GREENMORTGAGES.COM SPECIALIZED FINANCING FOR GREEN REAL ESTATE.
When your green communities home is built to one of the recognized certified green building standards previously outlined, verified by a third party such as a green appraiser. There are special unique green financing options available to sustainable homeowners to finance your green home. This once obscure financial instrument that can be utilized to your family’s benefit is called the green mortgage or sometimes referred to as an energy mortgage EMM is the short acronym.
This unknown under utilized unique mortgage tool has actually been available for many years, however with the recent introduction and adoption of supportive collaborating specialized green underwriting tools such as the green addendum to Fannie Mae form 802.03 and the companion PC values spreadsheet to specifically outline, detail and publish the individual green features, your green communities home can now be measured, documented and bench marked to conventionally constructed homes.
As the national green data is collected by specialized knowledgeable green brokers and submitted into one of the corresponding local 800+ multiple listing service (MLS) directories. These developing MLS green data fields supply the nascent comparative green data for green appraisers and green brokers to support the higher comparable market price and less time for home resale on the national market. Conventionally constructed homes are slowly loosing their appraised value as green neighborhood homes are superior in construction, higher green appraised value, energy efficient and are more indoor comfortable to conventionally constructed homes. With the independent green appraiser validation of green data and green certification of your selected green neighborhood home, the enhanced option of utilizing the energy mortgage as the preferred financing mortgage to purchase the sustainable home of your family’s dreams can now become a reality! Your family is now eligible for a menu of financing options of green incentives.
Possible available green incentives now available are: 1. A reduced interest rate, lower than a conventional constructed home over the lifetime of the green mortgage amortization schedule. This will lower the total cost of financing over the lifetime of the energy mortgage…this can be a significant savings to your family. 2. Lower mortgage origination fees.This can vary from the individual green lender you select as there is actually more paperwork required to finance the green communities home. 3. Increased debt to value ratio. Stretching the appraised value to the debt value from 2-5%. As the green neighborhood home is a minimum documented 30% more energy efficient and actually costs less to operate on an annual basis (lower or sometimes no energy bills). Green underwriting guidelines allows the sustainable homeowner a larger green mortgage amount as the energy improvements are now assigned a monetary value with the accompanying verified third party green appraisal and insured by the specialized green policyholder.
As the nation continues its piece meal progress towards an energy efficient green sustainable nation. Federal laws will be passed such as the sensible accounting to value energy (SAVE) act. This updated green underwriting and appraisal guidelines will become mandatory for any mortgage issued, insured , purchased, or scrutinized by FHA, Fannie Mae and all other GSE agencies. Energy efficiency would become a mandatory mortgage underwriting requirement addressing the borrowers ability to service the mortgage debt. The total monthly payment will now consist of: principal, interest, taxes, Insurance and energy(PITIE). The typical homeowner currently spends two thousand dollars a year on energy costs. A higher amount than a homes taxes or insurance. However this amount is currently not calculated into the borrowers ability to service the debt on the mortgage.
The SAVE act would calculate the annual energy costs by either using an independent energy audit of the property, or the average utility costs from the Dept.of Energy residential data base, adjusted for the total square footage of the property. As of today green mortgage options available to borrowers include: Reduced interest rate, increased loan to value underwriting guidelines, and lender payment for the energy audit. As the market becomes more competitive, financial green lenders will expand their offerings of green incentives to borrowers. As the green financing secondary market has developed rapidly in 2016 facilitating the bundling of MBS green securities to be sold to investors worldwide. These green securities will sell at a market premium, as green homes are less costly to operate and borrowers are 30% less likely to default on their green mortgage. With the collection, verification, and published green data included into each green securities bundle.(financial byte).
Energy mortgages are flexible financing tools which can used to finance innovative green building. Providing it meets a recognized green certification and has a legitimate third party green appraisal! Another rapidly emerging market, and possible financing options for the emerging energy mortgage is for a conventionally constructed home to upgrade to green renovations and incorporate energy efficient products. The menu of possible green upgrades could include, but not limited to: programmable thermostats, increased energy efficient insulation, upgraded windows, air sealing, HVAC duct sealing, tank less hot water heaters, Estar appliances, upgrading to a high performance furnace, CFLs, etc. These selected individual upgrades can be custom tailed to your individual home by certified green ecoraters. Designed, implemented and constructed by specialized knowledgeable green contractors!
On March 29, 2016 Fannie Mae introduced Home style energy mortgage to address the falling value of conventional homes in the national marketplace. With new emerging green data now documenting, these older conventional homes take longer to sell, consume more energy and are in less demand from home buyers. Fannie Mae is now offering green underwriters the ability to finance 15% of the as-completed upgraded green appraisal value of your conventional home. One hundred percent of the approved energy mortgage funds must be applied towards the new energy efficient improvements.
Currently over 80% of new home buyers are interested in energy savings in their new home. Emerging research has now indicated the second most popular inquiry from new homeowners is water conservation measures within a home. Not surprisingly with spot water shortages across the entire United States, water is now finally being recognized as a valuable commodity. Seventy percent of surveyed homeowners believe it is acceptable to reuse water from sinks and showers to flush toilets for outdoor irrigation.
This new research now a decade over due, will lead to the future release of the water index. A scale from one to 100 rating the water efficiency within a home/business. This new water tool will be used as a green comp, verified by a third party, comparing the water efficiency from home to home. New terminology will become common public policy in the next decade. Net zero water. This phrase will indicate a home uses as much water as it consumes. This will be accomplished by many homes having a reusable grey water system installed. The water index will become commonplace in the public marketplace. Similar as the MPG rating has been used for decades by the public at large for transportation comparison between vehicles.
Home style energy mortgage provides green financing up to $3,500 for basic water conservation or weatherization improvements which may include: water conservation fixtures, faucets, toilets, smart thermostats, window and door weather stripping, basic air sealing or solar panel system instillation with no energy report required. Higher loan amounts require a HERS report or a DOE energy score report to identify, prioritize and document the selected energy efficient improvements, actual cost for the improvements, and calculate and document the estimated monthly/annual savings associated with the improvements.
Using the energy mortgage as a new low cost financing tool (approximately 4%) conventional homes can now be retrofitted with new solar panel systems. Instead of currently leasing the solar panels, homeowners can now actually own their solar panel system, using the solar appraisal to support the increased green appraisal value of the energy mortgage. Homeowners will now also be able to capture and retain all energy efficient tax benefits. Energy mortgages are currently available for one to four multi family units. Green underwriters in the secondary market, homebuyers and businesses are now embracing sustainability, water conservation and recognizing the improved indoor thermal comfort.
The 15% escrowed funds can be used to install the new solar panel system up to 180 days after the energy mortgage closing. Therefore solar systems will now become the number one requested upgrade for homeowners. The mortgage industry currently originates approximately 4 million mortgages annually. Using the lowest cost of funds available, the energy mortgage between one million to 1.5 million homeowners could have a new solar panel system installed on their home. It took approximately 40 years to install one million solar panel systems across the United States. Using the energy mortgage and its lowest cost of funds, one million solar panel systems could now potentially be installed annually! One million solar installations of homeowner systems at 10K per system, has the potential to add 10 billion annually to America’s aging housing.
This will facilitate the transition from fossil fuel energy to renewable energy nationwide in American homes. The Department of veterans affairs offers the VA energy mortgage through its own Home Loan Guaranty Program(HLGP). More commonly known as the G.I. bill. This specialized version of the Energy mortgage offers incomparable benefits for America’s veterans. This green underwriting includes: 100% financing with no down payment. Below market FHA, Fannie Mae, Freddie Mac rates. Also permitting below average credit scores(FICO). The VA energy mortgage is available for: refinancing, renovations or new home purchases. You can learn more about the vaeem here.
Freddie Mac’s version of the Energy mortgage is available for single family new construction, manufactured homes and energy efficient upgrades for older conventional properties. Fixed rate, Arm’s and cash out are available financing terms. Flexible green underwriting up to 97% LTV or 105% Total loan to value. Which includes subordinate financing. IE: green Heloc. Also permitted is 45% higher debt to income and expense to income ratios. This allows the homeowner to qualify for a larger energy mortgage loan amount! Thereby allowing the homeowner to purchase a green certified home at no additional cost.
Add in the green appraisal resale value and the green certified home actually costs less than a conventional home! This is where the entire nation has failed for the last decade. Every single vertical industry has been unable to connect the dots, properly document and communicate the increased intrinsic monetary value of certified green communities to the home buying public! This has allowed the nebulous label green washing to improperly arise and confuse the public as to what actually constitutes green certification. Eventually leading to the current false perception that certified green construction costs more.
Freddie Mac (GSE) has introduced its own multifamily green advantage financing. Offering green up or green up plus financing. A green mortgage designed to upgrade older properties to become more energy and water efficient. After a selected property receives a green assessment, evaluation from a third party ecorater, projected water and energy savings are at minimum of 15%. Freddie Mac will increase the green mortgage loan amount up to 50% of the projected energy and water savings. To be eligible for green up plus the property analysis is based upon an ASHRAE level 2 upgrade. Under green up plus Freddie Mac will increase the green mortgage loan amount to up to 75% of the projected energy and water savings. These savings will now be included into the green mortgage underwriting. Under both programs the borrower will be reimbursed up to $3,500 for the energy report.
A green rebate is also offered if the green certified property has an energy Star score. Freddie Mac has rate locked over 500 million dollars in the first month of offering the green rebate program. Recognizing the pent up demand for the greenmortgage market, Freddie anticipates of over 3 billion dollars in green mortgage underwriting in 2017. Fannie Mae who also guarantees all types of mortgages on the secondary market by providing liquidity for underwriters to originate mortgages for home buyers/commercial recently instituted a program specifically designed for commercial green mortgages. Fannie Mae is now offering two separate commercial green mortgage programs called green initiative featuring Green preservation plus and green rewards.
Both of these green initiative financing is geared towards multi family green financing. Green rewards and green preservation provides financing for multi family buildings 10 years old or more to upgrade their conventional real estate to energy and water efficient green buildings. Fannie’s green rewards program will underwrite up to 75% of the conventional buildings projected savings and up to 25% of the tenant cost savings. This results in a 5% increase in the green mortgage origination amount! Fannie Mae also offers generous green underwriting guidelines which include: a price break for a building that has a green certification, up to 85% loan to value ratio, and debt coverage lowered to 1.15. Also included is a free ASHRE level 2 energy audit. Fannie’s delegated lending model is now selling single asset green MBS securities on the secondary market.
In the first 7 months of 2016 Fannie Mae has processed more than 1.2 billion dollars in the commercial green mortgage market. Through the third quarter of 2017 Fannie Mae has now processed more than 14 billion dollars in multifamily green MBS securities.
Both Freddie and Fannie GSE programs are currently evolving to provide liquidity in the secondary markets. Due to the tremendous volume of interest in the green mortgage market both GSE’s will now focus on the green underwriting market. The federal housing finance agency (FHFA) who now overseas Fannie and Freddie has exempted greenmortgages from the current financing cap of 36 billion dollars. For the entire year of 2016 Fannie Mae has issued 3.5 billion dollars in multifamily green mortgages. This is still a small step in introducing green MBS securities to the secondary market. Fannie Mae issued over 50 billion dollars in generic MBS securities for the entire year 2016.
Lets remember that there is now third party documented evidence that energymortgages are 30% less likely to go into default! As the energy efficient and water savings are calculated into the green mortgage underwriting. This now compensates for fluctuating energy and water prices in different regions of the country which varies widely! This type of green risk underwriting is now accounted for, documented, and compensated in the sale of green securities on the worldwide market. This is not green washing or to be confused with voodoo economics, as the smart supply line is third party verified by the green appraiser, green broker, green policyholder, green ira and green securities!
FHA (GSE) also offers homeowners energy mortgage/green mortgage financing benefits. FHA offers energy mortgage insurance premium(MIP) reductions on multi family green certified structures. The MIP can be reduced from 75 basis points all the way down to 25 basis points. The structure must be green certified or certified to 75 or above on the Energy Star scale, verified by a green appraiser, or third party ecorater. First time homeowners can purchase a green home for as little as 3.5% down payment. Fifteen and thirty year green mortgage amortizations are available. MIP insurance and closing points can be financed into the energy mortgage. Debt to value ratios stretched allowing up to 250,000 more homeowners can now qualify for an energy mortgage! Recognizing the financial benefits of energy efficiency and water efficiency all three green mortgage GSE agencies programs now offer preferred pricing and flexible green underwriting borrowing terms.
Housing and Urban Development (Hud) up to 40 basis points, Fannie Mae up to 33 basis points and Freddie Mac up to 15 basis points on each negotiated green mortgage origination. With liquidity now firmly established in the secondary market consumers and business will now have a variety of green mortgage financing options available. In November 2010 the Department of Energy (DOE) and the Lawrence Berkley National Laboratory developed the Home energy score scale. (HES).
A simple scale designed for homeowners, from one to ten to represent an individual homes energy score. Using the scale the number one represents the home needing major energy improvements and the number ten representing the home needing no energy improvements. Each point on the scale responds to a specific source BTU level. Natural energy values that are used to calculate the total energy value for natural gas, propane gas, electricity, and fuel oil consumed by the home.
Using the US Department of Energy home energy scoring tool, with approximately forty different data points an independent energy rater collects specific data from the home and estimates a homes annual energy consumption. The DOE software then converts this energy use into a numerical score from one to ten. The home energy score evaluates a home on its expected performance. The HES is not tied to any specific type of recognized building code. This federally recognized numerical score compares homes in an apples to apples approach regardless of location of the home within a region or specific climate zones. The HES is an asset rating. Similar as the miles per gallon (MPG) is an energy rating to compare automobile energy consumption between automobiles of all types. This Federal numerical score reflects a residential homes structure and mechanical systems. The HES can be used in conjunction with the green appraisal and used as a specific green underwriting tool of greenbrokers for a common frame of reference for comparison of all types of real estate.
A new partnership has been established between HUD, FHA and the DOE. Starting in 2016 all constructed homes that score a number six (6) or higher on the HES scale will now be eligible for increased stretch ratios in the green underwriting processing for the energymortgage. The borrowers debt to income ratios will be increased from 31% on the front end on the loan and 43% on the back end of the loan to 33% and 45% respectively. Thereby by now using the specialized financing tools of the Energymortgage.com borrowers can now S.T.R.E.T.C.H. their mortgage power when purchasing an energy efficient green communities home.
Another burgeoning flexible green financial underwriting tool that will be emerging in the near future and become common place will be the home equity line of credit. (green Heloc).This flexible green financial tool can also be used for energy efficient green renovations. The green Heloc will be offered as a revolving line of credit in the second mortgage position on the green neighborhood home. The energy mortgage will be in first position securing the green communities home.
These specialized green financing tools will prove to be valuable as home interest is tax deductible compared to alternative financing methods. Additional financial benefits to the sustainable home owner include federal, state and local green tax incentives to help finance selected energy improvements. The green mortgage and the green heloc will be positioned in the marketplace offering conventional constructed homes the necessary financing tools to upgrade to energy efficient green renovations. As convential homes loose market share and appraised value, retrofitting these conventional homes with green upgrades will be another emerging market for the green contractors in the nations continued effort to becoming a sustainable green nation!