills for a refinance, as the energy usage would be based on the family's consumption that currently reside in the home.  But how could they realistically use energy bills on a new purchase? For example, say I sell my house to a family half the size of mine.  I would assume that they would use considerably less energy to live in the same house vs. my family of 6 teens / adults.  Would it be right to base their pojected energy costs on my much larger family's consumption?

The bill also calls on appraisers to raise their property value based on when energy eficiency savings on a home can be shown?  I understand the obvious, such as solar panels, etc. but barring the obvious, whouldn't that also work greatly to the disadvantage to the buying family in the above example?

I understand the concept of what is trying to be done, and I don't think it is a bad idea, as encouraging energy efficiency is always good.  However even with all of its good intentions, I think that there is the potential for this to unjustly harm a buyer's potntial to qualify (especially if they are qualifying by a thread in the first place.)

What are your thoughts?

Posted by Taydus Taydus on November 2nd, 2011 11:44 AM


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