Sec. 4. Enhanced energy appraisal
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In this section: The term advisory group means the advisory group established under subsection (f)(2). The term covered agency means— the Federal Housing Administration; includes each enterprise, as defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4502 ); and includes the Government National Mortgage Association. The term covered loan means a loan secured by a home that is issued, insured, purchased, or securitized by a covered agency.
The term energy report means an energy report that meets the requirements under subsection (c)(3)(B). The term HERS means the Home Energy Rating System of the Residential Energy Service Network. The term homeowner means the mortgagor under a covered loan. The term mortgagee means a creditor as defined in section 103 of the Truth in Lending Act ( 15 U.S.C. 1602 ). The term qualified appraiser means an appraiser with the requisite knowledge of energy efficiency to perform a professional quality appraisal, as evidenced by professional certification or development programs on the valuation of sustainable properties of at least 14 hours in length approved by the Secretary.
The term Secretary means the Secretary of Housing and Urban Development. Congress finds that— energy costs for homeowners are a significant and increasing portion of their household budgets; household energy use can vary substantially depending on the efficiency and renewable energy generation characteristics of a house; expected energy cost savings resulting from efficiency measures and/or the generation of energy from solar panels and/or other renewables are in many cases important to the value of a house; and the loan-to-value ratio test for originations of covered loans is tied to the appraisal or other valuation of a property of a house, which often does not adjust for the energy efficiency or renewable energy generation features of a house.
The purpose of this section is to— improve the credibility and reliability of appraisals of houses subject to covered loans by ensuring that the energy efficient and renewable energy generation features and energy costs of those houses are included in the appraisal analysis, which would place value on energy efficient and renewable energy features of a house and facilitate the creation of energy efficiency retrofit, renewable installation, and construction jobs; and require the Secretary to— develop consistent enhanced energy appraisal protocols that recognize all applicable approaches to the value of a house, including the cost and income approaches to value, in analyzing energy efficiency and renewable energy features; ensure that the guidelines described in clause
(i)prevent the double counting of energy cost savings in the valuation of a house; support safe and sound lending; and protect consumers. Not later than 1 year after the date of enactment of this Act, the Secretary, in consultation with the Federal Housing Finance Agency, the Bureau of Consumer Financial Protection and the advisory group, shall develop and issue guidelines for a covered agency to implement enhanced energy appraisal protocols for properties that are subject to a covered loan. The enhanced energy appraisal protocols under paragraph
(1)shall require that, for each property with a covered loan for which the homeowner has voluntarily opted for an energy report, the appraiser shall take into consideration the energy efficiency and renewable energy features of a house and resulting estimated energy cost savings and energy generation expected for the owner of the subject property as part of the appraisal process. The estimated energy costs to be taken into consideration under subparagraph
(A)shall include the cost of electricity, natural gas, oil, and any other fuel regularly used to supply energy to the subject property. The guidelines issued under paragraph
(1)shall include instructions for an appraiser to calculate estimated energy cost savings for a property using— an energy report documenting the energy efficiency and renewable energy features of the property; an estimate of baseline average energy costs for the property; and additional sources of information determined by the Secretary. For purposes of subparagraph (A), an energy report shall— estimate the expected energy cost savings specific to the subject property, based on specific information about the property; estimate the expected energy generated from installed renewable energy features; be prepared in accordance with the guidelines issued under paragraph (1); and be prepared— in accordance with 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 section; by the Department of Energy’s Home Energy Score; or by other methods approved by the Secretary, in consultation with the Secretary of Energy and the advisory group, for use under this section, which shall include a quality assurance procedure approved by the Secretary, in consultation with the Secretary of Energy. If an energy report is used under paragraph (2), the energy report shall be provided to the appraiser— to estimate the energy efficiency of the subject property including the estimated annual savings; to estimate the energy generated by renewables; and considered in developing opinions and conclusions about any value contribution for energy efficiency and renewable energy generation. If an energy report is used for an appraisal of a property under paragraph (2), the guidelines issued under paragraph
(1)shall require the mortgagee of the property to— inform the homeowner and loan applicant of the expected energy cost savings estimated in the energy report and any associated appraisal adjustment, in a manner and at a time as prescribed by the Secretary, and, if practicable, in the documents delivered at the time of the transfer of title; and include a copy of the energy report in the appraisal report provided to the homeowner and loan applicant. If an energy report is not used under paragraph (2), the guidelines to be issued under paragraph
(1)shall require the mortgagee to inform the loan applicant as part of the Closing Disclosure— 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. Not later than the earlier of two years after the date of enactment of this Act and December 31, 2023, the enhanced energy appraisal requirements required under this subsection shall be implemented by each covered agency to— apply to an appraisal for 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 appraisers with sufficient guidance and applicable tools to implement the required appraisal methods. Not later than 1 year after the date of enactment of this Act, the Secretary shall— in consultation with the advisory group, develop and issue guidelines for enhanced energy appraisal protocols for all covered loans made on properties with an energy report; develop lender collateral valuation guidelines on the use of all applicable approaches to value used by appraisers in accordance with the Uniform Standards of Professional Appraisal Practice to analyze market reaction to energy efficiency and renewable energy installation, including methods and techniques, which shall include the cost and income approaches to value; and in consultation with the Secretary of Energy, issue guidelines for— a covered agency to determine the estimated energy savings and energy generation under paragraph
(3)for properties with an energy report; and a qualified appraiser to use an energy report to estimate the energy efficiency rating, sales, and listing data to establish market reaction to energy efficiency. The enhanced energy appraisal protocols required under paragraph (1)(A) shall— include a requirement that if a homeowner voluntarily opts for an energy report to be used in valuing the home, then using methods to be established under the guidelines issued under paragraph (1)— such report may be used by a qualified appraiser to determine the estimated energy savings of the subject property in comparison to a baseline; the value of estimated energy savings and energy generation of the subject property shall be added to the appraised value of the subject property, unless the appraisal includes the value of the overall energy efficiency and renewable energy generation of the subject property; and the cost and income approaches to value be recognized as reasonable and appropriate approaches to valuing the energy efficiency and renewable energy features of a home; and prohibit restrictions of all applicable approaches to value an energy efficient home. For the purpose of paragraph (2), the amount of estimated energy savings of a subject property shall be determined by calculating the difference between the estimated energy costs from the energy report for the subject property compared to the energy costs of comparable houses, as determined in the guidelines issued under paragraph
(1)For the purpose of paragraph (2), the amount of estimated energy generation of a subject property shall be determined by calculating the amount of energy generated by the home’s energy-generating features over their useful lifetime. For the purpose of paragraph (2), the duration of the estimated energy savings and generation of a subject property shall be based on the useful life of applicable equipment, consistent with the rating system used to produce the energy report. For the purpose of paragraph (2), the present value of the estimated future energy savings and/or generation of a subject property shall be calculated using the average interest rate of conventional 30 year mortgages unless the qualified appraiser chooses to use the appropriate discount rate for the market area, in the manner directed by guidelines issued under paragraph (1). Section 1113 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ( 12 U.S.C. 3342 ) is amended— in paragraph (1), by inserting before the semicolon the following: , or any real property on which the appraiser makes adjustments using an energy report ; and in paragraph (2), by inserting after atypical the following: , or an appraisal on which the appraiser makes adjustments using an energy report. . The guidelines issued under paragraph
(1)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 and renewable energy features or energy cost savings and generation in the valuation of any subject property that is used to determine a loan amount. Not later than the earlier of 2 years after the date of enactment of this Act and December 31, 2023, each covered agency shall implement the guidelines required under this subsection, which shall— apply to the appraisal of a property that is subject to any covered loan for the sale, or refinancing of any loan for the sale, of any home; and be available on any residential real property, including individual units of condominiums and cooperatives, that qualifies for a covered loan. Not later than 1 year after the date on which the enhanced appraisal protocols are implemented under this section, and annually thereafter, each covered agency that issues a covered loan shall issue and make available to the public a report that— enumerates the number of covered loans issued by the agency during the previous year for which there was an energy report and that used energy appraisal protocols established under this section; includes the default rates and rates of foreclosures for loans (including a breakdown of default and foreclosure rates by geographic region, race, and self-identified gender) made using the energy appraisal protocols established under this section; and describes the risk premium, if any, that the agency has priced into covered loans for which there was an appraisal that included an energy report. The Secretary, in consultation with the Secretary of Energy and the advisory group, shall prescribe regulations to carry out this section, 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 section, to prevent circumvention or evasion thereof, or to facilitate compliance therewith. To assist in carrying out this section, the Secretary shall establish an advisory group, consisting of professional associations and individuals representing the interests of— mortgage lenders; appraisers; energy raters, residential energy consumption experts, and residential retrofit experts; energy efficiency organizations; real estate agents; home builders and remodelers; State energy officials; low-income communities; consumers; and other individuals determined by the Secretary. Not later than 18 months after the date of enactment of this Act, the Secretary, in consultation with the advisory group, shall reevaluate the effectiveness of the energy appraisal protocols established under this section to ensure that the cost savings of energy efficient and renewable energy features are properly valued in residential real estate appraisals. Not later than 18 months after the date of enactment of this Act, the advisory group shall provide recommendations to the Secretary on any revisions or additions to the enhanced energy appraisal protocols and guidelines established under subsections
(c)and
(d)determined 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 water costs, the storage of energy through batteries, indoor air quality, and transportation costs stemming from the home’s location. The Secretary shall forward any legislative recommendations received from the advisory group under subparagraph
(A)to Congress for consideration.
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