II 

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. 

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 2013’’. 


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1 SEC. 2. DEFINITIONS. 

2 In this Act, the following definitions shall apply: 

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

4 agency’’— 

5 (A) means— 

6 (i) an executive agency, as that term 

7 is defined in section 102 of title 31, United 

8 States Code; and 

9 (ii) any other agency of the Federal 

10 Government; and 

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

12 defined under section 1303 of the Federal 

13 Housing Enterprises Financial Safety and 

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

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

16 means a loan secured by a home that is issued, in17 sured, purchased, or securitized by a covered agency. 

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

19 means the mortgagor under a covered loan. 

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

21 means— 

22 (A) an original lender under a covered loan 

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

24 which that mortgage transaction is con25 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 the servicing of a 

14 covered loan, including the person or entity who 

15 makes or holds a covered loan if that person or enti16 ty also services the covered 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 efficiency and characteristics of 

3 the house; 

4 (3) expected energy cost savings are important 

5 to the value of the house; 

6 (4) the current test for loan affordability used 

7 by most covered agencies, commonly known as the 

8 ‘‘debt-to-income’’ test, is inadequate because it does 

9 not take into account the expected energy cost sav10 ings for the homeowner of an energy efficient home; 

11 and 

12 (5) another loan limitation, commonly known as 

13 the ‘‘loan-to-value’’ test, is tied to the appraisal, 

14 which often does not adjust for efficiency features of 

15 houses. 

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

17 (1) improve the accuracy of mortgage under18 writing by Federal mortgage agencies by ensuring 

19 that energy cost savings are included in the under20 writing process as described below, and thus to re21 duce the amount of energy consumed by homes and 

22 to facilitate the creation of energy efficiency retrofit 

23 and construction jobs; 

24 (2) require a covered agency to include the ex25 pected energy cost savings of a homeowner as a regVerDate Mar 15 2010 02:28 Jun 08, 2013 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1106.IS S1106

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1 ular expense in the tests, such as the debt-to-income 

2 test, used to determine the ability of the loan appli3 cant to afford the cost of homeownership for all loan 

4 programs; and 

5 (3) require a covered agency to include the 

6 value home buyers place on the energy efficiency of 

7 a house in tests used to compare the mortgage 

8 amount to home value, taking precautions to avoid 

9 double-counting and to support safe and sound lend10 ing. 

11 SEC. 4. ENHANCED ENERGY EFFICIENCY UNDERWRITING 

12 CRITERIA. 

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

14 date of enactment of this Act, the Secretary shall, in con15 sultation with the advisory group established in section 

16 7(b), develop and issue guidelines for a covered agency to 

17 implement enhanced loan eligibility requirements, for use 

18 when testing the ability of a loan applicant to repay a cov19 ered loan, that account for the expected energy cost sav20 ings for a loan applicant at a subject property, in the man21 ner set forth in subsections (b) and (c). 

22 (b) REQUIREMENTS TO ACCOUNT FOR ENERGY COST

23 SAVINGS.—The enhanced loan eligibility requirements 

24 under subsection (a) shall require that, for all covered 

25 loans for which an energy efficiency report is voluntarily 


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1 provided to the mortgagee by the mortgagor, the covered 

2 agency and the mortgagee shall take into consideration the 

3 estimated energy cost savings expected for the owner of 

4 the subject property in determining whether the loan ap5 plicant has sufficient income to service the mortgage debt 

6 plus other regular expenses. To the extent that a covered 

7 agency uses a test such as a debt-to-income test that in8 cludes certain regular expenses, such as hazard insurance 

9 and property taxes, the expected energy cost savings shall 

10 be included as an offset to these expenses. Energy costs 

11 to be assessed include the cost of electricity, natural gas, 

12 oil, and any other fuel regularly used to supply energy to 

13 the subject property. 

14 (c) DETERMINATION OF ESTIMATED ENERGY COST

15 SAVINGS.— 

16 (1) IN GENERAL.—The guidelines to be issued 

17 under subsection (a) shall include instructions for 

18 the covered agency to calculate estimated energy 

19 cost savings using— 

20 (A) the energy efficiency report; 

21 (B) an estimate of baseline average energy 

22 costs; and 

23 (C) additional sources of information as 

24 determined by the Secretary. 


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1 (2) REPORT REQUIREMENTS.—For the pur2 poses of paragraph (1), an energy efficiency report 

3 shall— 

4 (A) estimate the expected energy cost sav5 ings specific to the subject property, based on 

6 specific information about the property; 

7 (B) be prepared in accordance with the 

8 guidelines to be issued under subsection (a); 

9 and 

10 (C) be prepared— 

11 (i) in accordance with the Residential 

12 Energy Service Network’s Home Energy 

13 Rating System (commonly known as 

14 ‘‘HERS’’) by an individual certified by the 

15 Residential Energy Service Network, un16 less the Secretary finds that the use of 

17 HERS does not further the purposes of 

18 this Act; or 

19 (ii) by other methods approved by the 

20 Secretary, in consultation with the Sec21 retary of Energy and the advisory group 

22 established in section 7(b), for use under 

23 this Act, which shall include a third-party 

24 quality assurance procedure. 


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1 (3) USE BY APPRAISER.—If an energy effi2 ciency report is used under subsection (b), the en3 ergy efficiency report shall be provided to the ap4 praiser to estimate the energy efficiency of the sub5 ject property and for potential adjustments for en6 ergy efficiency. 

7 (d) REQUIRED DISCLOSURE TO CONSUMER FOR A

8 HOME WITH AN ENERGY EFFICIENCY REPORT.—If an 

9 energy efficiency report is used under subsection (b), the 

10 guidelines to be issued under subsection (a) shall require 

11 the mortgagee to— 

12 (1) inform the loan applicant of the expected 

13 energy costs as estimated in the energy efficiency re14 port, in a manner and at a time as prescribed by the 

15 Secretary, and if practicable, in the documents deliv16 ered at the time of loan application; and 

17 (2) include the energy efficiency report in the 

18 documentation for the loan provided to the borrower. 

19 (e) REQUIRED DISCLOSURE TO CONSUMER FOR A

20 HOME WITHOUT AN ENERGY EFFICIENCY REPORT.—If 

21 an energy efficiency report is not used under subsection 

22 (b), the guidelines to be issued under subsection (a) shall 

23 require the mortgagee to inform the loan applicant in a 

24 manner and at a time as prescribed by the Secretary, and 


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1 if practicable, in the documents delivered at the time of 

2 loan application of— 

3 (1) typical energy cost savings that would be 

4 possible from a cost-effective energy upgrade of a 

5 home of the size and in the region of the subject 

6 property; 

7 (2) the impact the typical energy cost savings 

8 would have on monthly ownership costs of a typical 

9 home; 

10 (3) the impact on the size of a mortgage that 

11 could be obtained if the typical energy cost savings 

12 were reflected in an energy efficiency report; and 

13 (4) resources for improving the energy effi14 ciency of a home. 

15 (f) LIMITATIONS.—A covered agency shall not— 

16 (1) modify existing underwriting criteria or 

17 adopt new underwriting criteria that intentionally 

18 negate or reduce the impact of the requirements or 

19 resulting benefits that are set forth or otherwise de20 rived from the enhanced loan eligibility requirements 

21 required under this section; or 

22 (2) impose greater buy back requirements, cred23 it overlays, insurance requirements, including private 

24 mortgage insurance, or any other material costs, im25 pediments, or penalties on covered loans merely beVerDate Mar 15 2010 02:28 Jun 08, 2013 Jkt 029200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1106.IS S1106

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1 cause the loan uses an energy efficiency report or 

2 the enhanced loan eligibility requirements required 

3 under this section. 

4 (g) APPLICABILITY AND IMPLEMENTATION DATE.— 

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

6 Act, and before December 31, 2016, the enhanced loan 

7 eligibility requirements required under this section shall 

8 be implemented by each covered agency to— 

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

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

11 (2) be available on any residential real property 

12 (including individual units of condominiums and co13 operatives) that qualifies for a covered loan; and 

14 (3) provide prospective mortgagees with suffi15 cient guidance and applicable tools to implement the 

16 required underwriting methods. 

17 SEC. 5. ENHANCED ENERGY EFFICIENCY UNDERWRITING 

18 VALUATION GUIDELINES. 

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

20 date of enactment of this Act, the Secretary shall— 

21 (1) in consultation with the Federal Financial 

22 Institutions Examination Council and the advisory 

23 group established in section 7(b), develop and issue 

24 guidelines for a covered agency to determine the 

25 maximum permitted loan amount based on the value 


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1 of the property for all covered loans made on prop2 erties with an energy efficiency report that meets the 

3 requirements of section 4(c)(2); and 

4 (2) in consultation with the Secretary of En5 ergy, issue guidelines for a covered agency to deter6 mine the estimated energy savings under subsection 

7 (c) for properties with an energy efficiency report. 

8 (b) REQUIREMENTS.—The enhanced energy effi9 ciency underwriting valuation guidelines required under 

10 subsection (a) shall include— 

11 (1) a requirement that if an energy efficiency 

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

13 is voluntarily provided to the mortgagee, such report 

14 shall be used by the mortgagee or covered agency to 

15 determine the estimated energy savings of the sub16 ject property; and 

17 (2) a requirement that the estimated energy 

18 savings of the subject property be added to the ap19 praised value of the subject property by a mortgagee 

20 or covered agency for the purpose of determining the 

21 loan-to-value ratio of the subject property, unless the 

22 appraisal includes the value of the overall energy ef23 ficiency of the subject property, using methods to be 

24 established under the guidelines issued under sub25 section (a). 


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1 (c) DETERMINATION OF ESTIMATED ENERGY SAV2 INGS.— 

3 (1) AMOUNT OF ENERGY SAVINGS.—The 

4 amount of estimated energy savings shall be deter5 mined by calculating the difference between the esti6 mated energy costs for the average comparable 

7 houses, as determined in guidelines to be issued 

8 under subsection (a), and the estimated energy costs 

9 for the subject property based upon the energy effi10 ciency report. 

11 (2) DURATION OF ENERGY SAVINGS.—The du12 ration of the estimated energy savings shall be based 

13 upon the estimated life of the applicable equipment, 

14 consistent with the rating system used to produce 

15 the energy efficiency report. 

16 (3) PRESENT VALUE OF ENERGY SAVINGS.— 

17 The present value of the future savings shall be dis18 counted using the average interest rate on conven19 tional 30-year mortgages, in the manner directed by 

20 guidelines issued under subsection (a). 

21 (d) ENSURING CONSIDERATION OF ENERGY EFFI22 CIENT FEATURES.—Section 1110 of the Financial Institu23 tions Reform, Recovery, and Enforcement Act of 1989 (12 

24 U.S.C. 3339) is amended— 


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1 (1) in paragraph (2), by striking ‘‘; and’’ and 

2 inserting a semicolon; and 

3 (2) in paragraph (3), by striking the period at 

4 the end and inserting ‘‘; and’’ and inserting after 

5 paragraph (3) the following: 

6 ‘‘(4) that State certified and licensed appraisers 

7 have timely access, whenever practicable, to informa8 tion from the property owner and the lender that 

9 may be relevant in developing an opinion of value re10 garding the energy- and water-saving improvements 

11 or features of a property, such as— 

12 ‘‘(A) labels or ratings of buildings; 

13 ‘‘(B) installed appliances, measures, sys14 tems or technologies; 

15 ‘‘(C) blueprints; 

16 ‘‘(D) construction costs; 

17 ‘‘(E) financial or other incentives regard18 ing energy- and water-efficient components and 

19 systems installed in a property; 

20 ‘‘(F) utility bills; 

21 ‘‘(G) energy consumption and benchmark22 ing data; and 

23 ‘‘(H) third-party verifications or represen24 tations of energy and water efficiency perform25 ance of a property, observing all financial priVerDate Mar 15 2010 02:28 Jun 08, 2013 Jkt 029200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S1106.IS S1106

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1 vacy requirements adhered to by certified and 

2 licensed appraisers, including section 501 of the 

3 Gramm-Leach-Bliley Act (15 U.S.C. 6801). 

4 Unless a property owner consents to a lender, an ap5 praiser, in carrying out the requirements of para6 graph (4), shall not have access to the commercial 

7 or financial information of the owner that is privi8 leged or confidential.’’. 

9 (e) TRANSACTIONS REQUIRING STATE CERTIFIED

10 APPRAISERS.—Section 1113 of the Financial Institutions 

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

12 U.S.C. 3342) is amended— 

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

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

15 which the appraiser makes adjustments using an en16 ergy efficiency report’’; and 

17 (2) in paragraph (2), by inserting after ‘‘atypi18 cal’’ the following: ‘‘, or an appraisal on which the 

19 appraiser makes adjustments using an energy effi20 ciency report.’’. 

21 (f) PROTECTIONS.— 

22 (1) AUTHORITY TO IMPOSE LIMITATIONS.—The 

23 guidelines to be issued under subsection (a) shall in24 clude such limitations and conditions as determined 

25 by the Secretary to be necessary to protect against 


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1 meaningful under or over valuation of energy cost 

2 savings or duplicative counting of energy efficiency 

3 features or energy cost savings in the valuation of 

4 any subject property that is used to determine a 

5 loan amount. 

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

7 the 7-year period following the implementation of 

8 enhanced eligibility and underwriting valuation re9 quirements under this Act, the Secretary may mod10 ify or apply additional exceptions to the approach 

11 described in subsection (b), where the Secretary 

12 finds that the unadjusted appraisal will reflect an 

13 accurate market value of the efficiency of the subject 

14 property or that a modified approach will better re15 flect an accurate market value. 

16 (g) APPLICABILITY AND IMPLEMENTATION DATE.— 

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

18 Act, and before December 31, 2016, each covered agency 

19 shall implement the guidelines required under this section, 

20 which shall— 

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

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

23 and 


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1 (2) be available on any residential real property, 

2 including individual units of condominiums and co3 operatives, that qualifies for a covered loan. 

4 SEC. 6. MONITORING. 

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

6 enhanced eligibility and underwriting valuation require7 ments are implemented under this Act, and every year 

8 thereafter, each covered agency with relevant activity shall 

9 issue and make available to the public a report that— 

10 (1) enumerates the number of covered loans of 

11 the agency for which there was an energy efficiency 

12 report, and that used energy efficiency appraisal 

13 guidelines and enhanced loan eligibility require14 ments; and 

15 (2) includes the default rates and rates of fore16 closures for each category of loans. 

17 SEC. 7. RULEMAKING. 

18 (a) IN GENERAL.—The Secretary shall prescribe reg19 ulations to carry out this Act, in consultation with the Sec20 retary of Energy and the advisory group established in 

21 subsection (b), which may contain such classifications, dif22 ferentiations, or other provisions, and may provide for 

23 such proper implementation and appropriate treatment of 

24 different types of transactions, as the Secretary deter25 mines are necessary or proper to effectuate the purposes 


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1 of this Act, to prevent circumvention or evasion thereof, 

2 or to facilitate compliance therewith. 

3 (b) ADVISORY GROUP.—To assist in carrying out this 

4 Act, the Secretary shall establish an advisory group, con5 sisting of individuals representing the interests of— 

6 (1) mortgage lenders; 

7 (2) appraisers; 

8 (3) energy raters and residential energy con9 sumption experts; 

10 (4) energy efficiency organizations; 

11 (5) real estate agents; 

12 (6) home builders and remodelers; 

13 (7) State energy officials; and 

14 (8) others as determined by the Secretary. 

15 SEC. 8. ADDITIONAL STUDY. 

16 (a) IN GENERAL.—Not later than 18 months after 

17 the date of enactment of this Act, the Secretary shall re18 convene the advisory group established in section 7(b), in 

19 addition to water and locational efficiency experts, to ad20 vise the Secretary on the implementation of the enhanced 

21 energy efficiency underwriting criteria established in sec22 tions 4 and 5. 

23 (b) RECOMMENDATIONS.—The advisory group estab24 lished in section 7(b) shall provide recommendations to the 

25 Secretary on any revisions or additions to the enhanced 


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1 energy efficiency underwriting criteria deemed necessary 

2 by the group, which may include alternate methods to bet3 ter account for home energy costs and additional factors 

4 to account for substantial and regular costs of homeowner5 ship such as location-based transportation costs and water 

6 costs. The Secretary shall forward any legislative rec7 ommendations from the advisory group to Congress for 

8 its consideration. 

Æ 


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