Because there aren't enough impediments already standing in the way of the revival of the residential mortgage market, two US representatives, Democrat Michael Bennett of Colorado and Republican Johnny Isakson of Georgia, have decided that now is the perfect time to introduce federal legislation to require Fannie Mae and Freddie Mac to include a borrower's "anticipated costs of energy" in the monthly cost of housing that's used in debt-to-income ratios to qualify (or disqualify) potential borrowers.
While lip service is paid to the idea that this radical change in underwriting requirements (which is likely to disqualify applicants who buy older, less energy-efficient homes) is required to properly underwrite mortgage loans (although it hasn't been deemed necessary in previous decades), the real reason for the requirement is gleaned from the fact that one of the major lobbying groups for the measure is the National Resources Defense Council. It wants to push its radical "greening" of America agenda by using home loan underwriting to "encourage" energy conservation. Isakson and Bennett claim that their so-called SAVE Act would "clear borrowers to finance cost-effective home energy upgrades as part of the mortgage." Really?
Community bank lender Tim Cornelison (a constituent of Isakson's) is dumbfounded and enraged that at a time when the residential mortgage market is hurting so deeply, "policymakers would consider including such a hazy variable into an already tight underwriting process."
"The idea that utility costs are not factored into the decision process on a mortgage is a misconception and comparing energy costs to taxes and insurance is insane. If you own a home you must pay taxes and if you have a mortgage insurance coverage is required and specified by the lender. Energy consumption varies greatly from household to household in identical residences," Cornelison said.
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"Energy conservation is important but enforcement through underwriting is impossible," Cornelison said. "An underwriter's job is to assess risk and they are not trained to measure energy efficiency. Local governments should establish and enforce conservation regulations through building standards and energy codes that are appropriate for their communities."
A spokesperson for the NRDC doesn't focus on the basic issue of whether or not it's good for the economy as a whole at this point to throw more glue into the wheels of the residential mortgage underwriting process. Instead, like all true believers, he merely assumes that his cause is not only just, but trumps all other considerations. His only focus is on the fact that, mechanically, Freddie and Fannie could "get 'er done."
I was surprised that the US Chamber of Commerce also publicly backed this bill. I thought they were preoccupied with their never-ending campaign to ensure that meat-packing plants, vegetable farms, and restaurants in this country have a steady supply of illegal immigrants who, because they fear deportation, will work for the slave wages that those industries want to pay and under often miserable working conditions that unionized laborers wouldn't tolerate. The cynicism of all concerned is enough to turn a capitalist whore into a populist prude, albeit one armed with a pitchfork, a torch, and an AR-15.
Add Bennett and Isakson to the list of those who must not be given another term.
