Energy Reports Could Affect Loan Approval
Could a bill known as the SAVE Act put more of an emphasis on energy efficient structures? Coupled with a similar piece of legislation, the Better Buildings Act, this would require lenders to consider new criteria when processing applications for home loans.
This includes, according to the Northern Colorado Business Report, having lenders communicate directly with prospective homeowners as to the energy efficiency of potential homes.
Specifically, if applicants provided energy reports showing that a home is more energy efficient than average for the area, lenders would have to consider the savings when calculating debt-to-income and loan-to-value ratios. This could affect whether particular loans are seen as unacceptably risky.
And incentives would encourage them to report on the energy state of their home, while making these reports voluntary, as the source noted. This is a major change that has been introduced to the most recent version of this bill.
In addition to arguing that this could lead to more home construction, more jobs, and more cost efficiency, a press release from U.S. Senator Michael Bennett of Colorado commented on the importance of energy expenditures as a portion of housing expenses. As he puts it in the release, a 30-year mortgage works out to more than $70,000 spent solely on energy costs over time, on average.
“There’s no reason mortgage lenders shouldn’t take into account the thousands of dollars homeowners spend annually on their energy bills when determining the size of a home loan,” Bennett said.
While this still has yet to be approved, banks and other lenders should be taking in the whole situation when processing applications. A credit risk management system can help by giving you the chance to evaluate cases the specificity they require.
