II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Sensible Accounting 

5 to Value Energy Act of 2011’’. 


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1 SEC. 2. DEFINITIONS. 

2 As used in this Act, the following definitions shall 

3 apply: 

4 (1) COVERED AGENCY.—The term ‘‘covered 

5 agency’’— 

6 (A) means— 

7 (i) an executive agency, as that term 

8 is defined in section 102 of title 31, United 

9 States Code; and 

10 (ii) any other agency of the Federal 

11 Government; and 

12 (B) includes any enterprise, as that term is 

13 defined under section 1303 of the Federal 

14 Housing Enterprises Financial Safety and 

15 Soundness Act of 1992 (12 U.S.C. 4502). 

16 (2) COVERED LOAN.—The term ‘‘covered loan’’ 

17 means a loan secured by a home that is issued, in18 sured, purchased, or securitized by a covered agency. 

19 (3) HOMEOWNER.—The term ‘‘homeowner’’ 

20 means the mortgagor under a covered loan. 

21 (4) MORTGAGEE.—The term ‘‘mortgagee’’ 

22 means— 

23 (A) an original lender under a covered loan 

24 or the holder of a covered loan at the time at 

25 which that mortgage transaction is con26 summated; 


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1 (B) any affiliate, agent, subsidiary, suc2 cessor, or assignee of an original lender under 

3 a covered loan or the holder of a covered loan 

4 at the time at which that mortgage transaction 

5 is consummated; 

6 (C) any servicer of a covered loan; and 

7 (D) any subsequent purchaser, trustee, or 

8 transferee of any covered loan issued by an 

9 original lender. 

10 (5) SECRETARY.—The term ‘‘Secretary’’ means 

11 the Secretary of Housing and Urban Development. 

12 (6) SERVICER.—The term ‘‘servicer’’ means the 

13 person or entity responsible for servicing of a cov14 ered loan (including the person or entity who makes 

15 or holds such a loan if such person or entity also 

16 services the loan). 

17 (7) SERVICING.—The term ‘‘servicing’’ has the 

18 meaning given the term in section 6(i) of the Real 

19 Estate Settlement Procedures Act of 1974 (12 

20 U.S.C. 2605(i)). 

21 SEC. 3. FINDINGS AND PURPOSES. 

22 (a) FINDINGS.—Congress finds that— 

23 (1) energy costs for homeowners are a signifi24 cant and increasing portion of their household budg25 ets; 


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1 (2) household energy use can vary substantially 

2 depending on the size and efficiency of the house; 

3 (3) expected energy costs are important to the 

4 value of the house; 

5 (4) the current test for loan affordability used 

6 by most covered agencies, commonly called the ‘‘debt 

7 to income’’ test, is inadequate because it does not 

8 assess the expected energy costs for the homeowner; 

9 and 

10 (5) another loan limitation, commonly called the 

11 ‘‘loan to value’’ test, is tied to the appraisal, which 

12 often does not adjust for efficiency features of 

13 houses. 

14 (b) PURPOSES.—The purposes of this Act are— 

15 (1) to improve the accuracy of mortgage under16 writing under Federal mortgage agencies by ensur17 ing that energy costs are included in the under18 writing process as described below, and thus to re19 duce the amount of energy consumed by homes and 

20 to facilitate the creation of energy efficiency retrofit 

21 and construction jobs; 

22 (2) to require covered agencies to include the 

23 expected energy utility costs of a homeowner as a 

24 regular expense in the tests, such as the debt to in25 come test, used to determine the ability of the loan 


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1 applicant to afford the cost of homeownership for all 

2 loan programs; 

3 (3) to require covered agencies to include the 

4 value of energy savings with the appraised home 

5 value in the loan to value metric so that loan 

6 amounts can reflect the value home buyers place on 

7 the energy efficiency of a house, taking precautions 

8 to avoid double-counting and to support safe and 

9 sound lending; and 

10 (4) to direct the covered agencies to make the 

11 necessary credit policy decisions to adjust the max12 imum permitted debt amounts or debt to income ra13 tios for eligibility to accommodate inclusion of ex14 pected energy costs. 

15 SEC. 4. ENHANCED ENERGY EFFICIENCY UNDERWRITING 

16 CRITERIA. 

17 (a) IN GENERAL.—Not later than 1 year after the 

18 date of enactment of this Act, the Secretary shall develop 

19 and issue guidelines for all covered agencies to implement 

20 enhanced loan eligibility requirements, for use when test21 ing the ability of a loan applicant to repay a covered loan, 

22 that account for the expected costs of energy for a loan 

23 applicant at the subject property, in the manner set forth 

24 in subsections (b) and (c). 


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1 (b) REQUIREMENTS TO ACCOUNT FOR ENERGY

2 COSTS.—The enhanced loan eligibility requirements re3 quired under subsection (a) shall include a requirement 

4 that for all covered loans, the covered agency and the 

5 mortgagee shall take into consideration the estimated en6 ergy costs expected for the owner of the subject property 

7 in determining whether the loan applicant has sufficient 

8 income to service the mortgage debt plus other regular ex9 penses. To the extent that a covered agency uses a test 

10 such as a debt-to-income test that includes certain regular 

11 expenses, such as hazard insurance and property taxes, 

12 the expected energy costs shall be included as such an ex13 pense, and the maximum permitted amounts or ratios for 

14 eligibility shall be adjusted to accommodate the average 

15 expected energy costs. Energy costs to be assessed include 

16 the cost of electricity, natural gas, oil, and any other fuel 

17 regularly used to supply energy to the subject property. 

18 (c) DETERMINATION OF ESTIMATED ENERGY

19 COSTS.— 

20 (1) IN GENERAL.—The regulations to be issued 

21 by the Secretary under subsection (a) shall include 

22 instructions for the covered agency to calculate esti23 mated energy costs, using the following approach: 

24 (A) If no energy efficiency report for the 

25 subject property, as described under paragraph 


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1 (2), is provided to the mortgagee, then the 

2 mortgagee shall determine the estimated energy 

3 costs for the subject property based upon the 

4 size of the subject property and an average per 

5 square foot energy cost for properties of that 

6 building type in that region. The most current 

7 version of the Residential Energy Consumption 

8 Survey of the Energy Information Administra9 tion, as such survey is authorized under section 

10 205(k) of the Department of Energy Organiza11 tion Act (42 U.S.C. 7135(k)), may be used as 

12 the basis for the average per square foot energy 

13 cost, or the Secretary may approve use of an14 other source. 

15 (B) If an energy efficiency report is pro16 vided to the mortgagee, then the findings in 

17 such report shall be used in determining the es18 timated energy costs of the subject property, 

19 and shall be provided to the appraiser for use 

20 in estimating the energy efficiency of the house 

21 and potential adjustments for energy efficiency. 

22 (C) Additional sources of information may 

23 be incorporated into the method for deter24 mining expected energy costs, as determined by 

25 the Secretary. 


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1 (2) REPORT REQUIREMENTS.—In order for an 

2 energy efficiency report to be valid and acceptable 

3 for the purposes of paragraph (1)(B), such report 

4 shall— 

5 (A) estimate the expected energy costs spe6 cific to the subject property, based on specific 

7 information about the property; 

8 (B) be prepared in accordance with rules 

9 and guidelines to be issued by the Secretary 

10 under subsection (a); and 

11 (C) be prepared— 

12 (i) in accordance with the Residential 

13 Energy Service Network’s Home Energy 

14 Rating System (also known as ‘‘HERS’’) 

15 by an individual certified by the network, 

16 unless the Secretary finds that such meth17 od does not further the purposes of this 

18 Act; or 

19 (ii) by other methods approved by the 

20 Secretary, in consultation with the Sec21 retary of Energy and other stakeholders, 

22 including State energy offices, for use 

23 under this Act, which in all cases shall in24 clude a third-party quality assurance pro25 cedure. 


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1 (d) REQUIRED DISCLOSURE TO CONSUMER.—If an 

2 energy efficiency report is used under subsection 

3 (c)(1)(B), the rules to be issued by the Secretary under 

4 subsection (a) shall require the mortgagee to— 

5 (1) inform the loan applicant of the expected 

6 energy costs as estimated in the report, in a manner 

7 and at a time as prescribed by the Secretary, and 

8 if practicable, in the documents delivered at the time 

9 of loan application; and 

10 (2) include such report in the documentation 

11 for the loan provided to the borrower. 

12 (e) LIMITATIONS.—A covered agency shall not— 

13 (1) modify existing underwriting criteria or 

14 adopt new underwriting criteria that intentionally 

15 negate or reduce the impact of the requirements or 

16 resulting benefits that are set forth or otherwise de17 rived from the enhanced loan eligibility requirements 

18 required under this section; or 

19 (2) impose greater buy back requirements, cred20 it overlays, insurance requirements, including private 

21 mortgage insurance, or any other material costs, im22 pediments, or penalties on covered loans merely be23 cause the loan uses an energy efficiency report or 

24 the enhanced loan eligibility requirements required 

25 under this section. 


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1 (f) APPLICABILITY AND IMPLEMENTATION DATE.— 

2 Not later than 3 years after the date of enactment of this 

3 Act, and before January 1, 2015, the enhanced loan eligi4 bility requirements required under this section shall be im5 plemented by each covered agency to— 

6 (1) apply to any covered loan for the sale, or 

7 refinancing of any loan for the sale, of any home; 

8 (2) be available on any residential real property 

9 (including individual units of condominiums and co10 operatives) that qualifies for a covered loan; and 

11 (3) provide prospective mortgagees with suffi12 cient guidance and applicable tools to implement the 

13 required underwriting methods. 

14 SEC. 5. ENHANCED ENERGY EFFICIENCY UNDERWRITING 

15 VALUATION GUIDELINES. 

16 (a) IN GENERAL.—Not later than 1 year after the 

17 date of enactment of this Act, the Secretary of Housing 

18 and Urban Development shall, in consultation with the 

19 Federal Financial Institutions Examination Council, de20 velop and issue guidelines for how covered agencies shall 

21 determine the maximum permitted loan amount based on 

22 the value of the property for all covered loans made on 

23 properties with an energy efficiency report as defined in 

24 section 4(c)(2). In addition, the Secretary of Housing and 

25 Urban Development shall, in consultation with the SecVerDate Mar 15 2010 03:17 Oct 20, 2011 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1737.IS S1737

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1 retary of Energy, within one year of enactment of this Act, 

2 issue regulations for covered agencies to determine the es3 timated energy savings for properties with an energy effi4 ciency report as required by subsection (c). 

5 (b) REQUIREMENTS.—The enhanced energy effi6 ciency underwriting valuation guidelines required under 

7 subsection (a) shall include the following: 

8 (1) A requirement that if an energy efficiency 

9 report that meets the requirements of section 4(c)(2) 

10 is provided to the mortgagee, then such report shall 

11 be used by the mortgagee or covered agency to de12 termine the estimated energy savings of the subject 

13 property. 

14 (2) A requirement that the estimated energy 

15 savings of the subject property be added by a mort16 gagee or covered agency to the appraised value for 

17 the purpose of determining the loan-to-value ratio of 

18 the subject property, unless the appraisal indicates 

19 it includes the value of the overall energy efficiency 

20 of the property, using methods to be established by 

21 the Secretary of Housing and Urban Development in 

22 regulations required under subsection (a). 

23 (c) DETERMINATION OF ESTIMATED ENERGY SAV24 INGS.—The amount of estimated energy savings shall be 

25 determined by calculating the difference between the estiVerDate Mar 15 2010 03:17 Oct 20, 2011 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1737.IS S1737

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1 mated energy costs for the average comparable house, as 

2 determined in rules to be issued by the Secretary of Hous3 ing and Urban Development under subsection (a), and the 

4 estimated energy costs for the subject property, using the 

5 energy efficiency report, as determined under section 

6 4(c)(2). The period of the savings shall be based upon the 

7 estimated life of the applicable equipment, consistent with 

8 the rating system used to produce the energy report in 

9 section 4(c)(2). The present value of the future savings 

10 shall be discounted using the average interest rate on con11 ventional 30-year mortgages, in the manner directed by 

12 guidelines issued by the Secretary of Housing and Urban 

13 Development under subsection (a). 

14 (d) ENSURING CONSIDERATION OF ENERGY-EFFI15 CIENT FEATURES.—Section 1110 of the Financial Institu16 tions Reform, Recovery, and Enforcement Act of 1989 (12 

17 U.S.C. 3339), is amended— 

18 (1) in paragraph (3), by striking the period at 

19 the end and inserting ‘‘; and’’; and 

20 (2) by adding at the end the following: 

21 ‘‘(4) that State-certified appraisers have timely 

22 access, whenever practicable, to information from 

23 the lender relevant to an appraisal of the energy and 

24 water efficiency or conserving improvements or fea25 tures of a property, such as labels or ratings of 


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1 buildings and installed appliances, blueprints, con2 struction costs, incentives regarding energy- and 

3 water-efficient components and systems installed in 

4 a property, and third-party verifications or represen5 tations of energy and water efficiency performance 

6 of a property, observing all financial privacy require7 ments adhered to by certified and licensed apprais8 ers, including section 501 of the Gramm-Leach-Bli9 ley Act (15 U.S.C. 6801), unless the property owner 

10 consents to the lender, an appraiser shall not have 

11 access to the commercial or financial information of 

12 the owner that is privileged or confidential.’’. 

13 (e) TRANSACTIONS REQUIRING STATE CERTIFIED

14 APPRAISERS.—Section 1113 of the Financial Institutions 

15 Reform, Recovery, and Enforcement Act of 1989 (12 

16 U.S.C. 3342), as amended by section 1473(e)(2) of the 

17 Dodd-Frank Wall Street Reform and Consumer Protec18 tion Act of 2010, is amended— 

19 (1) in paragraph (1), by inserting before the 

20 semicolon the following: ‘‘, or any real property on 

21 which the appraiser makes adjustments using an en22 ergy efficiency report’’; and 

23 (2) in paragraph (2) by inserting after ‘‘atypi24 cal’’ the following: ‘‘, or an appraisal on which the 


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1 appraiser makes adjustments using an energy effi2 ciency report.’’. 

3 (f) PROTECTIONS.— 

4 (1) AUTHORITY TO IMPOSE LIMITATIONS.—The 

5 guidelines to be issued under subsection (a) shall in6 clude such limitations and conditions determined by 

7 the Secretary to be necessary to protect against 

8 meaningful under or over valuation of energy sav9 ings or duplicative counting of energy efficiency fea10 tures or energy savings in the valuation of any sub11 ject property used to determine a loan amount. 

12 (2) ADDITIONAL AUTHORITY.—At the end of 

13 the 7-year period following the implementation of 

14 the program established under this Act, the Sec15 retary may modify or apply additional exceptions to 

16 the approach described in subsection (b), where the 

17 Secretary finds that the unadjusted appraisal will re18 flect an accurate market value of the efficiency of 

19 the subject property. 

20 (g) APPLICABILITY AND IMPLEMENTATION DATE.— 

21 Each covered agency shall, within 3 years after the date 

22 of enactment of this Act, and before January 1, 2015, im23 plement the guidelines required under this section, which 

24 shall— 


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1 (1) apply to any covered loan for the sale, or 

2 refinancing of any loan for the sale, of any home; 

3 and 

4 (2) be available on any residential real property 

5 (including individual units of condominiums and co6 operatives) that qualifies for a covered loan. 

7 SEC. 6. MONITORING. 

8 Not later than 1 year after the date on which the 

9 enhanced eligibility and underwriting valuation require10 ments are implemented under this Act, and each year 

11 thereafter, each covered agency with relevant activity shall 

12 issue and make available to the public a report that enu13 merates the number of covered loans of each such agency 

14 that used enhanced loan eligibility requirements, for which 

15 there was an energy efficiency report, and that used en16 hanced energy efficiency appraisal guidelines. Such report 

17 shall include the default rates and rates of foreclosures 

18 for each category of loan. 

19 SEC. 7. RULEMAKING. 

20 The Secretary shall prescribe regulations to carry out 

21 this Act, in consultation with the Secretary of Energy and 

22 stakeholders, including State energy offices. Such regula23 tions may contain such classifications, differentiations, or 

24 other provisions, and may provide for such proper imple25 mentation and appropriate treatment of different types of 


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1 transactions, as in the judgment of the Secretary are nec2 essary or proper to effectuate the purposes of this Act, 

3 to prevent circumvention or evasion thereof, or to facilitate 

4 compliance therewith. 

5 SEC. 8. ADDITIONAL STUDY. 

6 Not later than 18 months after the date of enactment 

7 of this Act, the Secretary shall establish an advisory group 

8 with the purpose of advising the Secretary on the imple9 mentation of the enhanced energy efficiency underwriting 

10 criteria established in sections 4 and 5. The advisory 

11 group shall provide recommendations to the Secretary on 

12 any revisions or additions to the enhanced energy effi13 ciency underwriting criteria deemed necessary by the 

14 group, which may include additional factors to account for 

15 substantial and regular costs of homeownership such as 

16 location-based transportation costs and water costs. The 

17 Secretary shall forward any legislative recommendations 

18 from the advisory group to Congress for its consideration. 

Æ 


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