[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 1106 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                S. 1106

   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

                              June 6, 2013

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 2013''.

SEC. 2. DEFINITIONS.

    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 the servicing of a covered loan, 
        including the person or entity who makes or holds a covered 
        loan if that person or entity also services the covered 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 efficiency and characteristics of the house;
            (3) expected energy cost savings are important to the value 
        of the house;
            (4) the current test for loan affordability used by most 
        covered agencies, commonly known as the ``debt-to-income'' 
        test, is inadequate because it does not take into account the 
        expected energy cost savings for the homeowner of an energy 
        efficient home; and
            (5) another loan limitation, commonly known as 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 to--
            (1) improve the accuracy of mortgage underwriting by 
        Federal mortgage agencies by ensuring that energy cost savings 
        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) require a covered agency to include the expected energy 
        cost savings 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; and
            (3) 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 value, taking 
        precautions to avoid double-counting and to support safe and 
        sound lending.

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, in consultation with the advisory 
group established in section 7(b), develop and issue guidelines for a 
covered agency 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 energy cost savings for a loan 
applicant at a subject property, in the manner set forth in subsections 
(b) and (c).
    (b) Requirements To Account for Energy Cost Savings.--The enhanced 
loan eligibility requirements under subsection (a) shall require that, 
for all covered loans for which an energy efficiency report is 
voluntarily provided to the mortgagee by the mortgagor, 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 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 cost savings shall be included as an offset to 
these expenses. 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 Cost Savings.--
            (1) In general.--The guidelines to be issued under 
        subsection (a) shall include instructions for the covered 
        agency to calculate estimated energy cost savings using--
                    (A) the energy efficiency report;
                    (B) an estimate of baseline average energy costs; 
                and
                    (C) additional sources of information as determined 
                by the Secretary.
            (2) Report requirements.--For the purposes of paragraph 
        (1), an energy efficiency report shall--
                    (A) estimate the expected energy cost savings 
                specific to the subject property, based on specific 
                information about the property;
                    (B) be prepared in accordance with the guidelines 
                to be issued under subsection (a); and
                    (C) be prepared--
                            (i) in accordance with the Residential 
                        Energy Service Network's Home Energy Rating 
                        System (commonly known as ``HERS'') by an 
                        individual certified by the Residential Energy 
                        Service Network, unless the Secretary finds 
                        that the use of HERS 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 the advisory group established in 
                        section 7(b), for use under this Act, which 
                        shall include a third-party quality assurance 
                        procedure.
            (3) Use by appraiser.--If an energy efficiency report is 
        used under subsection (b), 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 efficiency.
    (d) Required Disclosure to Consumer for a Home With an Energy 
Efficiency Report.--If an energy efficiency report is used under 
subsection (b), the guidelines to be issued under subsection (a) shall 
require the mortgagee to--
            (1) inform the loan applicant of the expected energy costs 
        as estimated in the energy efficiency 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 the energy efficiency report in the 
        documentation for the loan provided to the borrower.
    (e) Required Disclosure to Consumer for a Home Without an Energy 
Efficiency Report.--If an energy efficiency report is not used under 
subsection (b), the guidelines to be issued under subsection (a) shall 
require the mortgagee to inform the loan applicant 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 of--
            (1) 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 property;
            (2) the impact the typical energy cost savings would have 
        on monthly ownership costs of a typical home;
            (3) the impact on the size of a mortgage that could be 
        obtained if the typical energy cost savings were reflected in 
        an energy efficiency report; and
            (4) resources for improving the energy efficiency of a 
        home.
    (f) 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.
    (g) Applicability and Implementation Date.--Not later than 3 years 
after the date of enactment of this Act, and before December 31, 2016, 
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 shall--
            (1) in consultation with the Federal Financial Institutions 
        Examination Council and the advisory group established in 
        section 7(b), 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 4(c)(2); and
            (2) in consultation with the Secretary of Energy, issue 
        guidelines for a covered agency to determine the estimated 
        energy savings under subsection (c) for properties with an 
        energy efficiency report.
    (b) Requirements.--The enhanced energy efficiency underwriting 
valuation guidelines required under subsection (a) shall include--
            (1) a requirement that if an energy efficiency report that 
        meets the requirements of section 4(c)(2) is voluntarily 
        provided to the mortgagee, such report shall be used by the 
        mortgagee or covered agency to determine the estimated energy 
        savings of the subject property; and
            (2) 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 property, 
        unless the appraisal includes the value of the overall energy 
        efficiency of the subject property, using methods to be 
        established under the guidelines issued under subsection (a).
    (c) Determination of Estimated Energy Savings.--
            (1) 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 houses, as determined in guidelines to be issued 
        under subsection (a), and the estimated energy costs for the 
        subject property based upon the energy efficiency report.
            (2) Duration of energy savings.--The duration of the 
        estimated energy savings shall be based upon the estimated life 
        of the applicable equipment, consistent with the rating system 
        used to produce the energy efficiency report.
            (3) Present value of energy savings.--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 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 (2), by striking ``; and'' and inserting a 
        semicolon; and
            (2) in paragraph (3), by striking the period at the end and 
        inserting ``; and'' and inserting after paragraph (3) the 
        following:
            ``(4) that State certified and licensed appraisers have 
        timely access, whenever practicable, 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 property, such as--
                    ``(A) labels or ratings of buildings;
                    ``(B) installed appliances, measures, systems or 
                technologies;
                    ``(C) blueprints;
                    ``(D) construction costs;
                    ``(E) financial or other incentives regarding 
                energy- and water-efficient components and systems 
                installed in a property;
                    ``(F) utility bills;
                    ``(G) energy consumption and benchmarking data; and
                    ``(H) 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 a property owner consents to a lender, an appraiser, in 
        carrying out the requirements of paragraph (4), 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) 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 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 amount.
            (2) Additional authority.--At the end of the 7-year period 
        following the implementation of enhanced eligibility and 
        underwriting valuation requirements 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 or that a 
        modified approach will better reflect an accurate market value.
    (g) Applicability and Implementation Date.--Not later than 3 years 
after the date of enactment of this Act, and before December 31, 2016, 
each covered agency shall 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 every year thereafter, each covered agency with 
relevant activity shall issue and make available to the public a report 
that--
            (1) enumerates the number of covered loans of the agency 
        for which there was an energy efficiency report, and that used 
        energy efficiency appraisal guidelines and enhanced loan 
        eligibility requirements; and
            (2) includes the default rates and rates of foreclosures 
        for each category of loans.

SEC. 7. RULEMAKING.

    (a) In General.--The Secretary shall prescribe regulations to carry 
out this Act, in consultation with the Secretary of Energy and the 
advisory group established in subsection (b), which may contain such 
classifications, differentiations, or other provisions, and may provide 
for such proper implementation and appropriate treatment of different 
types of transactions, as the Secretary determines are necessary or 
proper to effectuate the purposes of this Act, to prevent circumvention 
or evasion thereof, or to facilitate compliance therewith.
    (b) Advisory Group.--To assist in carrying out this Act, the 
Secretary shall establish an advisory group, consisting of individuals 
representing the interests of--
            (1) mortgage lenders;
            (2) appraisers;
            (3) energy raters and residential energy consumption 
        experts;
            (4) energy efficiency organizations;
            (5) real estate agents;
            (6) home builders and remodelers;
            (7) State energy officials; and
            (8) others as determined by the Secretary.

SEC. 8. ADDITIONAL STUDY.

    (a) In General.--Not later than 18 months after the date of 
enactment of this Act, the Secretary shall reconvene the advisory group 
established in section 7(b), in addition to water and locational 
efficiency experts, to advise the Secretary on the implementation of 
the enhanced energy efficiency underwriting criteria established in 
sections 4 and 5.
    (b) Recommendations.--The advisory group established in section 
7(b) 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 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 costs. The Secretary shall forward 
any legislative recommendations from the advisory group to Congress for 
its consideration.
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