S.Amdt. 1499

SA 1499. Mr. BENNET (for himself and Mr. Portman) submitted an
amendment intended to be proposed to amendment SA 1407 proposed by Ms.
Murkowski to the bill S. 2657, to support innovation in advanced
geothermal research and development, and for other purposes; which was
ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. __. ENHANCED ENERGY EFFICIENCY UNDERWRITING CRITERIA.

(a) Definitions.--In this section, the following
definitions shall apply:
(1) Administration.--The term ``Administration'' means the
Federal Housing Administration.
(2) Covered loan.--The term ``covered loan'' means a loan
secured by a home that is insured by the Administration under
title II of the National Housing Act (12 U.S.C. 1707 et
seq.).
(3) Homeowner.--The term ``homeowner'' means the mortgagor
under a covered loan.
(4) Mortgagee.--The term ``mortgagee'' means an original
lender under a covered loan or the holder of a covered loan
at the time at which that mortgage transaction is
consummated.
(5) Secretary.--The term ``Secretary'' means the Secretary
of Housing and Urban Development.
(b) Enhanced Energy Efficiency Underwriting Criteria.--
(1) In general.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall, in consultation
with the advisory group established under subsection (e)(3),
develop and issue guidelines for the Administration to
implement enhanced loan eligibility requirements, for use
when testing the ability of a loan applicant to repay a
covered loan, that account for the expected energy cost
savings for a loan applicant at a subject property, in the
manner set forth in paragraphs (2) and (3).
(2) Requirements to account for energy cost savings.--
(A) In general.--The enhanced loan eligibility requirements
under paragraph (1) shall require that, for all covered loans
for which an energy efficiency report is voluntarily provided
to the mortgagee by the homeowner, the Administration and the
mortgagee shall take into consideration the estimated energy
cost savings expected for the owner of the subject property
in determining whether the loan applicant has sufficient
income to service the mortgage debt plus other regular
expenses.
(B) Use as offset.--To the extent that the Administration
uses a test such as a debt-to-income test that includes
certain regular expenses, such as hazard insurance and
property taxes--
(i) the expected energy cost savings shall be included as
an offset to these expenses; and
(ii) the Administration may not use the offset described in
clause (i) to qualify a loan applicant for insurance under
title II of the National Housing Act (12 U.S.C. 1707 et seq.)
with respect to a loan that would not otherwise meet the
requirements for such insurance.
(C) Types of energy costs.--Energy costs to be assessed
under this paragraph shall include the cost of electricity,
natural gas, oil, and any other fuel regularly used to supply
energy to the subject property.
(3) Determination of estimated energy cost savings.--
(A) In general.--The guidelines to be issued under
paragraph (1) shall include instructions for the
Administration to calculate estimated energy cost savings
using--
(i) the energy efficiency report;
(ii) an estimate of baseline average energy costs; and
(iii) additional sources of information as determined by
the Secretary.
(B) Report requirements.--For the purposes of subparagraph
(A), an energy efficiency report shall--
(i) estimate the expected energy cost savings specific to
the subject property, based on specific information about the
property;
(ii) be prepared in accordance with the guidelines to be
issued under paragraph (1); and
(iii) be prepared--

(I) in accordance with the Residential Energy Service
Network's Home Energy Rating System (commonly known as
``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;
(II) in accordance with the Alaska Housing Finance
Corporation energy rating system by an individual certified
by the Alaska Housing Finance Corporation as an authorized
Energy Rater; or
(III) by other methods approved by the Secretary, in
consultation with the Secretary of Energy and the advisory
group established under subsection (e)(3), for use under this
section, which shall include a third-party quality assurance
procedure.

(4) Use by appraiser.--If an energy efficiency report is
used under paragraph (2), the energy efficiency report shall
be provided to the appraiser to estimate the energy
efficiency of the subject property and for potential
adjustments for energy efficiency.
(5) Pricing of loans.--
(A) In general.--The Administration may price covered loans
originated under the enhanced loan eligibility requirements
required under this subsection in accordance with the
estimated risk of the loans.
(B) Imposition of certain material costs, impediments, or
penalties.--In the absence of a publicly disclosed analysis
that demonstrates significant additional default risk or
prepayment risk associated with the loans, the Administration
shall not impose material costs, impediments, or penalties on
covered loans merely because the loan uses an energy
efficiency report or the enhanced loan eligibility
requirements required under this subsection.
(6) Limitations.--
(A) In general.--The Administration may price covered loans
originated under the enhanced loan eligibility requirements
required under this subsection in accordance with the
estimated risk of those loans.
(B) Prohibited actions.--The Administration shall not--
(i) modify existing underwriting criteria or adopt new
underwriting criteria that intentionally negate or reduce the
impact of the requirements or resulting benefits that are set
forth or otherwise derived from the enhanced loan eligibility
requirements required under this subsection; or
(ii) impose greater buy back requirements, credit overlays,
or insurance requirements, including private mortgage
insurance, on covered loans merely because the loan uses an
energy efficiency report or the enhanced loan eligibility
requirements required under this subsection.
(7) Applicability and implementation date.--Not later than
3 years after the date of enactment of this Act, and before
December 31, 2023, the enhanced loan eligibility requirements
required under this subsection shall be implemented by the
Administration to--
(A) apply to any covered loan for the sale, or refinancing
of any loan for the sale, of any home;

[[Page S1492]]

(B) be available on any residential real property
(including individual units of condominiums and cooperatives)
that qualifies for a covered loan; and
(C) provide prospective mortgagees with sufficient guidance
and applicable tools to implement the required underwriting
methods.
(c) Enhanced Energy Efficiency Underwriting Valuation
Guidelines.--
(1) In general.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall--
(A) in consultation with the Federal Financial Institutions
Examination Council and the advisory group established under
subsection (e)(3), develop and issue guidelines for the
Administration to determine the maximum permitted loan amount
based on the value of the property for all covered loans made
on properties with an energy efficiency report that meets the
requirements of subsection (b)(3)(B); and
(B) in consultation with the Secretary of Energy, issue
guidelines for the Administration to determine the estimated
energy savings under subsection (b) for properties with an
energy efficiency report.
(2) Requirements.--The enhanced energy efficiency
underwriting valuation guidelines required under paragraph
(1) shall include--
(A) a requirement that if an energy efficiency report that
meets the requirements of subsection (b)(3)(B) is voluntarily
provided to the mortgagee, such report shall be used by the
mortgagee or the Administration to determine the estimated
energy savings of the subject property; and
(B) a requirement that the estimated energy savings of the
subject property be added to the appraised value of the
subject property by a mortgagee or the Administration for the
purpose of determining the loan-to-value ratio of the subject
property, unless the appraisal includes the value of the
overall energy efficiency of the subject property, using
methods to be established under the guidelines issued under
paragraph (1).
(3) Determination of estimated energy savings.--
(A) Amount of energy savings.--The amount of estimated
energy savings shall be determined by calculating the
difference between the estimated energy costs for the average
comparable houses, as determined in guidelines to be issued
under paragraph (1), and the estimated energy costs for the
subject property based upon the energy efficiency report.
(B) Duration of energy savings.--The duration of the
estimated energy savings shall be based upon the estimated
life of the applicable equipment, consistent with the rating
system used to produce the energy efficiency report.
(C) Present value of energy savings.--The present value of
the future savings shall be discounted using the average
interest rate on conventional 30-year mortgages, in the
manner directed by guidelines issued under paragraph (1).
(4) Ensuring consideration of energy efficient features.--
Section 1110 of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (12 U.S.C. 3339) is amended--
(A) in paragraph (2), by striking ``; and'' at the end;
(B) in paragraph (3), by striking the period at the end and
inserting ``; and''; and
(C) by inserting after paragraph (3) the following:
``(4) that State certified and licensed appraisers have
timely access, whenever practicable, to information from the
property owner and the lender that may be relevant in
developing an opinion of value regarding the energy-saving
improvements or features of a property, such as--
``(A) labels or ratings of buildings;
``(B) installed appliances, measures, systems or
technologies;
``(C) blueprints;
``(D) construction costs;
``(E) financial or other incentives regarding energy-
efficient components and systems installed in a property;
``(F) utility bills;
``(G) energy consumption and benchmarking data; and
``(H) third-party verifications or representations of
energy and water efficiency performance of a property,
observing all financial privacy requirements adhered to by
certified and licensed appraisers, including section 501 of
the Gramm-Leach-Bliley Act (15 U.S.C. 6801).
Unless a property owner consents to a lender, an appraiser,
in carrying out the requirements of paragraph (4), shall not
have access to the commercial or financial information of the
owner that is privileged or confidential.''.
(5) Transactions requiring state certified appraisers.--
Section 1113 of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (12 U.S.C. 3342) is amended--
(A) in paragraph (1), by inserting before the semicolon the
following: ``, or any real property on which the appraiser
makes adjustments using an energy efficiency report''; and
(B) in paragraph (2), by inserting after before the period
at the end the following: ``, or an appraisal on which the
appraiser makes adjustments using an energy efficiency
report''.
(6) Protections.--
(A) Authority to impose limitations.--The guidelines to be
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
features or energy cost savings in the valuation of any
subject property that is used to determine a loan amount.
(B) Additional authority.--At the end of the 7-year period
following the implementation of enhanced eligibility and
underwriting valuation requirements under this subsection,
the Secretary may modify or apply additional exceptions to
the approach described in paragraph (2), where the Secretary
finds that the unadjusted appraisal will reflect an accurate
market value of the efficiency of the subject property or
that a modified approach will better reflect an accurate
market value.
(7) Applicability and implementation date.--Not later than
3 years after the date of enactment of this Act, and before
December 31, 2023, the Administration shall implement the
guidelines required under this subsection, which shall--
(A) apply to any covered loan for the sale, or refinancing
of any loan for the sale, of any home; and
(B) be available on any residential real property,
including individual units of condominiums and cooperatives,
that qualifies for a covered loan.
(d) Monitoring.--Not later than 1 year after the date on
which the enhanced eligibility and underwriting valuation
requirements are implemented under this subsection, and every
year thereafter, the Administration shall issue and make
available to the public a report that--
(1) enumerates the number of covered loans of the
Administration for which there was an energy efficiency
report, and that used energy efficiency appraisal guidelines
and enhanced loan eligibility requirements;
(2) includes the default rates and rates of foreclosures
for each category of loans; and
(3) describes the risk premium, if any, that the
Administration has priced into covered loans for which there
was an energy efficiency report.
(e) Rulemaking.--
(1) In general.--The Secretary shall prescribe regulations
to carry out this section, in consultation with the Secretary
of Energy and the advisory group established in paragraph
(3), 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.
(2) Rule of construction.--Nothing in this section shall be
construed to authorize the Secretary to require any homeowner
or other party to provide energy efficiency reports, energy
efficiency labels, or other disclosures to the Administration
or to a mortgagee.
(3) Advisory group.--To assist in carrying out this
section, the Secretary shall establish an advisory group,
consisting of individuals representing the interests of--
(A) mortgage lenders;
(B) appraisers;
(C) energy raters and residential energy consumption
experts;
(D) energy efficiency organizations;
(E) real estate agents;
(F) home builders and remodelers;
(G) consumer advocates;
(H) State energy officials; and
(I) others as determined by the Secretary.
(f) Additional Study.--
(1) In general.--Not later than 18 months after the date of
enactment of this Act, the Secretary shall reconvene the
advisory group established under subsection (e)(3), in
addition to water and locational efficiency experts, to
advise the Secretary on the implementation of the enhanced
energy efficiency underwriting criteria established under
subsections (b) and (c).
(2) Recommendations.--The advisory group established in
subsection (e)(3) shall provide recommendations to the
Secretary on any revisions or additions to the enhanced
energy efficiency underwriting criteria deemed 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 location-based transportation costs and water costs.
The Secretary shall forward any legislative recommendations
from the advisory group to Congress for its consideration.
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