Green Mortgages

Source: BIG BUILDER Magazine
Publication date: 2002-03-19

Comfort Zone: Creating a Middle Ground for Green Building and Great Profits

By Alison Rice

Financing has often been the missing piece in green home sales. But attitudes are changing, especially at Fannie Mae. "We want to encourage lenders and builders to be more resource efficient and give the consumer benefits based on the fact that they're spending less on utilities," says Jim Taylor, director of product development in Fannie Mae's housing impact division. "They're a better credit risk to us because they're not spending that money on utilities."

Nationally, Fannie Mae offers an energy-efficient mortgage, which allows a lender to use the estimated monthly utility savings to increase an applicant's buying power and qualify them for a higher-priced home.

Taylor estimates that the lender did about $30 million (on 300 loans) in its first mortgage energy business last year, up from $1 million to $2 million the two previous years. He expects the numbers to jump higher this year as Fannie Mae conducts more marketing and product development.

Some buyers may have a second option: Fannie Mae's home performance power product, which boosts an applicant's monthly income by the home's monthly energy savings. Lower utility cost is just one requirement of this mortgage, which is available only in specific markets. In Albuquerque, N.M., for example, a home must demonstrate energy efficiency and be located within 5 miles of downtown. In Colorado, a home must conserve energy and water.

Fewer than 50 currently offer the green mortgages, according to Fannie Mae. And builders, such financing options are essential to converting green prospects into purchasers. "If you can't qualify for [a green home], [the energy savings] doesn't make any difference," says Frank Glankler, COO of Forecast Homes in Rancho Cucamonga, Calif., which offers energy-efficient mortgages. "That type of program is critical for getting consumer support." Fannie Mae and other lenders sponsor a Web site that provides more information: www.natresnet.org.

--Alison Rice is based in Arlington, Va.

Back to Comfort Zone: Creating a Middle Ground for Green Building and Great Profits

BIG BUILDER Magazine, March 2002