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  Weststar | GEM Newsletter August  2015 |




Into The Future – Green Mortgage Finance: What’s up with Energy Efficient Mortgages 

What’s a Green Mortgage and where can you find one? 


 That’s a loaded question these days. Unfortunately, there is no verifiable, transparent answer.  Web searches regarding the subject of green mortgages seem to be caught in a time warp, with dated information (up to a decade ago) from the old Fannie Mae and FHA Energy Efficient Mortgage (EEM) guidelines still abundantly popping up; nothing new, and rather disappointing.

 Energy and building innovation continues to evolve rapidly. Yet we are patiently (or not) waiting for the financial industry; consistently trailing behind in adaption to high-performance lending practices that incentivize high-performance building markets. Multiple websites with links to information regarding energy mortgages date back to 2001. Or worse, the green links send you to conventional lending websites that don’t have anything to do with green lending, and offer the same generic loan programs.  What about financing that actually rewards those that are doing the right thing?

For most Americans trying to find a green mortgage company who gets it (knowledgeable and passionate about the Built Environment) and gives it (offers incentives and recognizes green premium value) the process can be discouraging. Finding a lender that walks the talk and demonstrates a strong sense of corporate culture and environmental leadership is often an anomaly.                                                          

A good example of financial market non-adaption in the lending industry is Green Energy Money’s E-Book for Residential Homes, first published in 2011.  This book is still relevant today, due to the slow evolution and traction of green financing mechanisms.  The government has tried to jumpstart and lead financial markets with tax incentives and energy efficient mortgages (EEMs), but many challenges have stalled or ended in market failures.

Fannie Mae did offer the Energy Efficient Mortgage (EEM) loan until several years ago. The guidelines allowed expanded debt ratios of 2-3%; you could qualify for between $4k - $6k more for upgrades.  However, the maximum loan increase was capped at $8000 for energy efficient features. They even adopted an appraised value, dollar amount per energy savings formula; $15 for every dollar of energy saved ($1000) (*$15=$15,000). The formula didn’t work due to a guideline that allowed either the $8000 maximum or the appraised value, whichever was lower; and since energy upgrades cost more than they do today.  This formula could be an acceptable baseline and standard calculation model; GEM’s Free IPV Calculator reflects an estimated present value of $1000 energy savings @ 4% is $13,762.

FHA still offers EEM programs, but lender participation has been extremely low due to the labor intensity involved in processing and limited number of approved builder-project managers.  Few lenders have been willing to take on the additional construction risk and processing flow.  The 203k streamlined loan product (existing homes only, up to $35k) allows up to 110% of costs to be applied to the loan and many lenders have opted to use this program as an EEM because it is easier to qualify and process.  In good news, FHA has changed their guidelines to *allow solar financing, up to 20% over the statutory loan limit for solar upgrades.  Check new FHA handbook for guidelines.          *(available September 2015)


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The IECC Building Code ® is a model energy building code produced by the International Code Council ® Residential IECC has been adopted in over 47 states (4 states have adopted IECC 2015 so far, CA, TX, MD, WA).  States and municipalities require builders to build efficiently and the new 2015 IECC will require them to build to high-performance standards.  These energy efficiency standards are pretty darn close to net-zero ready homes; they can come close to net-zero by adding solar.  This is good news for homeowners wanting to buy a green home. 

 Builders and homebuyers in states and municipalities adopting the 2015 IECC Code (many states jumping from 2006 to 2015 will feel the pinch most)  will undoubtedly notice a substantial price increase (estimated at $3k-6k per home) as builders learn to build within the constraints of higher efficiency codes and lower the costs through trial and error.)  


The residential International Energy Conservation Code (IECC) guidelines offer several ways for builders to meet code compliance efforts.  Now they can obtain a HERS Audit and must meet the Energy Rating Index (ERI)criteria  . The ERI provides flexibility for builders and a way to demonstrate the miles-per-gallon energy reduction.  

Homes built to 2015 IECC guidelines are expected to increase efficiency by a minimum of 30%; an increase of over 15% from 2012 IECC.   

We can now see how government mandates are creating more high-performance building stock and should drive green premium pricing on new homes as more buyers compare energy features.  Not so good news for older homes that are not efficient and will receive a brown discount for deferred maintenance risk and higher operating costs.  



The latest version of the energy code offers a new way to achieve significant energy savings while providing builders with more flexibility.    By Ryan Meres

This is the first of a two-part series on the 2015 IECC and what it means for home ieccbuilders.Are you ready for the 2015 International Energy Conservation Code (IECC)? Changes to the 2012 code will make the 2015 version the most energy-saving code yet. But, as with any building code, the 2015 IECC has to be adopted by a state or local jurisdiction before it takes effect. Roughly half of the country is currently under the 2009 IECC, but many states and cities are considering the 2015 IECC as their next energy code. This will affect home builders across the country. 

In terms of overall energy savings, the 2015 IECC is not significantly different than the 2012 version. It is, however, roughly 15 percent better than the 2009 IECC. This will mean a jump in energy targets is in the future for a number of states.   See More


Fannie Mae Lowers Mandatory Waiting Period After Bankruptcy, Short Sale, & Pre-Foreclosure 


Posted JULY 27, 2015 

watchIt's getting easier to get approved for a mortgage.Following in the FHA's footsteps, Fannie Mae has reduced the mandatory waiting period for a mortgage after bankruptcy, short sale, or pre-foreclosure. Borrowers no longer need to wait 4 years before re-applying to get a mortgage.

Borrowers can now re-apply for a loan just two years after a bankruptcy, short sale, or pre-foreclosure. This is one year longer than the FHA's minimum waiting period via its FHA Back to Work program, and a major improvement for conforming mortgage borrowers nationwide.


High-Performance Product Feature of the Month 

Structured insulated panels (SIPs) are now a very good option for many existing homes.  SIPs can be used to insulate the sides of older homes that have vinyl siding; doesn’t’ work for homes with stone or brick siding. They can be installed on the exterior of the home and don’t disrupt the occupants.  They can even be used for roof areas and offer a higher efficiency upgrade than insulation, but will cost more.  For owners looking to achieve a near-net zero deep retrofit this product could make a dramatic difference to the home’s performance.  Check out the product here for more information. 

Green Tip of the Month

The U.S. Department of Energy estimates that 60 million Americans have BBQs on the Fourth.These millions of BBQs release some 225,000 metric tons of carbon dioxide, burn the equivalent of 2,300 acres of forest and consume the same amount of energy as the city of Flagstaff, Arizona, uses in a year. And those are just the stats for Fourth of July cookouts. With environmental consequences like these, what's a griller to do? 

Copyright © Green Energy Money, Inc. All rights reserved.

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