Solar Mortgages Benefit Banks, Consumers

According to a new report, Clean Energy Financing, mortgage lenders can make 10 percent more profit per mortgage while making solar homes affordable for 46 percent of Americans by promoting Energy Improvements Mortgages.

Washington, D.C. – February 6, 2003 [SolarAccess.com] Fannie Mae and Freddie Mac created Energy Efficiency Mortgages, which allow homebuyers to qualify for a larger mortgage to pay for energy efficiency and clean energy projects in homes. Consumers qualify for this mortgage if the projects save enough money to pay for the increased monthly mortgage costs. Fannie Mae and Freddie Mac purchase mortgages from mortgage lenders, freeing up the lenders money to offer as other loans. This makes offering this clean energy mortgages virtually risk free for lenders. “Freddie Mac’s guidelines have recognized the value of improving energy efficiency in housing since 1983,” said John E. Hemschoot, Director of Credit Policy for Freddie Mac. “Our guidelines allow lenders to finance more buyers of energy efficient homes by considering the expected utility savings in their qualifying ratios. We also permit lenders to finance the costs of making energy improvements to existing homes in the mortgage.” Mortgage lenders can profit from Energy Improvement Mortgages in two ways. If the bank holds the mortgage in its portfolio then it will earn US$23,940 more in interest. If the bank sells the mortgage to Fannie Mae of Freddie Mac, then profits will increase by approximately US$239 per mortgage. Energy Improvement Mortgages are also eligible for Community Reinvestment Act Credits and, according to Power Shift, provide banks with a green edge over competitors. The report concluded that 46 percent of average American homeowners could save money by purchasing a new solar powered, energy efficient homes using Energy Efficiency Mortgages. Average savings in the 50 largest U.S. cities would be US$164 per year, with Honolulu residents saving US$1,158 per year. These savings are realized by installing solar panels, high quality insulation, compact fluorescent light bulbs, Energy Star appliances and other products during home construction. These investments reduce the amount of electricity that homeowners purchases by over 30 percent and increase the value of homes by thousands of dollars. Solar panels and energy efficiency prevent CO2, the pollution produced when coal, gasoline and natural gas are burned to generate electricity. Scientists agree that CO2 forms an unnatural blanket above the earth, which traps in heat and causes global warming. This report is a part of Power Shift’s ongoing work to urge banks to invest more capital in clean energy,” said Philip Radford, Executive Director of Power Shift. “Power Shift has focused much of its attention on Citibank, which Bloomberg L.P. reports is the largest financier of oil and gas infrastructure projects and coal projects worldwide. Right now banks like Citigroup are bankrolling global warming by financing fossil fuel projects. This is their chance to make clean energy affordable and available to the average American homeowner while making money.”
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