energy star residential branch
u.s. environmental protection agency
by darrick meneken
THE DEMAND FOR ENERGY-EFFICIENT MORTGAGES WILL ESCALATE AS ENERGY
COSTS INCREASE, according to Brian Ng of the U.S. Environmental Protection Agency’s
ENERGY STAR program ( energystar.gov). Ng shares more about how he works to educate mortgage brokers about energy-efficient loan products.
What makes an energy-efficient mortgage?
It’s a mortgage homebuyers can obtain if they’re either buying a home that’s already energy-efficient or a home that needs energy-efficiency improvements. Energy-efficient mortgages
count energy savings as income, thereby allowing borrowers to qualify for a slightly larger
Where can mortgage brokers find energy-efficient mortgage products?
Fannie Mae and Freddie Mac offer energy-efficient mortgages. So do the Federal Housing Administration and the U.S. Department of Veterans Affairs. Also, some national and local banks
have developed their own green mortgage programs, which typically involve either an interest-rate reduction or a closing-cost credit.
Why should brokers care about these programs?
As energy costs go up, the demand for energy-efficiency is going to increase, and that is going
to drive lenders and brokers to want to get involved in offering some sort of special financing
for energy-efficiency measures.
Do energy-efficient mortgages require special steps?
Typically, borrowers have to get what’s called a home-energy rating done on the home. A home-energy rating is an indicator of the level of energy-efficiency of a home. From that energy-rating
report, the home-energy rater calculates the present value of the energy savings of the home.
It’s that value that lenders can add to the mortgage transaction. If a home already has the
ENERGY STAR label, the borrower can get an energy-efficient mortgage. The energy-efficient
mortgage, however, is not exclusive to the ENERGY STAR label.
Do we know how many U.S. borrowers have energy-efficient mortgages?
I know the number is extremely small relative to the total number of mortgages that have been
Why aren’t they more popular?
You have the extra step of getting a home-energy rating done on the home, and you have the
additional cost of paying for that rating. Lenders and borrowers often don’t want to do anything
that slows down the transaction. But the idea is that the energy savings that borrowers get
more than offsets the additional monthly mortgage payment.
Darrick Meneken is an associate editor at Scotsman Guide.
Reach him at (800) 297-6061 or firstname.lastname@example.org.
… in April’s Scotsman Guide
We present Scotsman Guide Top
Originators 2009, our ranking
of the nation’s top-producing
mortgage professionals by:
… and much more.
Online? Check out current and past editions of
Scotsman Guide at scotsmanguide.com.
TIP OF THE MONTH
Plan on innovation
Mortgage brokers should create and
maintain a blueprint outlining how they
focus their resources and how they
would like to do so in the future. This
plan should assess business practices
and identify areas of improvement. It also
should allow them to respond to market
conditions. Innovation is the product
of discomfort, and brokers should find
ways to work smarter in the face of market challenges.
— JIM FELDMAN, SHIF T HAPPENS,
ByGriff Straw president solidifi u.s. APPRAISERS: WHAT TO WATCH FOR
Just because originators cannot order appraisals directly for many loans doesn’t mean they can’t benefit
from appraisal metrics to ensure they are receiving
good performance from appraisers. Here are a few
items to note when examining your or your lender’s appraiser or appraisal-management company (AMC).
Turnaround time: • Your borrowers are almost always
in a hurry. Even if they’re not, you are. Appraisals
generally are the factor most-responsible for slowing
down the loan process, which frequently needs the
property value before moving forward. By tracking
the turnaround time on individual appraisers, AMCs
can help lenders and brokers avoid certain providers
that are routinely slow.
Thoroughness and completeness: • Software helps
appraisers find many oversights and mistakes —
but not all. For example, if the data field for “floor”
expects a word such as “hardwood” and instead is
filled with a number, the program might not pick up
the error. Metrics accounting for the number of mistakes caught in appraisal reports help ascertain who
does good work and who returns sloppy reports.
Cost: • Not all appraisals cost the same, even if they
are mainstream and “vanilla.” Although the borrower
generally pays the appraisal fee, appraisal costs
could become a competitive issue in light of the Federal Housing Administration’s (FHA’s) new appraiser-independence rules. Tracking appraisal-cost trends
with providers over the course of a few months may
reveal conditions that could put you at a disadvantage, especially compared to large competitors who
can afford to subsidize appraisal costs.
Issues and revisions: • How often are there issues with
values, distance to comparables and sizes of adjustments listed on appraisals? If one appraiser seems
to be the focus of repeated concerns on these issues, it may indicate a problem. If a particular branch
or office has many issues with appraisals from a variety of appraisers, this may indicate problems with
that office’s staff or with the process itself.
Ask if your or your lender’s appraiser or AMC has these
performance metrics available. These appraisal outfits
also may have their own method of scoring appraisers.
Remember: You can have a say in ensuring your deals
are handled by the best-available talent. Having the information you need to back up your concerns is key.
Also: In January’s Valuation Insight ( sctsm.in/3918),
I mentioned that AMC fees are disclosed separately
from appraiser fees on the U.S. Department of Housing and Urban Development (HUD)-1 as per the new
FHA rules. A reader correctly noted that FHA’s FAQs
on the subject ( sctsm.in/FAQappr) indicate that HUD
is not asking for these fees to be broken out. But HUD
cannot have it both ways: If the appraisal fee must
be shown separately, and if an AMC fee is charged,
that AMC fee therefore must be disclosed elsewhere
on the settlement statement.
Griff Straw is president of Solidifi U.S., a leading technology-enabled appraisal-management company and provider of col-lateral-risk-management and data-analytic services. He writes a
monthly column on valuation issues for Scotsman Guide. Straw
is a 30-year mortgage banker, a former Freddie Mac technology
executive and a Mortgage Bankers Association Master Faculty
member. Reach him at email@example.com or (703) 496-7579.