Earth Day 2021 — Why is Going Green Important to Lenders and Borrowers?

Earth Day 2021 — Why is Going Green Important to Lenders and Borrowers? - Earth Day 2021

By Jesse Rivera, CEO at New Vista Solutions

On this Earth Day, we as a country reflect on what we can all do to recycle, reduce water and fossil fuel consumption, and incorporate green energy into our daily lives in order to combat climate change and reduce our carbon footprint.

The Biden administration has made climate change a priority in not only our national energy policy, but also in the global community. The new administration is looking to enact legislation that puts our country on a net zero emissions path by 2050 and invest $400 billion dollars over the next decade in clean energy. Not only will these initiatives be implemented across the federal government, but industry and households will be urged to utilize green energy and green energy innovations as well.

These initiatives do not stop at the White House doorstep either. State and local governments are now also mandating new building codes that include solar energy, water conservation, and other energy conserving or efficiency components for commercial and residential properties.

So, why is this important to borrowers?

Each year, about $20 billion dollars is available in the form of incentives such as tax credits, rebates, grants, subsidies, and more for incorporating green energy into not only new home and commercial building projects, but also renovations and upgrades to existing properties. GSEs Fannie Mae and Freddie Mac offer green programs as well.

From the residential real estate borrowers’ perspective, with energy and water bills rising, homeowners now focus on what they can do to reduce these costs. Homeowners can easily capture cost savings from incentives that can pay for a significant portion of their home improvement project when they install energy-efficient lighting, appliances, HVAC, water conserving equipment or landscaping, solar, and much more.

Commercial property owners must upgrade properties to not only attract and retain tenants, but they also want to reduce monthly electric and water costs. Building owners and developers can capture cost-savings from energy efficiency as well for both renovations and new construction projects too.

What does this mean for lenders?

Energy-efficient properties in a lender’s portfolio improves the lender’s bottom line:

A recent university study reported that owners of energy-efficient homes are 32% less likely to default on their mortgage.

Properties that are more resilient against catastrophic weather are less likely to need costly repairs or replacement. This is a loss mitigation win for lenders.

Statistics now show that properties with higher energy efficiency ratings are more likely to appraise at a higher value than those with lower ratings. Higher appraised value means lower loan-to-value ratios and less exposure for lenders.

Ok, so how does this all come together?

New Vista Solutions partnered with IncentiFind to create our exclusive Green Report and Quick Summary which lenders can market to borrowers and use to promote loans that provide financing for construction and renovation projects that incorporate green energy components. The Green Report and Quick Summary are powered by IncentiFind, the only national database for real estate and home improvement incentives, and they connect lenders and borrowers to over 260,000 incentives.

The Quick Summary summarizes incentives available to property owners and gives them the ability to upgrade to the Green Report which walks property owners through capturing their incentives.

The Green Report adds value to a lender’s suite of consumer and commercial services. Since many property owners are not aware that incentives exist for most construction and home improvement projects, introducing loan prospects to this report positions the lender as a valuable source of cost-saving information and differentiates themselves from the competition.

Property owners and lenders can now work together utilizing green energy to their own benefit. Lenders can offer their loan prospects a money saving value-add, and property owners save money on their energy-efficient projects. It is a win-win for all, including our planet as a whole.

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