I have added my comments to the article in red.
A bill introduced Wednesday by Senators Michael Bennet (D-Colorado) and Johnny Isakson (R-Georgia), the Sensible Accounting to Value Energy (SAVE) Act, would require lenders to “account for energy costs in mortgage underwriting” of government backed mortgages. This would, apparently, include FHA mortgages.
In essence, the cost of utitlities would be added to the debt factoring that determines how much a person can qualify for in a government backed mortgage without making an adjustment in the allowable ratio's for a prospective borrower to offset the additional energy costs.
According to a press release from these boneheads, this bill will “enable better mortgage underwriting, encourage investments in energy efficient homebuilding and create more than 80,000 construction jobs.”
This assumes that the factoring in energy costs will promote the development of more energy efficient homes and thereby create so called "green jobs". The point of logic they are missing is that regardless of how efficient a home is, there is always going to be some energy costs associated with the home. If this is factored in, it may shift the borrower toward a more efficient home, but in any case, the borrower can qualify for less of a home. This lowers or limits demand which of course further stifles the already struggling housing market. This of course, eliminates or reduces the construction industry and the associated jobs there-in. The trickle down effect is obvious.
“As someone who has 30 years of experience in the residential real estate industry and who has lived through multiple recessions, I understand that recovery in the housing market and job creation in the construction sector is pivotal to getting our economy back on track,” said Isakson. “I place my support behind this bill because it has the potential to create jobs without any cost to taxpayers, and it will also improve mortgage underwriting in this country by including energy as a factor in the process.”
The premise that the housing market is the single most pivotal industry, especially in Arizona, is accurate. The solution of stricter underwriting to promote the housing industry and create jobs just doesn't pass the laugh test.
According to the press release the bill has the support of “Leading Builders of America, Appraisal Institute, U.S. Green Building Council, National Association of
Manufacturers, International Code Council, EcoBroker, Green Builder Coalition,
U.S. Chamber of Commerce, American Society of Heating, Refrigerating and Air
Conditioning, Engineers, Structural Insulated Panel Association, The Residential Energy Services, Network, Inc. (RESNET), Efficiency First, E2 Environment Entrepreneurs, Alliance to Save Energy, American Council for an Energy-Efficient Economy, American Gas Association, American Public Gas Association, Center for American Progress, Natural Resources Defense Council, National Association of State Energy Officials and Institute for Market Transformation.”
I’m sure both of these Senators will enjoy support from all these organizations when fundraising time comes for them.This bill is a typical lobbyist created ridiculous bit of micromanagement by politicians. There’s no way an underwriter or a bureaucrat is qualified to figure out how much the energy costs are going to be on the wide variety of homes covered by government backed mortgages. The entire concept is ridiculous.
A case could possibly be made that debt ratios need to be lower on FHA loans, or at least more closely followed in underwriting. A case could be made that FHA needs to
get rid of automated underwriting and credit scoring. A case could be made that FHA underwriting should be handled by locally based lenders familiar with the community where the loan is being made. A case could be made that more resources need to be directed at preventing fraud in FHA insured mortgage transactions (and all the other mortgage transactions as well).
Again, these assumptions are based on the false assumption that many people recieved loans that shouldn't have and this was the cause of the crisis. The actual fact is the lending response to a declining market was to alter the available demand by restricting lending policies that had been viable for more than 25 years and spend a million dollars in investigation and regulation to prevent $10,000 in fraud. In essence, none of the bankers anticipated a declining market and none of them reserved the excess profits from these marginal loans to offset the additional risk they had taken.
Every one of the above issues should be addressed well before turning any attention to paying off the green energy coalition. Government regulation is NOT the way to create jobs. This bill just adds more confusion to an already confused industry.
I encourage everyone to call their Senators and their Representatives and get
this bill killed ASAP!
Why can none of the politicians or bureaucrats understand that the solution to the real estate housing crisis lies in increasing demand and thereby increasing prices (within reason) so that builders can start to build and construction workers and their associated businesses can start back to work. All of which solves the joblessness problem and the economic crisis without spending any taxpayer money.