SAVE Act would factor energy performance into mortgage lending

This guest post is from passive house veteran John Semmelhack, CPHC®, PHIUS Trainer, and PHIUS+ Rater Manager.

Hello everyone, here’s a legislative update  that everyone in the high-performance building community should find exciting. An important bill is making its way through Congress. Called the SAVE Act, it’s summarized in the following excerpt from  a recent press release from one of PHIUS’ partner organizations, RESNET:

On June 6, 2013, Senators Michael Bennet (D-CO) and Johnny Isakson (R-GA) reintroduced the Sensible Accounting to Value Act of 2013 (the SAVE Act).  The legislation will rationalize the American mortgage underwriting process by including a home’s expected energy cost savings when determining the value and affordability of energy efficient homes.  To view the legislation go to SAVE Act.

 Section 4 (c) (2) (C) (i) of the bill recognizes RESNET and Home Energy Ratings stating that an option to determine energy savings would be “in accordance with the Residential Energy Service Network’s Home Energy Rating System (commonly known as ‘‘HERS’’) by an individual certified by the Residential Energy Service Network.”

You may remember that similar legislation was introduced last year, but that it died in the Senate. This time around, however, both the National Association of Realtors and National Association of Homebuilders worked with the Senate to craft the bill. That means it has a very good chance of passing.

This is a pretty big deal for prospective passive house homeowners! Here’s why:

For homes with HERS ratings (standard on PHIUS+ projects), the loan underwriter would be required to add the projected energy savings to the homeowner’s income when conducting a debt-to-income analysis. This addition would likely range from $1,500-$2,000 for typical PHIUS+ houses. The lender or appraiser would also be required to add the present value of the energy savings (over the life of the loan) to the value of the home when conducting a loan-to-value analysis. For instance, the present value of 30 years’ worth of $2,000 annual energy savings (at 4% discount rate) is about $35,000. That is to say, the appraiser/lender would need to add $35,000 to the value of the house to account for the energy savings. A home that would otherwise be appraised at $350,000 would now be valued at $385,000 for this analysis.

For information on the SAVE Act – go to

Passage would mark a giant step toward making passive building mainstream. If you want your voice to be heard, contact your Senators and Representative – especially if your Senator sits on the Banking, Housing and Urban Affairs committee, where the bill currently sits.