[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1737 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1737

   To improve the accuracy of mortgage underwriting used by Federal 
  mortgage agencies by ensuring that energy costs are included in the 
underwriting process, to reduce the amount of energy consumed by homes, 
     to facilitate the creation of energy efficiency retrofit and 
               construction jobs, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 19, 2011

Mr. Bennet (for himself and Mr. Isakson) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           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 process, to reduce the amount of energy consumed by homes, 
     to facilitate the creation of energy efficiency retrofit and 
               construction jobs, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sensible Accounting to Value Energy 
Act of 2011''.

SEC. 2. DEFINITIONS.

    As used in this Act, the following definitions shall apply:
            (1) Covered agency.--The term ``covered agency''--
                    (A) means--
                            (i) an executive agency, as that term is 
                        defined in section 102 of title 31, United 
                        States Code; and
                            (ii) any other agency of the Federal 
                        Government; and
                    (B) includes any enterprise, as that term is 
                defined under section 1303 of the Federal Housing 
                Enterprises Financial Safety and Soundness Act of 1992 
                (12 U.S.C. 4502).
            (2) Covered loan.--The term ``covered loan'' means a loan 
        secured by a home that is issued, insured, purchased, or 
        securitized by a covered agency.
            (3) Homeowner.--The term ``homeowner'' means the mortgagor 
        under a covered loan.
            (4) Mortgagee.--The term ``mortgagee'' means--
                    (A) an original lender under a covered loan or the 
                holder of a covered loan at the time at which that 
                mortgage transaction is consummated;
                    (B) any affiliate, agent, subsidiary, successor, 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 consummated;
                    (C) any servicer of a covered loan; and
                    (D) any subsequent purchaser, trustee, or 
                transferee of any covered loan issued by an original 
                lender.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Housing and Urban Development.
            (6) Servicer.--The term ``servicer'' means the person or 
        entity responsible for servicing of a covered loan (including 
        the person or entity who makes or holds such a loan if such 
        person or entity also services the loan).
            (7) Servicing.--The term ``servicing'' has the meaning 
        given the term in section 6(i) of the Real Estate Settlement 
        Procedures Act of 1974 (12 U.S.C. 2605(i)).

SEC. 3. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that--
            (1) energy costs for homeowners are a significant and 
        increasing portion of their household budgets;
            (2) household energy use can vary substantially depending 
        on the size and efficiency of the house;
            (3) expected energy costs are important to the value of the 
        house;
            (4) the current test for loan affordability used by most 
        covered agencies, commonly called the ``debt to income'' test, 
        is inadequate because it does not assess the expected energy 
        costs for the homeowner; and
            (5) another loan limitation, commonly called the ``loan to 
        value'' test, is tied to the appraisal, which often does not 
        adjust for efficiency features of houses.
    (b) Purposes.--The purposes of this Act are--
            (1) to improve the accuracy of mortgage underwriting under 
        Federal mortgage agencies by ensuring that energy costs are 
        included in the underwriting process as described below, and 
        thus to reduce the amount of energy consumed by homes and to 
        facilitate the creation of energy efficiency retrofit and 
        construction jobs;
            (2) to require covered agencies to include the expected 
        energy utility costs of a homeowner as a regular expense in the 
        tests, such as the debt to income test, used to determine the 
        ability of the loan applicant to afford the cost of 
        homeownership for all loan programs;
            (3) to require covered agencies to include the value of 
        energy savings with the appraised home value in the loan to 
        value metric so that loan amounts can reflect the value home 
        buyers place on the energy efficiency of a house, taking 
        precautions to avoid double-counting and to support safe and 
        sound lending; and
            (4) to direct the covered agencies to make the necessary 
        credit policy decisions to adjust the maximum permitted debt 
        amounts or debt to income ratios for eligibility to accommodate 
        inclusion of expected energy costs.

SEC. 4. ENHANCED ENERGY EFFICIENCY UNDERWRITING CRITERIA.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, the Secretary shall develop and issue guidelines for all 
covered agencies to implement enhanced loan eligibility requirements, 
for use when testing the ability of a loan applicant to repay a covered 
loan, that account for the expected costs of energy for a loan 
applicant at the subject property, in the manner set forth in 
subsections (b) and (c).
    (b) Requirements To Account for Energy Costs.--The enhanced loan 
eligibility requirements required under subsection (a) shall include a 
requirement that for all covered loans, the covered agency and the 
mortgagee shall take into consideration the estimated energy costs 
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 expenses. To the extent that a covered agency uses a 
test such as a debt-to-income test that includes certain regular 
expenses, such as hazard insurance and property taxes, the expected 
energy costs shall be included as such an expense, and the maximum 
permitted amounts or ratios for eligibility shall be adjusted to 
accommodate the average expected energy costs. Energy costs to be 
assessed include the cost of electricity, natural gas, oil, and any 
other fuel regularly used to supply energy to the subject property.
    (c) Determination of Estimated Energy Costs.--
            (1) In general.--The regulations to be issued by the 
        Secretary under subsection (a) shall include instructions for 
        the covered agency to calculate estimated energy costs, using 
        the following approach:
                    (A) If no energy efficiency report for the subject 
                property, as described under paragraph (2), is provided 
                to the mortgagee, then the mortgagee shall determine 
                the estimated energy costs for the subject property 
                based upon the size of the subject property and an 
                average per square foot energy cost for properties of 
                that building type in that region. The most current 
                version of the Residential Energy Consumption Survey of 
                the Energy Information Administration, as such survey 
                is authorized under section 205(k) of the Department of 
                Energy Organization Act (42 U.S.C. 7135(k)), may be 
                used as the basis for the average per square foot 
                energy cost, or the Secretary may approve use of 
                another source.
                    (B) If an energy efficiency report is provided to 
                the mortgagee, then the findings in such report shall 
                be used in determining the estimated energy costs of 
                the subject property, and shall be provided to the 
                appraiser for use in estimating the energy efficiency 
                of the house and potential adjustments for energy 
                efficiency.
                    (C) Additional sources of information may be 
                incorporated into the method for determining expected 
                energy costs, as determined by the Secretary.
            (2) Report requirements.--In order for an energy efficiency 
        report to be valid and acceptable for the purposes of paragraph 
        (1)(B), such report shall--
                    (A) estimate the expected energy costs specific to 
                the subject property, based on specific information 
                about the property;
                    (B) be prepared in accordance with rules and 
                guidelines to be issued by the Secretary under 
                subsection (a); and
                    (C) be prepared--
                            (i) in accordance with the Residential 
                        Energy Service Network's Home Energy Rating 
                        System (also known as ``HERS'') by an 
                        individual certified by the network, unless the 
                        Secretary finds that such method does not 
                        further the purposes of this Act; or
                            (ii) by other methods approved by the 
                        Secretary, in consultation with the Secretary 
                        of Energy and other stakeholders, including 
                        State energy offices, for use under this Act, 
                        which in all cases shall include a third-party 
                        quality assurance procedure.
    (d) Required Disclosure to Consumer.--If an energy efficiency 
report is used under subsection (c)(1)(B), the rules to be issued by 
the Secretary under subsection (a) shall require the mortgagee to--
            (1) inform the loan applicant of the expected energy costs 
        as estimated in the report, in a manner and at a time as 
        prescribed by the Secretary, and if practicable, in the 
        documents delivered at the time of loan application; and
            (2) include such report in the documentation for the loan 
        provided to the borrower.
    (e) Limitations.--A covered agency shall not--
            (1) 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 section; or
            (2) impose greater buy back requirements, credit overlays, 
        insurance requirements, including private mortgage insurance, 
        or any other material costs, impediments, or penalties on 
        covered loans merely because the loan uses an energy efficiency 
        report or the enhanced loan eligibility requirements required 
        under this section.
    (f) Applicability and Implementation Date.--Not later than 3 years 
after the date of enactment of this Act, and before January 1, 2015, 
the enhanced loan eligibility requirements required under this section 
shall be implemented by each covered agency to--
            (1) apply to any covered loan for the sale, or refinancing 
        of any loan for the sale, of any home;
            (2) be available on any residential real property 
        (including individual units of condominiums and cooperatives) 
        that qualifies for a covered loan; and
            (3) provide prospective mortgagees with sufficient guidance 
        and applicable tools to implement the required underwriting 
        methods.

SEC. 5. ENHANCED ENERGY EFFICIENCY UNDERWRITING VALUATION GUIDELINES.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, the Secretary of Housing and Urban Development shall, in 
consultation with the Federal Financial Institutions Examination 
Council, develop and issue guidelines for how covered agencies shall 
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 as defined in section 4(c)(2). In addition, the 
Secretary of Housing and Urban Development shall, in consultation with 
the Secretary of Energy, within one year of enactment of this Act, 
issue regulations for covered agencies to determine the estimated 
energy savings for properties with an energy efficiency report as 
required by subsection (c).
    (b) Requirements.--The enhanced energy efficiency underwriting 
valuation guidelines required under subsection (a) shall include the 
following:
            (1) A requirement that if an energy efficiency report that 
        meets the requirements of section 4(c)(2) is provided to the 
        mortgagee, then such report shall be used by the mortgagee or 
        covered agency to determine the estimated energy savings of the 
        subject property.
            (2) A requirement that the estimated energy savings of the 
        subject property be added by a mortgagee or covered agency to 
        the appraised value for the purpose of determining the loan-to-
        value ratio of the subject property, unless the appraisal 
        indicates it includes the value of the overall energy 
        efficiency of the property, using methods to be established by 
        the Secretary of Housing and Urban Development in regulations 
        required under subsection (a).
    (c) Determination of Estimated Energy Savings.--The amount of 
estimated energy savings shall be determined by calculating the 
difference between the estimated energy costs for the average 
comparable house, as determined in rules to be issued by the Secretary 
of Housing and Urban Development under subsection (a), and the 
estimated energy costs for the subject property, using the energy 
efficiency report, as determined under section 4(c)(2). The period of 
the savings shall be based upon the estimated life of the applicable 
equipment, consistent with the rating system used to produce the energy 
report in section 4(c)(2). The present value of the future savings 
shall be discounted using the average interest rate on conventional 30-
year mortgages, in the manner directed by guidelines issued by the 
Secretary of Housing and Urban Development under subsection (a).
    (d) Ensuring Consideration of Energy-Efficient Features.--Section 
1110 of the Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (12 U.S.C. 3339), is amended--
            (1) in paragraph (3), by striking the period at the end and 
        inserting ``; and''; and
            (2) by adding at the end the following:
            ``(4) that State-certified appraisers have timely access, 
        whenever practicable, to information from the lender relevant 
        to an appraisal of the energy and water efficiency or 
        conserving improvements or features of a property, such as 
        labels or ratings of buildings and installed appliances, 
        blueprints, construction costs, incentives regarding energy- 
        and water-efficient components and systems installed in a 
        property, and third-party verifications or representations of 
        energy and water efficiency performance of a property, 
        observing all financial privacy requirements adhered to by 
        certified and licensed appraisers, including section 501 of the 
        Gramm-Leach-Bliley Act (15 U.S.C. 6801), unless the property 
        owner consents to the lender, an appraiser shall not have 
        access to the commercial or financial information of the owner 
        that is privileged or confidential.''.
    (e) Transactions Requiring State Certified Appraisers.--Section 
1113 of the Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (12 U.S.C. 3342), as amended by section 1473(e)(2) of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is 
amended--
            (1) in paragraph (1), by inserting before the semicolon the 
        following: ``, or any real property on which the appraiser 
        makes adjustments using an energy efficiency report''; and
            (2) in paragraph (2) by inserting after ``atypical'' the 
        following: ``, or an appraisal on which the appraiser makes 
        adjustments using an energy efficiency report.''.
    (f) Protections.--
            (1) Authority to impose limitations.--The guidelines to be 
        issued under subsection (a) shall include such limitations and 
        conditions determined by the Secretary to be necessary to 
        protect against meaningful under or over valuation of energy 
        savings or duplicative counting of energy efficiency features 
        or energy savings in the valuation of any subject property used 
        to determine a loan amount.
            (2) Additional authority.--At the end of the 7-year period 
        following the implementation of the program established under 
        this Act, the Secretary may modify or apply additional 
        exceptions to the approach described in subsection (b), where 
        the Secretary finds that the unadjusted appraisal will reflect 
        an accurate market value of the efficiency of the subject 
        property.
    (g) Applicability and Implementation Date.--Each covered agency 
shall, within 3 years after the date of enactment of this Act, and 
before January 1, 2015, implement the guidelines required under this 
section, which shall--
            (1) apply to any covered loan for the sale, or refinancing 
        of any loan for the sale, of any home; and
            (2) be available on any residential real property 
        (including individual units of condominiums and cooperatives) 
        that qualifies for a covered loan.

SEC. 6. MONITORING.

    Not later than 1 year after the date on which the enhanced 
eligibility and underwriting valuation requirements are implemented 
under this Act, and each year thereafter, each covered agency with 
relevant activity shall issue and make available to the public a report 
that enumerates the number of covered loans of each such agency that 
used enhanced loan eligibility requirements, for which there was an 
energy efficiency report, and that used enhanced energy efficiency 
appraisal guidelines. Such report shall include the default rates and 
rates of foreclosures for each category of loan.

SEC. 7. RULEMAKING.

    The Secretary shall prescribe regulations to carry out this Act, in 
consultation with the Secretary of Energy and stakeholders, including 
State energy offices. Such regulations may contain such 
classifications, differentiations, or other provisions, and may provide 
for such proper implementation and appropriate treatment of different 
types of transactions, as in the judgment of the Secretary are 
necessary or proper to effectuate the purposes of this Act, to prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith.

SEC. 8. ADDITIONAL STUDY.

    Not later than 18 months after the date of enactment of this Act, 
the Secretary shall establish an advisory group with the purpose of 
advising the Secretary on the implementation of the enhanced energy 
efficiency underwriting criteria established in sections 4 and 5. The 
advisory group shall provide recommendations to the Secretary on any 
revisions or additions to the enhanced energy efficiency underwriting 
criteria deemed necessary by the group, which may include additional 
factors to account for substantial and regular costs of homeownership 
such as location-based transportation costs and water costs. The 
Secretary shall forward any legislative recommendations from the 
advisory group to Congress for its consideration.
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