We've written before about turning the mortgage crisis into a green building opportunity, and now we realize that the feds have already taken at least one step in that direction. On July 30, lame duck President Bush signed into law the Housing and Economic Recovery Act of 2008 which few realize contained an incentive for green mortgages.
Green mortgages, also called energy efficient mortgages (EEMs), are decades old in theory, though they have yet to be widely adopted. They allow people to purchase or refinance their principal residence and incorporate the cost of energy efficiency improvements into the mortgage.
Sounds like a good idea, right? And yet, according to the U.S. Department of Energy, the Federal Housing Authority typically only issues about 30,000 EEMs per year. As the agency points out, borrowers must first receive a home energy rating report demonstrating that the energy efficiency improvements are cost effective. After the loan closes, the money for the improvements is placed in an escrow account and is not released until an inspector verifies that the improvements are done and will achieve the desired results. The process is long and not well known.
In response, Section 2902 of the new act requires the Secretary of Housing and Urban Development (HUD) to develop recommendations to eliminate the barriers to the use of EEMs, including the lack of accessible information on such mortgages and a shortage of certified home energy rating services. HUD is to work to streamline the process, and must report recommendations to Congress within six months.
In addition, the act increases the limits for energy efficiency improvements, to nearly 5% of the property value (as opposed to the current cap of $8,000). However, the act does limit the number of energy efficient mortgages to 5% of the number of mortgages insured by HUD during the preceding year.
It's good news for homeowners that green mortgages are receiving more attention and support. Hopefully they will become more mainstream and widely available as the years go on. Find out more from this energy efficient mortgage homeowner guide.
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