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Addressing the Hidden Cost of Homeownership

The monthly mortgage payment is the most obvious cost of homeownership, but several other factors come into play in the total cost of owning a home. Freddie Mac is currently working to reduce and study one additional cost of homeownership: utility costs.

According to the latest data from the U.S. Department of Energy, Americans generally spend about $2,200 per year on energy bills, primarily on heating and cooling their homes. This cost is usually not factored into mortgage underwriting, “meaning that the value of energy efficiency has been overlooked in first lien financing,” Freddie Mac explained in an announcement last week.

Freddie Mac is on a mission to change that with its GreenCHOICE Mortgage program, which it is continuing to build. Last week, the GSE announced further enhancements to the program, which provides financing for energy efficiency improvements and energy efficient homes. Families can obtain financing for energy and/or water efficiency improvements to their homes, which will help lower their overall utility costs.

Freddie Mac believes its GreenCHOICE program ultimately “places families in a better financial situation and helps preserve home affordability over time,” the GSE stated in a November bulletin discussing the program.

“Older homes tend to be more energy inefficient, which may raise the cost of homeownership and may make them more difficult to maintain,” said Mike Dawson, VP of Single-Family Affordable Lending Strategy and Policy at Freddie Mac.

He continued: “GreenCHOICE Mortgages is part of a multiyear initiative to facilitate energy-saving improvements that could help families better sustain homeownership.”

Freddie Mac is partnering with Rocky Mountain Institute, RESNET, the Institute for Market Transformation, and the U.S. Department of Energy to conduct further research and to promote further understanding of energy-efficient offerings.

“With a deeper understanding of the value of energy efficiency, as well as an increased awareness of Freddie Mac’s solutions and underwriting requirements, lenders will have more opportunities to expand their green product offerings in the marketplace,” said Robert Sahadi, Senior Advisor to the Rocky Mountain Institute.

Freddie Mac’s GreenCHOICE Mortgages program is a component of its broader “Duty to Serve” plan, which is aimed at serving underserved markets, including rural and manufactured housing and other affordable options for buyers and renters with very low, low, and moderate incomes.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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