 |
 |
 |
Members Corner | Site Map | Search | Home
New financial benefit for energy-smart buildersIf Columbus had an advisory committee, he would probably still be at
the dock. What does not destroy me makes me stronger. Builders interested in building energy-efficient homes now have a new financial tool to help them take that step. For more adventurous builders thinking about stepping up to high-performance design and construction. there's a slightly bigger tool to help them take that larger leap. We're talking mortgage money here, with a couple of major twists. BACKDROPTwenty-five years ago, the Carter Administration introduced something called the energy-efficient mortgage (EEM). But a few years later almost no one knew about it, and even fewer cared. The program went nowhere. During the early 1990s. the U.S. Department of Housing and Urban Development raised energy standards within its general housing criteria package. Any builders selling homes under FHA mortgages saw their costs go up, with little interest shown by buyers in the energy savings. In Colorado's environment of low energy costs and higher housing costs, most builders turned away from building to the FHA standards tied to low dollar caps. With the exception of a few builders like Village Homes, who used energy mortgages on up to 20 percent of their sales in some subdivisions, the push to encourage energy-efficient construction again stalled. During the mid-1990s. the U.S. Department of Energy distributed funds to six "pilot states" (including Colorado) to help them establish home energy rating systems. The general idea: first, help identify cost-effective ways to upgrade energy features in existing homes as well as in homes not yet built, and second, to follow up with mortgage advantages to stimulate investment in residential energy efficiency. There's a local twist as to why this effort never really caught on. BACKFIREFrom 1995-99, E-Star Colorado received funding to help the mortgage and real estate industries spread the use of EEMs into the new home sector and the energy improvement mortgage (EIM) among existing homes. The results fell well short of expectations. Why? "The concept failed because no one got paid to make the EEM happen," said Megan Edmunds, director of E-Star. "We energy dweebs were out there trying to convince mortgage experts to become energy experts." That dog wouldn't hunt. For most Realtors and lenders, the roaring late-1990s were too hot a period to add a new wrinkle that might slow down a sale, thus putting it at risk. EEMs fizzled for this and value-related reasons. "In the past, the EEM allowed you to stretch debt-to-income ratios based on an energy rating," said Edmunds. "But today's credit scoring allows you to stretch ratios for other reasons. Lenders don't care about that ratio if you have a good credit rating." Likewise, EIMs never took off, except for several hundred homes financed through the Colorado Housing and Finance Authority. But even there. with an intimate relationship between CHFA and E-Star -which was, until this past January 1, a division of CHFA- lenders weren't happy with the process. PULLING A 180With a never-say-die attitude. Plus an unwavering commitment to its mission of advancing energy efficiency in housing, E-Star decided to invest in the exact opposite direction from past in-state and national efforts. "We've turned the old model upside down." said Edmunds. "We've brought two experienced mortgage lenders on board as employees of E-Star. Now, by partnering with the largest Colorado-based mortgage lender in the state, we're offering the full universe of competitive conventional mortgage products plus several energy mortgage tools that add value for buyers and builders." Edmunds believes that the timing this go-round is much better. During the mid-to-late 1990s, she points out that, "We didn't have a large infrastructure of builders who would qualify." That's changed. Now there is even a small but growing group of high-performance home builders whose buyers could benefit from better financial tools. ENERGY-EFFICIENT DISCOUNT MORTGAGEThere are two pieces here: a very different approach to the EEM, plus a discount feature. The EEM specifies that if a home scores at least an 80 on the 0-to-100 uniform Home Energy Rating Scale, a home's energy-efficient features can be counted towards its total value. This decreases the loan-to-value ratio of the home's mortgage. In some cases, this could drop the cost of private mortgage insurance from the homebuyer's cost list. Additionally, the homes monthly energy savings can be added to the borrower's qualifying income, That allows qualification for a larger home or more amenities, through a loan up to 3 percent larger than available through other means. The discount feature covers the cost of obtaining a rating for most homes. For a home that scores less than 82 points, $300 is discounted off the loan origination fee. The discount increases to $375 on honks scoring between 82 and 85.9 points, and tops out at $450 for a home scoring 86 points or higher. The latter figure would cover most of the costs of complete performance testing for a production home being enrolled in the Built Green program (Tier 11 level: see the January issue of Home Builder magazine for more details). In existing homes that are being renovated, a discount of $300 on the loan origination fee is available when the home is energy-rated and the energy improvements are projected to save less than 20 percent on the home's energy bill. When the projected savings hit 20 Percent or greater, the discount increases to $400. The bottom line for consumers is clear. In an era when energy prices are at all-time highs and projected to stay fairly high for the foreseeable future. E-Star aims to help all Colorado citizens reduce energy usage and make homeownership more affordable. FOR MORE INFOIf this writer either tickled your fancy with the basics above or confused you by leaving out some info, contact either of E-Star's mortgage specialists directly (Russ Pygott at 303-944-4556 or Karen Holsclaw at 303-618-1538). Builders and buyers wanting some initial feedback can obtain a fast and free pre-approval by completing an online application (www.e-sturhomcloans.com). For those who've decided to buy. E-Star has a fast, on-line home loan application process. Steve Andrews consults with builders for E-Star Colorado and writes on energy issues (sbandrews@att.net). E-Star (www.e-star.com), is a nonprofit home energy rating system that works with both new and existing homes statewide. |
|
2008 Built Green Colorado
Home Builders Association of Metro Denver, 9033 E. Easter Place, Suite 200,
Centennial, CO 80112 Last Updated: 10/05/2007 |