Next Generation Energy Efficiency Mortgages, Resnet Conference 2010
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Next Generation Energy Efficiency Mortgages, Resnet Conference 2010

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This is the presentation I gave on EEMs and EIMs at the RESNET conference in Raleigh, NC on 24 February 2010.

This is the presentation I gave on EEMs and EIMs at the RESNET conference in Raleigh, NC on 24 February 2010.

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Next Generation Energy Efficiency Mortgages, Resnet Conference 2010 Next Generation Energy Efficiency Mortgages, Resnet Conference 2010 Presentation Transcript

  • EEMs & EIMs: The Next Generation Allison A. Bailes III, PhD & Geoff Ferland 24 February 2010, RESNET Conference
  • Purpose “An EEM recognizes the energy savings of a home that has ‘cost effective’ energy saving improvements that increase the energy efficiency of a home.” -- 1993 HUD Mortgage Letter
  • New Homes
  • Improvements on Existing Homes
  • Improvement Example Summary Existing Home Improved Home Price $200,000 $203,200 Loan Amount $160,000 $162,560 Monthly Payment* $908 $923 Energy Bills $302 $256 True Monthly Cost $1210 $1179 Monthly Savings $31 * 30 year loan, 5.5% interest
  • What’s the Payback? Cost Simple Payback = Savings $3200 = $552/yr = 5.8 years
  • Takeaway
  • Takeaway ✤ Payback is irrelevant!
  • Takeaway ✤ Payback is irrelevant! ✤ It’s all about cash flow for homeowner/ buyer.
  • History
  • History ✤ 1979 Solar Bank proposal
  • History ✤ 1979 Solar Bank proposal ✤ 1993 HUD Mortgagee Letter
  • History ✤ 1979 Solar Bank proposal ✤ 1993 HUD Mortgagee Letter ✤ Pilot, 5 states, $8000 cap
  • History ✤ 1979 Solar Bank proposal ✤ 1993 HUD Mortgagee Letter ✤ Pilot, 5 states, $8000 cap ✤ 1995-2009 HUD Mortgagee Letters
  • History ✤ 1979 Solar Bank proposal ✤ 1993 HUD Mortgagee Letter ✤ Pilot, 5 states, $8000 cap ✤ 1995-2009 HUD Mortgagee Letters ✤ Restrictions lifted, including $8000 cap (in 2009)
  • Players & Products
  • Players & Products ✤ FHA/HUD
  • Players & Products ✤ FHA/HUD ✤ VA
  • Players & Products ✤ FHA/HUD ✤ VA ✤ Fannie Mae
  • Players & Products ✤ FHA/HUD ✤ VA ✤ Fannie Mae ✤ Freddie Mac
  • Players & Products ✤ FHA/HUD ✤ EEM ✤ VA ✤ Fannie Mae ✤ Freddie Mac
  • Players & Products ✤ FHA/HUD ✤ EEM ✤ VA ✤ EIM (RESNET term) ✤ Fannie Mae ✤ Freddie Mac
  • Players & Products ✤ FHA/HUD ✤ EEM ✤ VA ✤ EIM (RESNET term) ✤ Fannie Mae ✤ 203(k) ✤ Freddie Mac
  • Rater’s Perspective Existing Home Process
  • Rater’s Perspective Existing Home Process Initial Rating
  • Rater’s Perspective Existing Home Process Initial Rating Improvement Analysis
  • Rater’s Perspective Existing Home Process Initial Rating Improvement Analysis Reporting
  • Rater’s Perspective Existing Home Process Initial Rating Improvement Analysis Reporting Followup Inspection
  • Cost Effectiveness Time Value of Money $100 of Future Value (e.g., energy savings) is worth less than $100 in Present Value.
  • Present Value Calculation Single payment
  • Present Value Calculation Annual payments HERS Standards, pp. 3-10 - 3-12
  • Present Value Calculation PV = Present Value FV = Future Value i = interest rate n = number of years A = annual savings - maintenance costs
  • Improvement Example Leaky, old house in Atlanta Reduce infiltration: 7531 cfm50 --> 3766 cfm50 Reduce duct leakage: 1077 cfm25 --> 269 cfm25
  • Improvement Example Cost for both $3200 Annual savings $551 Maintenance costs $0
  • Improvement Example Interest rate 5.5% Lifetime 23 years
  • Improvement Example
  • Improvement Example PV = $551 * (1- 1/(1+ 0.055)23)/ 0.055
  • Improvement Example PV = $551 * (1- 1/(1+ 0.055)23)/ 0.055 = $551 * 12.875
  • Improvement Example PV = $551 * (1- 1/(1+ 0.055)23)/ 0.055 = $551 * 12.875 = $7094
  • Improvement Example PV = $551 * (1- 1/(1+ 0.055)23)/ 0.055 = $551 * 12.875 = $7094 Total savings over 23 years: $12,673.
  • Improvement Example Cost Effective?
  • Improvement Example Cost Effective? PV = $7094
  • Improvement Example Cost Effective? PV = $7094 Cost of improvements = $3200
  • Improvement Example Cost Effective? PV = $7094 Cost of improvements = $3200 Net PV = +$3894
  • Improvement Example Cost Effective? PV = $7094 Cost of improvements = $3200 Net PV = +$3894 Positive ==> Cost effective
  • Present Value Variables 5.5% 8% 23 years $7094 $5714 10 years $4153 $3697
  • Present Value Variables 5.5% 8% 23 years $7094 $5714 Higher PV from: 10 years $4153 $3697
  • Present Value Variables 5.5% 8% 23 years $7094 $5714 Higher PV from: ✤ Lower interest 10 years $4153 $3697
  • Present Value Variables 5.5% 8% 23 years $7094 $5714 Higher PV from: ✤ Lower interest ✤ Longer lifetimes 10 years $4153 $3697
  • REM/Rate Improvement Analysis
  • REM/Rate Improvement Analysis
  • REM/Rate Improvement Analysis
  • REM/Rate Improvement Analysis
  • Reporting
  • Reporting ✤ Basic info (Address, client name, property type...)
  • Reporting ✤ Basic info (Address, client name, property type...) ✤ Description of current energy features
  • Reporting ✤ Basic info (Address, client name, property type...) ✤ Description of current energy features ✤ Description of energy package
  • Reporting ✤ Basic info (Address, client name, property type...) ✤ Description of current energy features ✤ Description of energy package ✤ Estimated cost, useful life, & maintenance costs of energy package
  • Reporting ✤ Basic info (Address, client name, property type...) ✤ Description of current energy features ✤ Description of energy package ✤ Estimated cost, useful life, & maintenance costs of energy package ✤ Estimated current & projected energy costs
  • Reporting ✤ Basic info (Address, client name, property type...) ✤ Description of current energy features ✤ Description of energy package ✤ Estimated cost, useful life, & maintenance costs of energy package ✤ Estimated current & projected energy costs ✤ Estimated annual savings & present value
  • Reporting
  • Reporting ✤ Names & signatures of field inspector (if any) and rater
  • Reporting ✤ Names & signatures of field inspector (if any) and rater ✤ The following certification:
  • Reporting ✤ Names & signatures of field inspector (if any) and rater ✤ The following certification: “I certify to the best of my knowledge and belief, the information contained in this report is true and accurate and I understand that the information in this report may be used in connection with an application for an Energy Efficient Mortgage to be insured by the Federal Housing Administration of the U.S. Department of Housing and Urban Development.”
  • Followup Inspection
  • Followup Inspection From HUD Mortgagee Letter 2005-21:
  • Followup Inspection From HUD Mortgagee Letter 2005-21: “The lender, the rater, or an FHA fee inspector may inspect the installation of the improvements.”
  • Barriers to Widespread Use of EEMs
  • Barriers to Widespread Use of EEMs ✤ EEMs have not been user friendly.
  • Barriers to Widespread Use of EEMs ✤ EEMs have not been user friendly. ✤ Lenders & underwriters aren’t aware of them.
  • Barriers to Widespread Use of EEMs ✤ EEMs have not been user friendly. ✤ Lenders & underwriters aren’t aware of them. ✤ Lenders & underwriters don’t understand them.
  • Barriers to Widespread Use of EEMs ✤ EEMs have not been user friendly. ✤ Lenders & underwriters aren’t aware of them. ✤ Lenders & underwriters don’t understand them. ✤ Realtors are afraid of them.
  • Barriers to Widespread Use of EEMs ✤ EEMs have not been user friendly. ✤ Lenders & underwriters aren’t aware of them. ✤ Lenders & underwriters don’t understand them. ✤ Realtors are afraid of them. ✤ Homeowners/buyers aren’t aware of them.
  • PACE
  • PACE ✤ Property-Assessed Clean Energy
  • PACE ✤ Property-Assessed Clean Energy ✤ Finances energy improvements through property assessment
  • PACE ✤ Property-Assessed Clean Energy ✤ Finances energy improvements through property assessment ✤ Stays with the property, not the borrower
  • ENERGY STAR Mortgages
  • ENERGY STAR Mortgages ✤ Similar to EEMs but without stretch ratios
  • ENERGY STAR Mortgages ✤ Similar to EEMs but without stretch ratios ✤ For homes certified in:
  • ENERGY STAR Mortgages ✤ Similar to EEMs but without stretch ratios ✤ For homes certified in: ✤ ENERGY STAR new homes
  • ENERGY STAR Mortgages ✤ Similar to EEMs but without stretch ratios ✤ For homes certified in: ✤ ENERGY STAR new homes ✤ Home Performance with ENERGY STAR
  • ENERGY STAR Mortgages ✤ Similar to EEMs but without stretch ratios ✤ For homes certified in: ✤ ENERGY STAR new homes ✤ Home Performance with ENERGY STAR ✤ Weatherization Assistance Program
  • ENERGY STAR Mortgages ✤ Similar to EEMs but without stretch ratios ✤ For homes certified in: ✤ ENERGY STAR new homes ✤ Home Performance with ENERGY STAR ✤ Weatherization Assistance Program ✤ Can be combined with EEM
  • Architecture 2030
  • Architecture 2030 ✤ Ed Mazria
  • Architecture 2030 ✤ Ed Mazria ✤ Includes mortgage rate buydown tied to energy improvements
  • Architecture 2030 ✤ Ed Mazria ✤ Includes mortgage rate buydown tied to energy improvements ✤ 2.5% interest rate for 75% reduction in energy use, for example
  • Allison A. Bailes III, PhD Geoff Ferland Energy Vanguard EcoLend 404-428-3393 828-479-LEND (5363) abailes@energyvanguard.com geoff@ecolend.com energyvanguard.com www.EcoLend.com www.facebook.com/EcoLend twitter.com/EnergyVanguard twitter.com/EcoLend www.LinkedIn.com/in/EcoLend