The energy-efficient mortgage, an idea that has been around for years but has never attained broad appeal, may be ready to catch on in a big way.
The Department of Housing and Urban Development and the Department of Energy are pressing ahead with plans to make the mortgages easily available around the country within the next year or two.
The action by the federal agencies has come in response to a Congress-imposed deadline of November for the creation of a uniform, nationwide system that would help eliminate snags that have made such mortgages hard to obtain.
Basically intended to promote energy efficiency by encouraging buyers to purchase homes with energy-saving features, the mortgages have been little used.
Although they started coming on line through federal and federally backed home loan finance agencies in 1980, only about 20,500 have been written out of the more than 70 million mortgages issued since then, according to James Curtis, head of the National Association of Energy-Efficient Mortgage Companies.
Their emergence has been hindered by their narrow applicability and a lack of awareness, perhaps even apathy, on the part of consumers, builders and lenders. But the federal effort has the ,, potential to cause a growth spurt.
"The energy-efficient mortgage is a winner, but has been treated as an afterthought," said Steve Andrews, a residential energy consultant who is working with the city of Denver on an energy-efficient mortgage program. "Now it is moving to become a hot product."
The mortgages work by allowing loan applicants to add the cost of needed energy improvements to the mortgage at the time of purchase or refinance, or to buy more costly homes if they are energy-efficient already.
The key elements that determine their usefulness are how much can be financed, how an applicant's qualifying ratio is affected and what standards determine energy efficiency.
The programs of agencies backing the mortgages -- the Department of Veterans Affairs, the Federal Housing Administration, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac) -- all have put different spins on these elements.
But a team of nationwide experts, convened by the Department of Energy, has come up with a plan to standardize the mortgage features. The team's recommendations will be used by a HUD-Energy Department task force in formulating a uniform mortgage plan by next November.
Perry Bigelow, a Chicago-area homebuilder who is a nationally acknowledged as a pioneer in energy-efficient home construction and who worked with the Energy Department team, said its recommendations stressed four major points:
* A 2 percent stretch of qualifying ratios for energy-efficient homes.
Standard guidelines allow 28/36 percent qualifying ratios, which mean that housing expenses (mortgage payment, taxes and insurance) can be up to 28 percent of income, and that total constant obligations (including installment payments, etc.) can be up to 36 percent of income.
The energy-efficiency stretch would raise those ratios to 30/38 under the assumption that monthly expenses would be decreased because the utility bills would be lower, thanks to energy improvements.
Higher qualifying ratios allow a purchaser buying at the margin of income to afford a more expensive house. Builders who offer them often point out that buyers will use the stretch for luxury features such as decks or upgraded finishes, since in new construction the extra amount can be used for anything as long as the home is energy-efficient.
* A 5 percent increase in the appraised value of a house if it is deemed energy-efficient.
Promoters of energy-efficient mortgages have complained that appraisers don't know how to evaluate energy efficiency. This sometimes leads to appraisals lower than the amount of a mortgage applied for on an energy- efficient home, they say.
The problem is more acute for existing homes, where appraisers have a hard time finding comparable homes to judge by. "It's a tough call for appraisers to make," Mr. Andrews said. "They say, 'You'll see added value on the appraisal when I see added value on the market.' "
* An automatic increase of 5 percent on loan limits by Fannie Mae and FHA for energy-efficient homes.
* A provision for down-payment help.
More expensive homes require higher down payments. For instance, $5,000 added to the price of a home with a 5 percent down payment means the buyer has to pay $250 more up front.
Consequently, Mr. Bigelow said, a way is needed to allow the added down payment amount to be contributed by interested third parties.
Such help might come in grants from utility companies, municipalities, state energy offices or even homebuilders associations, he said.
The Energy Department is also working on a home energy rating system (HERS) designed to compute the energy efficiency of a home by using construction and appliance specifications.