Energy efficient mortgage

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An energy efficient mortgage (EEM) (or "green mortgage"){{cite web |url=http://www.nbcnews.com/id/24203028 |archive-url=https://web.archive.org/web/20160305160422/http://www.nbcnews.com/id/24203028/ |url-status=dead |archive-date=5 March 2016 |title= How to cultivate a 'green mortgage' |website= NBC News |date= 25 April 2008 |accessdate= 15 February 2011}} is a loan product that allows borrowers to reduce their utility bill costs by allowing them to finance the cost of improving the energy-efficiency of the real estate property, at the point of the house purchase or the refinancing of existing housing.{{Cite web|url=http://www.boston.com/business/personalfinance/articles/2007/11/15/green_mortgages_taking_root/|title="'Green mortgages' taking root," The Boston Globe|accessdate=15 November 2023}} In practice, energy efficient mortgages can take the form of a standard mortgage (which includes the cost of house purchase and the renovation) or a second mortgage which covers only the cost of the renovation.

First introduced in 1980, EEMs are currently sponsored by all mortgage programs insured by the U.S. federal government. To date, the popularity of the product has been somewhat limited: The New York Times estimates less than 1% of all U.S. home loans are EEMs.{{Cite web|url=https://www.nytimes.com/2006/09/10/realestate/10mort.html|title=Saving Both Money and Energy|first=Bob|last=Tedeschi|date=10 September 2006|accessdate=15 November 2023|via=NYTimes.com}}

In the European Union, the Energy Efficient Mortgage Initiative has developed an industry-led label, which is currently being used by 37 banks.{{Cite web |last=Simon |first=Frédéric |date=2018-09-24 |title=More banks join EU-backed pilot scheme for green mortgages |url=https://www.euractiv.com/section/energy-environment/news/more-banks-join-eu-backed-pilot-scheme-for-green-mortgages/ |access-date=2022-05-15 |website=www.euractiv.com |language=en-GB}}{{Cite web |title=Issuer directory :: EEM Label |url=https://www.energy-efficient-mortgage-label.org/issuers/directory |access-date=2022-05-15 |website=www.energy-efficient-mortgage-label.org}}{{Cite web |last=Norton |first=Hannah |date=2021-10-27 |title=Green mortgages to help EU achieve climate goals |url=https://www.euractiv.com/section/energy/news/green-mortgages-to-help-eu-achieve-climate-goals/ |access-date=2022-05-15 |website=www.euractiv.com |language=en-GB}} its definition requires loans to enable an energy efficiency improvement of at least 30%, which is aligned with the EU Taxonomy of sustainable activities.[https://energyefficientmortgages.eu/wp-content/uploads/2021/07/EEMI-Definition-14.11.18.pdf EEMI Definition] energyefficientmortgages.eu The European Commission has announced it will consider promoting green loans and green mortgages in the coming months as part of its sustainable finance action plan.{{Cite web |last=Simon |first=Frédéric |date=2021-06-30 |title=Draft EU plan outlines regulatory roadmap for green finance |url=https://www.euractiv.com/section/energy-environment/news/draft-eu-plan-outlines-regulatory-roadmap-for-green-finance/ |access-date=2022-05-15 |website=www.euractiv.com |language=en-GB}}

Several studies have found evidence of a correlation between energy efficiency and credit risk, meaning that borrowers of a green mortgages are less likely to fall into insolvency.{{Cite web |title=New report: Final Report on Risk Assessment |url=https://ec.europa.eu/eefig/news/new-report-final-report-risk-assessment-2022-05-09_en |access-date=2022-05-15 |website=ec.europa.eu |language=en}}{{Cite journal |last1=Cespedes-Lopez |first1=Maria-Francisca |last2=Mora-Garcia |first2=Raul-Tomas |last3=Perez-Sanchez |first3=V. Raul |last4=Perez-Sanchez |first4=Juan-Carlos |date=January 2019 |title=Meta-Analysis of Price Premiums in Housing with Energy Performance Certificates (EPC) |journal=Sustainability |language=en |volume=11 |issue=22 |pages=6303 |doi=10.3390/su11226303 |issn=2071-1050|doi-access=free |hdl=10045/98939 |hdl-access=free }}{{Cite journal |last1=Fizaine |first1=Florian |last2=Voye |first2=Pierre |last3=Baumont |first3=Catherine |date=2018 |title=Les études hédoniques soutiennent-elles une valeur verte élevée dans le bâtiment ? Une réponse par la méta-analyse |url=https://halshs.archives-ouvertes.fr/halshs-01957447 |journal=Revue d'Économie Politique |volume=128 |issue=5 |language=fr}} The banking industry argues that such evidence justifies both a reduction in the interest rate for consumers,{{Cite web |last=Crisp |first=James |date=2016-06-15 |title=Homeowners offered cheaper mortgages in return for energy efficiency renovations |url=https://www.euractiv.com/section/energy/news/energy-efficient-renovation-could-lead-to-cheaper-mortgages/ |access-date=2022-05-15 |website=www.euractiv.com |language=en-GB}} but also a reduction in the amount of capital banks have to set aside under prudential regulation, the so-called "green supporting factor". The European Banking Authority is currently studying whether prudential rules should be adjusted to reflect this.{{Cite web |date=2022-05-02 |title=Discussion paper on the role of environmental risks in the prudential framework |url=https://www.eba.europa.eu/regulation-and-policy/credit-risk/discussion-paper-role-environmental-risk-prudential-framework |access-date=2022-05-15 |website=European Banking Authority |language=en}}

Borrowers who qualify for an EEM usually need to complete a home inspection by an energy rater working off qualification standards created by the U.S. Department of Energy. The results of this energy audit can then be used when applying for an EEM.”Energy-efficient mortgage offers savings,” The Olympian (McClatchy-Tribune News Service) [http://www.theolympian.com/181/story/437937.html]{{Dead link|date=August 2019|bot=InternetArchiveBot|fix-attempted=yes}}