GreenSage E-zine 01/2008

Commentary: myEnergyLoan, Green Property Loans Providing Incentive, Making a Difference
By Jeff Cole

My name is Jeff Cole and about two years ago I started a company called myEnergyLoan. To be sure I saw this as me doing my part to help save the world, stop global warming and generally make a difference in an apparent world gone mad. I am a homeowner, a husband and a father of three children. My father died on a classified assignment in the middle east when I was 15 years old so this has a special meaning to my family and to me.

I have not been called a nut too many times, but I know a lot of them. I have not been involved in more than a few sub-prime loans, though I know a lot of unscrupulous mortgage lenders who got rich off of them. I did not single-handedly create global warming and I did not create the mortgage market meltdown, which is popularly considered to be and described as a strictly sub-prime mortgage debacle.

Actually, it goes much deeper than that. The credit markets are seizing up - quite literally - because people are greedy and others are prime for prey. It is impossible to quantify the number of dollars lost - and stolen - by what I call the feeding frenzy of the mortgage market power base. Interestingly, however, as dismal as our current credit markets appear to be, there are a small but growing number of lenders who are attempting to make a difference by supporting the growing green building market.

myEnergyLoan, for instance, is the uncontested leader in green lending; which says something, but not what it could say considering the opportunity presented. myEnergyLoan provides lower interest rates and/or lower closing costs to buyers of many green property types. To date we have provided over $250,000 worth of closing cost credits which are felt as reduced closing costs or reduced interest rates for our clients at closing. We try to do energy-efficient mortgages, but in a market where the early adopter pool is barely full, the much-hyped Energy Efficient Mortgage product is extremely difficult to do - even for guys and gals like us who really, really, really want to do them.

As it stands, the US Housing Market is crumbling - again, quite literally - as hundreds of thousands of homes all across the country are in desperate need of a greenovation, having been built some 20 to 30 years ago at a time when the depletion of our natural resources and ensuing dependence on foreign oil was not being taken to heart. Clearly, as reported all over major and minor media alike, over 35% of all energy consumption in the USA is classified as being used to operate our homes. Unfortunately, these homes are highly inefficient causing an unnecessary drain on our energy resources. Our crumbling homes are leaking and at a cost far greater than the mere cost of the energy we consume.

Imagine if the US Credit Markets provided an incentive - a Federal Incentive - to renovate and/or upgrade our homes as part of a securitized program in association with groups like the USGBC, EarthCraft House or its own EPA-based program referred to as the EnergyStar program. If the Federal Government, through FHA, provided a program to renovate 20 year-old and older homes in accordance with any one of these green building programs, our credit markets would be the beneficiary. An investment in this market would be less risky since our homes would cost less to operate and become more valuable. At this moment, buyers of green properties actually represent an extremely committed group of home owners who pay far more than average home prices - since most early adopters pay more to be first with anything. Further, while we lack easily accessible empirical evidence to support our assertion, we believe green property owners at this time likely have a much lower default rate as well.

What's more, a green home is one that is more comfortable and, above all, a healthier home - which is connected to another crisis of ours, our health care crisis. Perhaps we should take note that many issues are connected and a move toward an Eco-Economy puts us in a better position to solve them. People comprise markets and as a result our markets are connected both to us and to each other.

A plausible move in the right direction is thus: Our homes are crumbling and crumbling homes can be identified as such based on their efficiency measures - referred to as a HERS RATING (learn more at <http://www.natresnet.org/>www.natresnet.org ). A Home Energy Rating is one that defines an index - that index is 100 if the home conforms to energy standards for new homes built today. Most homes are not new and have a HERS rating of 150 or more - meaning that most homes are 50% less efficient than current building code. If a homeowner (or a potential homeowner) agrees to perform a renovation that improves efficiency - in this case reflected as a decreased HERS RATING INDEX (think Golf score-keeping not Bowling score-keeping) - then they qualify for a government-backed loan. (Sounds very much like an FHA program.) Too bad the FHA EEM (Energy Efficient Mortgages Program) is dead and dying. Heck, Fannie Mae even pulled its support of its EEM product.

Did you know that there is such a thing as a NET ZERO ENERGY HOME - which means a home can actually produce as much energy as it consumes - with very little reliance on oil or gas? In fact, some homes today are considered to be NET POSITIVE ENERGY HOMES - because they produce more energy then they consume. Some of these homeowners actually get paid by their utility companies using a billing scheme called net-metering. Not all homes can achieve this rating, but most of them can. But with the markets so heavily capitalized in fossil fuels - a dying resource at best - we will never make significant positive progress with any of our crisis. Oil is our collective cancer. We have to shift from a fossil-fuel based economy to an Eco-Economy and greening your house is the most important way to engage in this shift - hence all the recent press on green building. Providing an energy loan is one way to facilitate this shift.

Think about it. Use fewer natural resources and improve people's overall ability to afford the home they live in. People could even afford to pay a slightly higher interest rate for their mortgage because it makes so much sense. Granted, few people can or ever will be able to afford Interest Only, Adjustable Rate Pay Option ARM loans, the likes of which are sinking our economy at this present time.

This begs the questions, why should a better investment, a more responsible investment, require a higher rate? It shouldn't, but it could support one if need be as a way to get us out of our current pickle. A slightly higher fixed rate mortgage - even with Mortgage Insurance at a reduced MI factor for added security and risk management. The thinking that a borrower who pays less in utilities could say, spend more on a mortgage and be a more stable risk is an idea whose time has come.

myEnergyLoan has been providing an incentive. In fact, to date we have contributed nearly $250,000 more than 100 green property loans - making a difference in the lives of home owners and putting our money where our mouths are. A bright light in the dark mortgage sky? Absolutely. And a very dark and lonely sky it is.