Mortgage Banking Meets Earth Day

BLOG VIEW: Did you know that this Thursday, April 22, is Earth Day? That annual celebration of protecting the environment first took place in 1970 – and at the risk of being flippant, one could easily state that the global environment is a lot less healthy today than it was four decades ago.

I thought about Earth Day following a recent conversation I had with Erik Nore, director of homeownership at the New Mexico Mortgage Finance Authority. That agency has added an environmental hue to its origination endeavors through the Green Initiative, which encourages green building, energy retrofits and energy-efficiency practices to all of its loan programs.

According to Nore, the Green Initiative is designed to create savings that are both ecological and economical. ‘Everything we do incorporates green standards that make homes energy-efficient,’ he says. ‘This is done to protect consumers and retain scarce resources.’

The New Mexican example applies not only to residential and commercial properties, but also to affordable-housing developments – a sector that rarely raises environmental considerations. But the logic behind that aspect of the Green Initiative is both ecological and economical.

First, the agency estimates that energy costs often constitute up to 25% of the monthly budget for low- and moderate-income homeowners, so energy efficiency is clearly a cost-effective approach. Furthermore, green construction places a strong emphasis on the use of durable building materials and construction techniques. As a result, there will be fewer needs for building repairs, which is another welcome benefit for those living on tight budgets.

Even better, the occupants can be assured that they are living in a healthier environment, because green building also focuses on non-toxic construction materials. This ultimately translates into fewer medical visits relating to health problems with the building materials. (Can you say ‘Chinese drywall’?) All told, it is literally a win-win situation.

However, very few state housing finance agencies are following New Mexico's lead in offering their own Green Initiative. In fairness, you cannot blame them – the May edition of Secondary Marketing Executive details the myriad of problems facing these agencies today, and promoting a healthier environment is not at the top of their lists.

But if you are looking for a federal version of the Green Initiative, forget it. The federal ENERGY STAR mortgage program, which allows borrowers to lower their energy consumption while making home improvements to reduce their property's overall carbon emissions, is only available in 18 states. The Federal Housing Administration and the Department of Veterans' Affairs have energy-efficient mortgage programs, but that product only represents a sliver of both agencies' overall mortgage origination.

As for the private sector, energy-efficient mortgages have been around for years, but the product only occupies less than 1% of the total home-loan market. It seems that no lender wants to take the lead in jump-starting this product into a major economic force.

The lack of interest here is puzzling. With a glut of inventory on the market, an energy-efficient house would clearly be more attractive to potential borrowers. And while housing prices may be tumbling, energy prices are going in the opposite direction. This is particularly acute in the colder climate sections of the country, where winter inevitably brings about teeth-chattering from both the bitterness of the frigid temperatures and the pain of paying out costly heating bills.

It is too late to coordinate a special push for Green Initiative-style programs and energy-efficient mortgages in time for the upcoming Earth Day. But at the same time, we shouldn't put these considerations back in the drawer until the 2011 edition of Earth Day rolls around. The sooner that the industry gets serious about this subject, the sooner it will begin to harvest a new green crop.

– Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b]

[i] (Please address all comments regarding this opinion column to[/i]


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