Sec. 4. Enhanced energy efficiency underwriting criteria
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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). 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. The guidelines to be issued under subsection
(a)shall include instructions for the covered agency to calculate estimated energy cost savings using— the energy efficiency report; an estimate of baseline average energy costs; and additional sources of information as determined by the Secretary. For the purposes of paragraph (1), an energy efficiency report shall— estimate the expected energy cost savings specific to the subject property, based on specific information about the property; be prepared in accordance with the guidelines to be issued under subsection (a); and be prepared— 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 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. 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. If an energy efficiency report is used under subsection (b), the guidelines to be issued under subsection
(a)shall require the mortgagee to— 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 include the energy efficiency report in the documentation for the loan provided to the borrower. 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— 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; the impact the typical energy cost savings would have on monthly ownership costs of a typical home; 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 resources for improving the energy efficiency of a home. A covered agency shall not— 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 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. 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— apply to any covered loan for the sale, or refinancing of any loan for the sale, of any home; be available on any residential real property (including individual units of condominiums and cooperatives) that qualifies for a covered loan; and provide prospective mortgagees with sufficient guidance and applicable tools to implement the required underwriting methods.