Prepare to Underwrite More Green Homes
Genworth Mortgage Insurance has produced a video to urge credit unions and other mortgage lenders to learn more about appraising and underwriting homes constructed in an environmentally sustainable way.
The firm, which is a branch of Genworth Financial Inc, noted an increasing percentage of recently constructed homes have been built or retrofitted with ‘green’ modifications that have an impact on their value and affordability.
“In 2011 about 17% of residential construction was green homes, according to a National Association of Home Builders study conducted with McGraw Hill Construction. By 2016 green homes are expected to be 29% to 38% of the market by value, possibly reaching about $114 billion of activity,” explained Adam Johnston, chief appraiser for Genworth MI.
Johnston added Genworth MI is studying the green market to better understand what it means to home buyers and the housing industry.
“While not all markets show signs of people paying measurably more for many of the common items we would classify as green, we do see an improvement in recognition of that area,” said Johnston.
“As we gain greater understanding of the green features and benefits that drive value, those and other factors may influence how we underwrite borrowers and value homes,” he said.
For example, the lower utility and maintenance costs that result from incorporating well-designed energy-saving and sustainable features can make both new and existing homes more affordable for owners over the long term, Johnston said.
Green Building Capitalist, a website devoted to green building, reports data that says green homes are growing in popularity among a larger percentage of home buyers.
“A family may find a green home appealing because they want their kids to grow up in a healthy home without allergens and toxins, the website reported. “Empty-nesters may be attracted to the cheaper utility bills. Environmentalists focus on the sustainability aspect. For most, it is a combination of all of the above.”
Part of the challenge of appraising or underwriting green homes is the lack of generally agreed-upon factors which make up a green home.
Genworth MI considers things like sustainable construction practices with minimal waste, use of energy and water-efficient appliances, and retrofitting homes to add items like energy efficient windows and insulation.
Johnston said Genworth MI is closely following efforts to develop education, standardization, measurement and verification guidelines that ultimately may allow homeowners to reap the benefits of green design in the context of responsible lending.
“One thing we know is that markets change and will continue to change. We have lots of tools to measure those changes to see what’s happening, both now and what’s likely to happen in the future. That type of information is valuable in understanding risk,” Johnston said.