Sensible Accounting To Value Energy Act

Senator Michael Bennet

The "Sensible Accounting to Value Energy Act," or SAVE Act, expected to be introduced this fall by Senator Michael Bennet (D-Colo.), would require federal loan agencies to include projected energy costs when financing a house, essentially offering better mortgage values on properties that are more energy efficient.

The Center has promoted a similar program for years called Energy Back Securities (EBS). EBS would work the same way Fannie Mae and Freddie Mac promote homeownership and make money. They make money on the difference between loans they buy and their borrowing costs, guarantee fees charged to lenders on mortgage-backed securities sold to investors and returns on the sale of mortgage-backed securities. Put another way: as wholesalers for the mortgage industry, Fannie and Freddie borrow money from investors to buy mortgages from lenders. They also repackage mortgages into securities for sale to investors, adding their own guarantee that investors will receive the promised principal and interest. They charge lenders a fee for that service.

The Center's EBS has a Secondary Energy Mortgage Market mechanism and a Credit Trading Market mechanism. (Read More)

Currently, property appraisers consider identically sized residences the same, regardless of whether one might offer significant savings on energy bills. Appraisers don't know how to evaluate the energy efficiency of a home because it's not something they can feel and touch.  According to some estimates, the average U.S. homeowner spent more than $2,200 on energy in 2008, far more than the average cost of the property taxes (almost $1,900) and homeowners insurance (nearly $800). Energy costs are more volatile than other factors currently included in an appraisal, so they can have an even greater impact on the overall value of the home.

Under the SAVE bill, energy costs could be calculated through average utility costs as determined by a Department of Energy survey or through an independent energy inspection that is already done on 40 percent of new homes. It would only apply to loans controlled by the Federal Housing Administration or other government bodies, which would include mortgage giants Fannie Mae and Freddie Mac. (NYT, Energy & Environment, 8/25/2011)