Ratings System Will Aid in Energy-Efficient Mortgages
A consortium of California utilities has set up a rating system that will help property owners lower their utility bills and enable home buyers to get better mortgage loan terms when they purchase energy-efficient houses.
The system will certify the energy use of houses, much as cars and trucks receive miles-per-gallon ratings.
The statewide system was announced Thursday by a nonprofit partnership of state utilities, including Southern California Edison Co., the Department of Water & Power, Southern California Gas Co. and San Diego Gas & Electric Co. The partnership, called the California Home Energy Efficiency Rating System, or CHEERS, also includes real estate firms, mortgage lenders, builders, environmentalists and consumer groups.
The rating system will use a scale of 1 to 100 to evaluate homes for energy efficiency, providing a standard that could be used by borrowers, lenders and other parties to calculate the terms of a new mortgage. Such ratings are key to a concept of using mortgages to make U.S. homes more energy-efficient, an idea encouraged by various federal laws passed in 1992.
Proponents say the ratings will help homeowners fund new insulation and similar projects as part of refinancing a home. For new buyers, such ratings will be as necessary as a conventional home appraisal in a developing system of energy-efficient mortgages. Offering better rates and qualifying terms for homes that will cost the buyer less in monthly utility bills, such mortgages are already endorsed by Fannie Mae, Freddie Mac, the Veterans Administration and other federal secondary lending agencies.
The U.S. Department of Housing and Urban Development will set up a pilot project to encourage such mortgages by the end of April.
“CHEERS gives the customer a very predictable, reliable and scientific rating that they can literally take to the bank,” said David Altscher, a senior project manager for Pacific Gas & Electric Co. and project manager in San Jose, where the ratings will first be available.
The system will be used by private business people who, like standard appraisers, will offer energy-efficiency surveys for an estimated $100 to $250 per home. CHEERS is offering the first 1,200 surveys free in the San Jose area. The system will be offered in San Bernardino County this spring and statewide by early 1994, organizers said.
In recent years, similar systems have been devised across the country. But the CHEERS system, which an appraiser in the field can use via a small computer, is highly regarded by proponents of energy-efficient mortgages.
“No one has done a better job,” said Jim Curtis of Palo Alto-based Bay Area Energy Consultants. Curtis is executive director of the National Assn. of Energy Efficient Mortgage Service Cos.
He estimated that in 1992, fewer than 2,000 energy-efficient mortgages were closed in the United States--more than half of them in California--out of a total of more than 8 million new mortgages.
