Archives for September 2012

Sowing the Seeds of Green Renovations

Hey I am not the most environmentally conscious guy (I kinda say worship the creator not the creation) but there are a lot of good thoughts on Real Estate in the article and I thought you might enjoy it.  Hope you have a great weekend.  Jerry & Jordan Case

Green building and energy-efficient home upgrades do more than merely help the environment.  For homebuyers, energy-wise improvements can help reduce future utility costs and deliver a comfortable home with improved air quality and living standards.  In many cases, energy-efficient upgrades also can bring a home up to current building codes, increasing its value and, by extension, bolstering the value of the entire neighborhood by converting an old, functionally obsolescent home into an energy-wise, renovated home.

As appealing as a renovation may be, however, upgrading a home can be a difficult undertaking.  With that in mind, how can mortgage brokers and originators help their green-minded clients plant the seeds for success?  When it comes to upgrading a property with energy-efficient improvements, homebuyers need to know that it takes a team of informed professionals to help a project flourish.  Navigating the world of underwriting can be tricky business, however.  Even if a loan fits given parameters and guidelines at the time of closing, originators still can be held liable for mortgage-insurance rescissions and repurchase demands long after a loan’s closing.  When it comes to steering clear of underwriting trouble, brokers and originators must have a solid grasp on general underwriting processes and the many layers of due diligence that occur after a loan closes.

Mortgage brokers and originators should know what to expect out of the entire process when helping clients finance green renovations.  By working together, the right team of professionals can help their clients create energy-efficient, environmentally friendly homes that will decrease energy use while increasing value.

The Green Team

Closing any deal within the mortgage industry requires a degree of teamwork, but this is especially true when it comes to green purchases and refinances.  Homebuyers — and the originators who are working with them — should be sure to align themselves with an experienced, well-functioning team to ensure that their green deal doesn’t wilt away.

The green-buying process likely will begin with a qualified Realtor who can identify viable properties that meet the borrower’s specifications.  This person can estimate current market value and negotiate an acceptable purchase price and terms.  In today’s market, these professionals must be skilled negotiators in addition to being well-versed professionals when it comes to green homes specifically.

A general contractor who is a certified and experienced energy professional can act as a project manager for a deal, providing a viable project estimate and identifying available rebates and incentives.  Once again, experience is key.  With regards to green building and renovations, general contractors must work through a myriad of problems and bumps in the road, so it’s vital for this person to stay informed about the latest techniques and tools of the green industry.

Finally, there’s you: the loan professional who is tasked with providing realistic cash requirements and a fully documented pre-approval.  There are multiple energy-wise financing options in today’s industry, so it’s crucial to have a clear understanding of your borrower’s desired outcome and qualifying capacity.  This can be a great help in determining the best approach to your client’s financing options.

Invariably, many of your borrowers will be interested in either the FHA’s 203(k) loan program or an energy-efficient mortgage.  In working with these borrowers, mortgage brokers and originators should consider several key factors before the deal gets fully underway:

Is the borrower clear about the specific type of home that’s desired?

Does the borrower have a realistic expectation for the purchase or renovation, given the state of the housing market?

Does the borrower have enough cash for the transaction?  When working with the 203(k) program the loan amount will be determined by the lesser of two calculations: Either the sale price (or appraised value) plus rehabilitation and other allowable costs; or the property’s ultimate, improved value plus 10 percent.

For investors or flippers, a green property’s value and project cost obviously can affect the deal’s cash requirements.  For this reason, it’s important for the Realtor’s assessment of the property’s value to be as accurate as possible, and it’s critical to have a timely and realistic project proposal from the general contractor.  In other words, regardless of a deal’s specifics, communication and cooperation among the members of your green team always will be of the utmost importance.

Home-energy inspections

Mortgage brokers and originators also can assist their energy-minded clients simply by helping them understand some of the steps necessary for a green home renovation.  For one thing, in addition to advising their clients about funding and loans, originators can get their clients up to speed about a key part of the green-renovation process: the home-energy inspection.

A home-energy inspection is a great tool for diagnosing problems with a property and for planning cost-effective solutions.  These home inspections typically cost between $350 and $600, and it generally takes four to six hours to have a qualified energy expert perform the inspection.  Mortgage brokers and originators can help their clients know what to expect when it comes to this preliminary renovation phase.

For instance, before the day of the inspection, the inspector — i.e., a Building Performance Institute building analyst — will ask the borrower for a copy of the home’s utility billing statements.  These statements will contain information about the base amount of energy consumed in a period of one year.  The inspector also will ask the borrower to ensure that there are no fires in the fireplace and even will ask that the fireplace be cleaned before the day of inspection.  This is because the inspector will be performing air pressure testing, so it’s important for the home to be free of ashes and dust.

On the day of the inspection, one of the primary concerns is to check for ambient levels of carbon monoxide in the home.  Inspectors will examine the entire house, looking for drainage, moisture or other concerns.  The inspector also will want to talk with the home’s occupant to glean any information about areas of discomfort or other concerns that may relate to the home’s environment.

An exterior inspection will assess potential leaks coming from gas lines entering the home.  The inspector will look for structural concerns and take note of combustion appliance vents connected to the dryer, hot-water heater, fireplace and stove. In addition to these considerations, an exterior inspection may note any or all of the following:

The air conditioner’s size, make and model, which could reveal a problematic design that may inhibit air flow;

The condition of the windows and doors, particularly noting how tightly they shut or if there are any breaks in their seals;

The home’s landscape and grading;

Any moisture that may be present in the crawl spaces under the home;

The condition of the home’s electrical wiring and phone boxes;

The home’s total measurements.

The inspector also will identify the house’s insulation type, as well as its thermal boundaries.  Measuring the entire indoor living space and calculating square footage and volume will determine the minimum acceptable airflow.

Following the initial review, inspectors will perform combustion safety testing on all of a home’s combustion appliances.  This inspection records how the home performs under its natural pressure state.  Finally, by turning on and off the exhaust and other fans while opening and closing doors and checking pressures, the inspector will bring the home to its most negative natural pressure state to re-test and determine if combustible appliances are adequately carrying combustion byproducts out of the home.

Of course, in terms of energy-related issues and necessary repairs, each home will be different from the next — and the same certainly goes for borrowers and their budgets, as well.  Major problems can exist even in homes that seem to need only minor renovations.  Carbon monoxide, for instance, can be an invisible threat, as it has no noticeable smell or taste.

The home energy inspection is one of the single most important aspects of the renovation process.  While providing borrowers with qualified information about a home’s current condition, the inspection also ensures that the home in question is safe.  Borrowers should be advised to take their inspections seriously and, furthermore, should choose their inspectors wisely.


By: Susan Frost,

Time for Presidential Candidates to Talk Housing

President Obama and GOP challenger Mitt Romney should start talking about their housing policy intentions, experts in the industry said.

A group of associations, nonprofits and think tanks made speeches and conducted a panel discussion in Washington, D.C., late last month to elevate the housing debate onto the national stage.  They challenged political candidates to address the still ailing housing market as the presidential campaign shifts into high gear.

Both presidential candidates have been mostly silent on housing policy aside from Obama’s push to allow more homeowners to refinance and Romney’s comments early on the campaign trail to let the foreclosure process run its course.

Neither campaign, to date, has released substantive housing policy proposals.

“We are entering a critical phase of the presidential campaign,” said David Abromowitz, a senior fellow at the Center for American Progress. CAP and the National Council of La Raza, among others, sponsored the event.

In conjunction with the event, CAP released a set of seven housing questions it said it sent to each presidential candidate in a “Home for Good” campaign to bring more awareness to the still struggling housing market:

1. What will you do to prevent more unnecessary foreclosures and keep more families from losing their homes?

2. How will you address the problem of “underwater” mortgages?

3. How will you revitalize communities already hit hard by the foreclosure crisis?

4. How will you meet the pressing need for affordable rental housing?

5. What will you do to assure that working and middle-class families can achieve homeownership in the future?

6. What do you plan to do with the government-backed mortgage giants Fannie Mae and Freddie Mac, and what will take their place in the mortgage market of the future?

7. How do you plan to protect households from predatory lending and discrimination in the U.S. mortgage market?

“We’ve caused extraordinary damage, my industry has,” said Mortgage Bankers Association President David Stevens, who spoke on a panel at the event.  “The question is, How do we get hope back into the housing system?”

Stevens said he doesn’t want to create irrational exuberance over recent good news about home sales and house prices, but rather seeks balance in the housing market, including a balance between homeownership and renting.

“Clearly we had too many people promoted into homeownership, and it disparaged and destroyed communities,” he said.

Homeownership needs to shift toward well-qualified borrowers with fully documented loans who can prove their ability to repay while balance on the renter side requires addressing a shortage of affordable rentals in key urban markets, Stevens said.

“I’m very concerned about the future of access to homeownership.  In the effort to eliminate risk and unfair practices of the past few years, we’ve moved too far,” he said.

First-time homebuyers, especially, could be locked out of the market with the movement toward requiring a 20% down payment and higher credit scores, he said.

Regulators and the housing industry must find a balance in which access to credit is not restricted, Stevens said.

“That’s the fundamental dialogue that we need to be having.”


By: Kerry Curry,