The SAVE Act – Sensible Accounting to Value Energy

Lucas Hamilton

Lucas Hamilton is Manager, Building Science Applications for CertainTeed Corporation

We are seeing an increase in legislation to drive the energy consumption and retrofit message to homeowners.  One that can make a huge impact is The SAVE Act.  This legislation instructs federal loan agencies to assess a borrower’s expected energy costs when financing a home.  The average U.S. homeowner energy costs in 2008 were $2,278/year.  This exceeds the average property taxes where on average were $1,897.

The basic goals of this Act are to:

  • Enable better mortgage underwriting
  • Reduce utility bills for American homeowners
  • Provide affordable financing for home energy improvements
  • Spark job creation in the housing industry

There are several key supporters of this legislation within the build industry.  These are the U.S. Green Building Council (USGBC), International Code Council (ICC), Green Builder Coalition (GBC), American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE), and The Residential Energy Services Network, Inc (RESNET).

The two major components of the Act are the:

  • Affordability Test which accounts for expected energy costs along with other recurring payments in the debt-to-income qualifying ratio. So lenders would now be evaluating Principle + Interest + Taxes + Insurance + Energy, and
  • Loan to Value Adjustment which will ensure that the underwriting process consistently and accurately captures the added value of energy saving features, allowing homeowners to finance the cost of efficiency improvements as part of their mortgage.

The average home’s energy cost over the life of a 30-year mortgage is $60,000 and homes are responsible for nearly 25 percent of all energy consumed in the U.S.  The majority of our building inventory seriously needs energy upgrades to be current with the building codes.  Making it easier for homeowners to secure the financing to make energy updates is the best way to move the needle which we discussed in a blog last year.

Do you have any thoughts about The SAVE Act?

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