Best-Kept Secret in the Mortgage Industry

January/February 2007
A version of this article appears in the January/February 2007 issue of Home Energy Magazine.
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January 01, 2007
Improving the energy performance of a home is an economically sound investment.  Yet despite its economic attractiveness, home performance in the United States is nowhere near optimal levels.  Why is this?  In most cases there is an incremental added cost to improve a home’s performance, and many Americans resist the first cost even at the expense of positive cash flow in the future. To address this first-cost barrier, the mortgage industry has developed the energy mortgage.  There are two types of energy mortgage. An Energy Improvement Mortgage finances the energy upgrades of an existing home in the mortgage loan based on future monthly energy savings. An Energy-Efficient Mortgage uses the energy savings from a new energy-efficient home to increase the home-buying power of the consumer and capitalizes the energy savings in the appraisal. The entire U.S. secondary mortgage market (Fannie Mae, Freddie Mac, VA and FHA) offers energy mortgages. Overcoming Barriers In the past, lenders haven’t promoted energy mortgages because they require too much paperwork. Lenders have also complained that the energy mortgage was too complicated for the loan applicant. But, like the rest of the economy, the mortgage industry is ...

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