Sensible Accounting to Value Energy Act of 2014 - Directs the Secretary of Housing and Urban Development (HUD) to develop and issue guidelines for all federal mortgage agencies (including the Federal National Mortgage Association [Fannie Mae], the Federal Home Loan Mortgage Corporation [Freddie Mac], and any affiliates) to implement enhanced loan eligibility requirements, for use when testing the ability of a loan applicant to repay a covered loan, that account for the expected energy cost savings for a loan applicant at a subject property.
Directs the Secretary to issue guidelines for how covered agencies shall determine: (1) the maximum permitted loan amount based on the value of the property for all covered loans made on properties with an energy efficiency report, and (2) the estimated energy savings for properties with such a report.
Amends the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to require standards for the performance of real estate appraisals in connection with federally related transactions to require at a minimum that state certified and licensed appraisers have timely access, where practicable, to information from the property owner and the lender that may be relevant in developing an opinion of value regarding the energy- and water-saving improvements or features of a property.
Applies the requirement of state certified appraisers to transactions involving any real property on which the appraiser makes adjustments using an energy efficiency report.
Directs the Secretary to establish an advisory group on the implementation of the enhanced energy efficiency underwriting criteria established in this Act.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4615 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 4615
To improve the accuracy of mortgage underwriting used by Federal
mortgage agencies by ensuring that energy costs are included in the
underwriting process, to reduce the amount of energy consumed by homes,
to facilitate the creation of energy efficiency retrofit and
construction jobs, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 8, 2014
Mr. King of New York (for himself, Mr. Perlmutter, Mr. McKinley, Mr.
Welch, and Mr. Peters of California) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To improve the accuracy of mortgage underwriting used by Federal
mortgage agencies by ensuring that energy costs are included in the
underwriting process, to reduce the amount of energy consumed by homes,
to facilitate the creation of energy efficiency retrofit and
construction jobs, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Sensible Accounting to Value Energy
Act of 2014''.
SEC. 2. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Covered agency.--The term ``covered agency''--
(A) means--
(i) an executive agency, as that term is
defined in section 102 of title 31, United
States Code; and
(ii) any other agency of the Federal
Government; and
(B) includes any enterprise, as that term is
defined under section 1303 of the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992
(12 U.S.C. 4502).
(2) Covered loan.--The term ``covered loan'' means a loan
secured by a home that is issued, insured, purchased, or
securitized by a covered agency.
(3) Homeowner.--The term ``homeowner'' means the mortgagor
under a covered loan.
(4) Mortgagee.--The term ``mortgagee'' means--
(A) an original lender under a covered loan or the
holder of a covered loan at the time at which that
mortgage transaction is consummated;
(B) any affiliate, agent, subsidiary, successor, or
assignee of an original lender under a covered loan or
the holder of a covered loan at the time at which that
mortgage transaction is consummated;
(C) any servicer of a covered loan; and
(D) any subsequent purchaser, trustee, or
transferee of any covered loan issued by an original
lender.
(5) Secretary.--The term ``Secretary'' means the Secretary
of Housing and Urban Development.
(6) Servicer.--The term ``servicer'' means the person or
entity responsible for the servicing of a covered loan,
including the person or entity who makes or holds a covered
loan if that person or entity also services the covered loan.
(7) Servicing.--The term ``servicing'' has the meaning
given the term in section 6(i) of the Real Estate Settlement
Procedures Act of 1974 (12 U.S.C. 2605(i)).
SEC. 3. FINDINGS AND PURPOSES.
(a) Findings.--Congress finds that--
(1) energy costs for homeowners are a significant and
increasing portion of their household budgets;
(2) household energy use can vary substantially depending
on the efficiency and characteristics of the house;
(3) expected energy cost savings are important to the value
of the house;
(4) the current test for loan affordability used by most
covered agencies, commonly known as the ``debt-to-income''
test, is inadequate because it does not take into account the
expected energy cost savings for the homeowner of an energy
efficient home; and
(5) another loan limitation, commonly known as the ``loan-
to-value'' test, is tied to the appraisal, which often does not
adjust for efficiency features of houses.
(b) Purposes.--The purposes of this Act are to--
(1) improve the accuracy of mortgage underwriting by
Federal mortgage agencies by ensuring that energy cost savings
are included in the underwriting process as described below,
and thus to reduce the amount of energy consumed by homes and
to facilitate the creation of energy efficiency retrofit and
construction jobs;
(2) require a covered agency to include the expected energy
cost savings of a homeowner as a regular expense in the tests,
such as the debt-to-income test, used to determine the ability
of the loan applicant to afford the cost of homeownership for
all loan programs; and
(3) require a covered agency to include the value home
buyers place on the energy efficiency of a house in tests used
to compare the mortgage amount to home value, taking
precautions to avoid double-counting and to support safe and
sound lending.
SEC. 4. ENHANCED ENERGY EFFICIENCY UNDERWRITING CRITERIA.
(a) In General.--Not later than 1 year after the date of enactment
of this Act, the Secretary shall, in consultation with the advisory
group established in section 7(b), develop and issue guidelines for a
covered agency to implement enhanced loan eligibility requirements, for
use when testing the ability of a loan applicant to repay a covered
loan, that account for the expected energy cost savings for a loan
applicant at a subject property, in the manner set forth in subsections
(b) and (c).
(b) Requirements To Account for Energy Cost Savings.--The enhanced
loan eligibility requirements under subsection (a) shall require that,
for all covered loans for which an energy efficiency report is
voluntarily provided to the mortgagee by the mortgagor, the covered
agency and the mortgagee shall take into consideration the estimated
energy cost savings expected for the owner of the subject property in
determining whether the loan applicant has sufficient income to service
the mortgage debt plus other regular expenses. To the extent that a
covered agency uses a test such as a debt-to-income test that includes
certain regular expenses, such as hazard insurance and property taxes,
the expected energy cost savings shall be included as an offset to
these expenses. Energy costs to be assessed include the cost of
electricity, natural gas, oil, and any other fuel regularly used to
supply energy to the subject property.
(c) Determination of Estimated Energy Cost Savings.--
(1) In general.--The guidelines to be issued under
subsection (a) shall include instructions for the covered
agency to calculate estimated energy cost savings using--
(A) the energy efficiency report;
(B) an estimate of baseline average energy costs;
and
(C) additional sources of information as determined
by the Secretary.
(2) Report requirements.--For the purposes of paragraph
(1), an energy efficiency report shall--
(A) estimate the expected energy cost savings
specific to the subject property, based on specific
information about the property;
(B) be prepared in accordance with the guidelines
to be issued under subsection (a); and
(C) be prepared--
(i) 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, unless the Secretary finds
that the use of HERS does not further the
purposes of this Act; or
(ii) by other methods approved by the
Secretary, in consultation with the Secretary
of Energy and the advisory group established in
section 7(b), for use under this Act, which
shall include a third-party quality assurance
procedure.
(3) Use by appraiser.--If an energy efficiency report is
used under subsection (b), the energy efficiency report shall
be provided to the appraiser to estimate the energy efficiency
of the subject property and for potential adjustments for
energy efficiency.
(d) Required Disclosure to Consumer for a Home With an Energy
Efficiency Report.--If an energy efficiency report is used under
subsection (b), the guidelines to be issued under subsection (a) shall
require the mortgagee to--
(1) inform the loan applicant of the expected energy costs
as estimated in the energy efficiency report, in a manner and
at a time as prescribed by the Secretary, and if practicable,
in the documents delivered at the time of loan application; and
(2) include the energy efficiency report in the
documentation for the loan provided to the borrower.
(e) Required Disclosure to Consumer for a Home Without an Energy
Efficiency Report.--If an energy efficiency report is not used under
subsection (b), the guidelines to be issued under subsection (a) shall
require the mortgagee to inform the loan applicant in a manner and at a
time as prescribed by the Secretary, and if practicable, in the
documents delivered at the time of loan application of--
(1) typical energy cost savings that would be possible from
a cost-effective energy upgrade of a home of the size and in
the region of the subject property;
(2) the impact the typical energy cost savings would have
on monthly ownership costs of a typical home;
(3) the impact on the size of a mortgage that could be
obtained if the typical energy cost savings were reflected in
an energy efficiency report; and
(4) resources for improving the energy efficiency of a
home.
(f) Limitations.--A covered agency shall not--
(1) modify existing underwriting criteria or adopt new
underwriting criteria that intentionally negate or reduce the
impact of the requirements or resulting benefits that are set
forth or otherwise derived from the enhanced loan eligibility
requirements required under this section; or
(2) impose greater buy back requirements, credit overlays,
insurance requirements, including private mortgage insurance,
or any other material costs, impediments, or penalties on
covered loans merely because the loan uses an energy efficiency
report or the enhanced loan eligibility requirements required
under this section.
(g) Applicability and Implementation Date.--Not later than 3 years
after the date of enactment of this Act, and before December 31, 2016,
the enhanced loan eligibility requirements required under this section
shall be implemented by each covered agency to--
(1) apply to any covered loan for the sale, or refinancing
of any loan for the sale, of any home;
(2) be available on any residential real property
(including individual units of condominiums and cooperatives)
that qualifies for a covered loan; and
(3) provide prospective mortgagees with sufficient guidance
and applicable tools to implement the required underwriting
methods.
SEC. 5. ENHANCED ENERGY EFFICIENCY UNDERWRITING VALUATION GUIDELINES.
(a) In General.--Not later than 1 year after the date of enactment
of this Act, the Secretary shall--
(1) in consultation with the Federal Financial Institutions
Examination Council and the advisory group established in
section 7(b), develop and issue guidelines for a covered agency
to determine the maximum permitted loan amount based on the
value of the property for all covered loans made on properties
with an energy efficiency report that meets the requirements of
section 4(c)(2); and
(2) in consultation with the Secretary of Energy, issue
guidelines for a covered agency to determine the estimated
energy savings under subsection (c) for properties with an
energy efficiency report.
(b) Requirements.--The enhanced energy efficiency underwriting
valuation guidelines required under subsection (a) shall include--
(1) a requirement that if an energy efficiency report that
meets the requirements of section 4(c)(2) is voluntarily
provided to the mortgagee, such report shall be used by the
mortgagee or covered agency to determine the estimated energy
savings of the subject property; and
(2) a requirement that the estimated energy savings of the
subject property be added to the appraised value of the subject
property by a mortgagee or covered agency for the purpose of
determining the loan-to-value ratio of the subject property,
unless the appraisal includes the value of the overall energy
efficiency of the subject property, using methods to be
established under the guidelines issued under subsection (a).
(c) Determination of Estimated Energy Savings.--
(1) Amount of energy savings.--The amount of estimated
energy savings shall be determined by calculating the
difference between the estimated energy costs for the average
comparable houses, as determined in guidelines to be issued
under subsection (a), and the estimated energy costs for the
subject property based upon the energy efficiency report.
(2) Duration of energy savings.--The duration of the
estimated energy savings shall be based upon the estimated life
of the applicable equipment, consistent with the rating system
used to produce the energy efficiency report.
(3) Present value of energy savings.--The present value of
the future savings shall be discounted using the average
interest rate on conventional 30-year mortgages, in the manner
directed by guidelines issued under subsection (a).
(d) Ensuring Consideration of Energy Efficient Features.--Section
1110 of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (12 U.S.C. 3339) is amended--
(1) in paragraph (2), by striking ``; and'' and inserting a
semicolon; and
(2) in paragraph (3), by striking the period at the end and
inserting ``; and'' and inserting after paragraph (3) the
following:
``(4) that State certified and licensed appraisers have
timely access, whenever practicable, to information from the
property owner and the lender that may be relevant in
developing an opinion of value regarding the energy- and water-
saving improvements or features of a property, such as--
``(A) labels or ratings of buildings;
``(B) installed appliances, measures, systems or
technologies;
``(C) blueprints;
``(D) construction costs;
``(E) financial or other incentives regarding
energy- and water-efficient components and systems
installed in a property;
``(F) utility bills;
``(G) energy consumption and benchmarking data; and
``(H) third-party verifications or representations
of energy and water efficiency performance of a
property, observing all financial privacy requirements
adhered to by certified and licensed appraisers,
including section 501 of the Gramm-Leach-Bliley Act (15
U.S.C. 6801).
Unless a property owner consents to a lender, an appraiser, in
carrying out the requirements of paragraph (4), shall not have
access to the commercial or financial information of the owner
that is privileged or confidential.''.
(e) Transactions Requiring State Certified Appraisers.--Section
1113 of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (12 U.S.C. 3342) is amended--
(1) in paragraph (1), by inserting before the semicolon the
following: ``, or any real property on which the appraiser
makes adjustments using an energy efficiency report''; and
(2) in paragraph (2), by inserting after ``atypical'' the
following: ``, or an appraisal on which the appraiser makes
adjustments using an energy efficiency report.''.
(f) Protections.--
(1) Authority to impose limitations.--The guidelines to be
issued under subsection (a) shall include such limitations and
conditions as determined by the Secretary to be necessary to
protect against meaningful under or over valuation of energy
cost savings or duplicative counting of energy efficiency
features or energy cost savings in the valuation of any subject
property that is used to determine a loan amount.
(2) Additional authority.--At the end of the 7-year period
following the implementation of enhanced eligibility and
underwriting valuation requirements under this Act, the
Secretary may modify or apply additional exceptions to the
approach described in subsection (b), where the Secretary finds
that the unadjusted appraisal will reflect an accurate market
value of the efficiency of the subject property or that a
modified approach will better reflect an accurate market value.
(g) Applicability and Implementation Date.--Not later than 3 years
after the date of enactment of this Act, and before December 31, 2016,
each covered agency shall implement the guidelines required under this
section, which shall--
(1) apply to any covered loan for the sale, or refinancing
of any loan for the sale, of any home; and
(2) be available on any residential real property,
including individual units of condominiums and cooperatives,
that qualifies for a covered loan.
SEC. 6. MONITORING.
Not later than 1 year after the date on which the enhanced
eligibility and underwriting valuation requirements are implemented
under this Act, and every year thereafter, each covered agency with
relevant activity shall issue and make available to the public a report
that--
(1) enumerates the number of covered loans of the agency
for which there was an energy efficiency report, and that used
energy efficiency appraisal guidelines and enhanced loan
eligibility requirements; and
(2) includes the default rates and rates of foreclosures
for each category of loans.
SEC. 7. RULEMAKING.
(a) In General.--The Secretary shall prescribe regulations to carry
out this Act, in consultation with the Secretary of Energy and the
advisory group established in subsection (b), which may contain such
classifications, differentiations, or other provisions, and may provide
for such proper implementation and appropriate treatment of different
types of transactions, as the Secretary determines are necessary or
proper to effectuate the purposes of this Act, to prevent circumvention
or evasion thereof, or to facilitate compliance therewith.
(b) Advisory Group.--To assist in carrying out this Act, the
Secretary shall establish an advisory group, consisting of individuals
representing the interests of--
(1) mortgage lenders;
(2) appraisers;
(3) energy raters and residential energy consumption
experts;
(4) energy efficiency organizations;
(5) real estate agents;
(6) home builders and remodelers;
(7) State energy officials; and
(8) others as determined by the Secretary.
SEC. 8. ADDITIONAL STUDY.
(a) In General.--Not later than 18 months after the date of
enactment of this Act, the Secretary shall reconvene the advisory group
established in section 7(b), in addition to water and locational
efficiency experts, to advise the Secretary on the implementation of
the enhanced energy efficiency underwriting criteria established in
sections 4 and 5.
(b) Recommendations.--The advisory group established in section
7(b) shall provide recommendations to the Secretary on any revisions or
additions to the enhanced energy efficiency underwriting criteria
deemed necessary by the group, which may include alternate methods to
better account for home energy costs and additional factors to account
for substantial and regular costs of homeownership such as location-
based transportation costs and water costs. The Secretary shall forward
any legislative recommendations from the advisory group to Congress for
its consideration.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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