,,ii #aacth ,,congress #ast ,session ,s4 #aajf ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,june #f1 #bjac ,mr4 ,bennet 7for himself and ,mr4 ,isakson7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to improve the accuracy of mortgage underwriting used by ,federal mortgage agencies by ensuring that energy costs are included in the underwriting process1 to reduce the amount of energy consumed by homes1 to facilitate the creation of energy efficiency retrofit and construction jobs1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,sensible ,accounting to ,value ,energy ,act of #bjac 4 #b4 ,definitions ,in this ,act1 the following definitions shall apply3 7#a7 ,covered agency ,the term covered agency-- 7,a7 means-- 7i7 an executive agency1 as that term is defined in section #ajb of title #ca1 ,united ,states ,code2 and 7ii7 any other agency of the ,federal ,government2 and 7,b7 includes any enterprise1 as that term is defined under section #acjc of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib 7#ab ,u4,s4,c4 #dejb74 7#b7 ,covered loan ,the term covered loan means a loan secured by a home that is issued1 insured1 purchased1 or securitized by a covered agency4 7#c7 ,homeowner ,the term homeowner means the mortgagor under a covered loan4 7#d7 ,mortgagee ,the term mortgagee means-- 7,a7 an original lender under a covered loan or the holder of a covered loan at the time at which that mortgage transaction is consummated2 7,b7 any affiliate1 agent1 subsidiary1 successor1 or assignee of an original lender under a covered loan or the holder of a covered loan at the time at which that mortgage transaction is consummated2 7,c7 any servicer of a covered loan2 and 7,d7 any subsequent purchaser1 trustee1 or transferee of any covered loan issued by an original lender4 7#e7 ,secretary ,the term ,secretary means the ,secretary of ,housing and ,urban ,development4 7#f7 ,servicer ,the term servicer means the person or entity responsible for the servicing of a covered loan1 including the person or entity who makes or holds a covered loan if that person or entity also services the covered loan4 7#g7 ,servicing ,the term servicing has the meaning given the term in section #f7;i7 of the ,real ,estate ,settlement ,procedures ,act of #aigd 7#ab ,u4,s4,c4 #bfje7;i774 #c4 ,findings and purposes 7a7 ,findings ,congress finds that-- 7#a7 energy costs for homeowners are a significant and increasing portion of their household budgets2 7#b7 household energy use can vary substantially depending on the efficiency and characteristics of the house2 7#c7 expected energy cost savings are important to the value of the house2 7#d7 the current test for loan affordability used by most covered agencies1 commonly known as the debt-to-income test1 is inadequate because it does not take into account the expected energy cost savings for the homeowner of an energy efficient home2 and 7#e7 another loan limitation1 commonly known as the loan-to-value test1 is tied to the appraisal1 which often does not adjust for efficiency features of houses4 7b7 ,purposes ,the purposes of this ,act are to-- 7#a7 improve the accuracy of mortgage underwriting by ,federal mortgage agencies by ensuring that energy cost savings are included in the underwriting process as described below1 and thus to reduce the amount of energy consumed by homes and to facilitate the creation of energy efficiency retrofit and construction jobs2 7#b7 require a covered agency to include the expected energy cost savings of a homeowner as a regular expense in the tests1 such as the debt-to-income test1 used to determine the ability of the loan applicant to afford the cost of homeownership for all loan programs2 and 7#c7 require a covered agency to include the value home buyers place on the energy efficiency of a house in tests used to compare the mortgage amount to home value1 taking precautions to avoid double-counting and to support safe and sound lending4 #d4 ,enhanced energy efficiency underwriting criteria 7a7 ,in general ,not later than #a year after the date of enactment of this ,act1 the ,secretary shall1 in consultation with the advisory group established in section #g7;b71 develop and issue guidelines for a covered agency to implement enhanced loan eligibility requirements1 for use when testing the ability of a loan applicant to repay a covered loan1 that account for the expected energy cost savings for a loan applicant at a subject property1 in the manner set forth in subsections 7b7 and 7c74 7b7 ,requirements ,to account for energy cost savings ,the enhanced loan eligibility requirements under subsection 7a7 shall require that1 for all covered loans for which an energy efficiency report is voluntarily provided to the mortgagee by the mortgagor1 the covered agency and the mortgagee shall take into consideration the estimated energy cost savings expected for the owner of the subject property in determining whether the loan applicant has sufficient income to service the mortgage debt plus other regular expenses4 ,to the extent that a covered agency uses a test such as a debt-to-income test that includes certain regular expenses1 such as hazard insurance and property taxes1 the expected energy cost savings shall be included as an offset to these expenses4 ,energy costs to be assessed include the cost of electricity1 natural gas1 oil1 and any other fuel regularly used to supply energy to the subject property4 7c7 ,determination of estimated energy cost savings 7#a7 ,in general ,the guidelines to be issued under subsection 7a7 shall include instructions for the covered agency to calculate estimated energy cost savings using-- 7,a7 the energy efficiency report2 7,b7 an estimate of baseline average energy costs2 and 7,c7 additional sources of information as determined by the ,secretary4 7#b7 ,report requirements ,for the purposes of paragraph 7#a71 an energy efficiency report shall-- 7,a7 estimate the expected energy cost savings specific to the subject property1 based on specific information about the property2 7,b7 be prepared in accordance with the guidelines to be issued under subsection 7a72 and 7,c7 be prepared-- 7i7 in accordance with the ,residential ,energy ,service ,network's ,home ,energy ,rating ,system 7commonly known as ,,hers7 by an individual certified by the ,residential ,energy ,service ,network1 unless the ,secretary finds that the use of ,,hers does not further the purposes of this ,act2 or 7ii7 by other methods approved by the ,secretary1 in consultation with the ,secretary of ,energy and the advisory group established in section #g7;b71 for use under this ,act1 which shall include a third-party quality assurance procedure4 7#c7 ,use by appraiser ,if an energy efficiency report is used under subsection 7b71 the energy efficiency report shall be provided to the appraiser to estimate the energy efficiency of the subject property and for potential adjustments for energy efficiency4 7d7 ,required disclosure to consumer for a home with an energy efficiency report ,if an energy efficiency report is used under subsection 7b71 the guidelines to be issued under subsection 7a7 shall require the mortgagee to-- 7#a7 inform the loan applicant of the expected energy costs as estimated in the energy efficiency report1 in a manner and at a time as prescribed by the ,secretary1 and if practicable1 in the documents delivered at the time of loan application2 and 7#b7 include the energy efficiency report in the documentation for the loan provided to the borrower4 7e7 ,required disclosure to consumer for a home without an energy efficiency report ,if an energy efficiency report is not used under subsection 7b71 the guidelines to be issued under subsection 7a7 shall require the mortgagee to inform the loan applicant in a manner and at a time as prescribed by the ,secretary1 and if practicable1 in the documents delivered at the time of loan application of-- 7#a7 typical energy cost savings that would be possible from a cost-effective energy upgrade of a home of the size and in the region of the subject property2 7#b7 the impact the typical energy cost savings would have on monthly ownership costs of a typical home2 7#c7 the impact on the size of a mortgage that could be obtained if the typical energy cost savings were reflected in an energy efficiency report2 and 7#d7 resources for improving the energy efficiency of a home4 7f7 ,limitations ,a covered agency shall not-- 7#a7 modify existing underwriting criteria or adopt new underwriting criteria that intentionally negate or reduce the impact of the requirements or resulting benefits that are set forth or otherwise derived from the enhanced loan eligibility requirements required under this section2 or 7#b7 impose greater buy back requirements1 credit overlays1 insurance requirements1 including private mortgage insurance1 or any other material costs1 impediments1 or penalties on covered loans merely because the loan uses an energy efficiency report or the enhanced loan eligibility requirements required under this section4 7g7 ,applicability and implementation date ,not later than #c years after the date of enactment of this ,act1 and before ,december #ca1 #bjaf1 the enhanced loan eligibility requirements required under this section shall be implemented by each covered agency to-- 7#a7 apply to any covered loan for the sale1 or refinancing of any loan for the sale1 of any home2 7#b7 be available on any residential real property 7including individual units of condominiums and cooperatives7 that qualifies for a covered loan2 and 7#c7 provide prospective mortgagees with sufficient guidance and applicable tools to implement the required underwriting methods4 #e4 ,enhanced energy efficiency underwriting valuation guidelines 7a7 ,in general ,not later than #a year after the date of enactment of this ,act1 the ,secretary shall-- 7#a7 in consultation with the ,federal ,financial ,institutions ,examination ,council and the advisory group established in section #g7;b71 develop and issue guidelines for a covered agency to determine the maximum permitted loan amount based on the value of the property for all covered loans made on properties with an energy efficiency report that meets the requirements of section #d7;c77#b72 and 7#b7 in consultation with the ,secretary of ,energy1 issue guidelines for a covered agency to determine the estimated energy savings under subsection 7c7 for properties with an energy efficiency report4 7b7 ,requirements ,the enhanced energy efficiency underwriting valuation guidelines required under subsection 7a7 shall include-- 7#a7 a requirement that if an energy efficiency report that meets the requirements of section #d7;c77#b7 is voluntarily provided to the mortgagee1 such report shall be used by the mortgagee or covered agency to determine the estimated energy savings of the subject property2 and 7#b7 a requirement that the estimated energy savings of the subject property be added to the appraised value of the subject property by a mortgagee or covered agency for the purpose of determining the loan-to-value ratio of the subject property1 unless the appraisal includes the value of the overall energy efficiency of the subject property1 using methods to be established under the guidelines issued under subsection 7a74 7c7 ,determination of estimated energy savings 7#a7 ,amount of energy savings ,the amount of estimated energy savings shall be determined by calculating the difference between the estimated energy costs for the average comparable houses1 as determined in guidelines to be issued under subsection 7a71 and the estimated energy costs for the subject property based upon the energy efficiency report4 7#b7 ,duration of energy savings ,the duration of the estimated energy savings shall be based upon the estimated life of the applicable equipment1 consistent with the rating system used to produce the energy efficiency report4 7#c7 ,present value of energy savings ,the present value of the future savings shall be discounted using the average interest rate on conventional #cj-year mortgages1 in the manner directed by guidelines issued under subsection 7a74 7d7 ,ensuring consideration of energy efficient features ,section #aaaj of the ,financial ,institutions ,reform1 ,recovery1 and ,enforcement ,act of #aihi 7#ab ,u4,s4,c4 #ccci7 is amended-- 7#a7 in paragraph 7#b71 by striking 2 and and inserting a semicolon2 and 7#b7 in paragraph 7#c71 by striking the period at the end and inserting 2 and and inserting after paragraph 7#c7 the following3 7#d7 that ,state certified and licensed appraisers have timely access1 whenever practicable1 to information from the property owner and the lender that may be relevant in developing an opinion of value regarding the energy- and water-saving improvements or features of a property1 such as-- 7,a7 labels or ratings of buildings2 7,b7 installed appliances1 measures1 systems or technologies2 7,c7 blueprints2 7,d7 construction costs2 7,e7 financial or other incentives regarding energy- and water-efficient components and systems installed in a property2 7,f7 utility bills2 7,g7 energy consumption and benchmarking data2 and 7,h7 third-party verifications or representations of energy and water efficiency performance of a property1 observing all financial privacy requirements adhered to by certified and licensed appraisers1 including section #eja of the ,gramm-,leach-,bliley ,act 7#ae ,u4,s4,c4 #fhja74 ,unless a property owner consents to a lender1 an appraiser1 in carrying out the requirements of paragraph 7#d71 shall not have access to the commercial or financial information of the owner that is privileged or confidential4 4 7e7 ,transactions requiring state certified appraisers ,section #aaac of the ,financial ,institutions ,reform1 ,recovery1 and ,enforcement ,act of #aihi 7#ab ,u4,s4,c4 #ccdb7 is amended-- 7#a7 in paragraph 7#a71 by inserting before the semicolon the following3 1 or any real property on which the appraiser makes adjustments using an energy efficiency report2 and 7#b7 in paragraph 7#b71 by inserting after atypical the following3 1 or an appraisal on which the appraiser makes adjustments using an energy efficiency report44 7f7 ,protections 7#a7 ,authority ,to impose limitations ,the guidelines to be issued under subsection 7a7 shall include such limitations and conditions as determined by the ,secretary to be necessary to protect against meaningful under or over valuation of energy cost savings or duplicative counting of energy efficiency features or energy cost savings in the valuation of any subject property that is used to determine a loan amount4 7#b7 ,additional authority ,at the end of the #g-year period following the implementation of enhanced eligibility and underwriting valuation requirements under this ,act1 the ,secretary may modify or apply additional exceptions to the approach described in subsection 7b71 where the ,secretary finds that the unadjusted appraisal will reflect an accurate market value of the efficiency of the subject property or that a modified approach will better reflect an accurate market value4 7g7 ,applicability and implementation date ,not later than #c years after the date of enactment of this ,act1 and before ,december #ca1 #bjaf1 each covered agency shall implement the guidelines required under this section1 which shall-- 7#a7 apply to any covered loan for the sale1 or refinancing of any loan for the sale1 of any home2 and 7#b7 be available on any residential real property1 including individual units of condominiums and cooperatives1 that qualifies for a covered loan4 #f4 ,monitoring ,not later than #a year after the date on which the enhanced eligibility and underwriting valuation requirements are implemented under this ,act1 and every year thereafter1 each covered agency with relevant activity shall issue and make available to the public a report that-- 7#a7 enumerates the number of covered loans of the agency for which there was an energy efficiency report1 and that used energy efficiency appraisal guidelines and enhanced loan eligibility requirements2 and 7#b7 includes the default rates and rates of foreclosures for each category of loans4 #g4 ,rulemaking 7a7 ,in general ,the ,secretary shall prescribe regulations to carry out this ,act1 in consultation with the ,secretary of ,energy and the advisory group established in subsection 7b71 which may contain such classifications1 differentiations1 or other provisions1 and may provide for such proper implementation and appropriate treatment of different types of transactions1 as the ,secretary determines are necessary or proper to effectuate the purposes of this ,act1 to prevent circumvention or evasion thereof1 or to facilitate compliance therewith4 7b7 ,advisory group ,to assist in carrying out this ,act1 the ,secretary shall establish an advisory group1 consisting of individuals representing the interests of-- 7#a7 mortgage lenders2 7#b7 appraisers2 7#c7 energy raters and residential energy consumption experts2 7#d7 energy efficiency organizations2 7#e7 real estate agents2 7#f7 home builders and remodelers2 7#g7 ,state energy officials2 and 7#h7 others as determined by the ,secretary4 #h4 ,additional study 7a7 ,in general ,not later than #ah months after the date of enactment of this ,act1 the ,secretary shall reconvene the advisory group established in section #g7;b71 in addition to water and locational efficiency experts1 to advise the ,secretary on the implementation of the enhanced energy efficiency underwriting criteria established in sections #d and #e4 7b7 ,recommendations ,the advisory group established in section #g7;b7 shall provide recommendations to the ,secretary on any revisions or additions to the enhanced energy efficiency underwriting criteria deemed necessary by the group1 which may include alternate methods to better account for home energy costs and additional factors to account for substantial and regular costs of homeownership such as location-based transportation costs and water costs4 ,the ,secretary shall forward any legislative recommendations from the advisory group to ,congress for its consideration4