Mortgage Lenders Embrace Push for Green Buildings

Mortgage Lenders Embrace Push for Green Buildings

Several major mortgage companies -- including Bank of America, Citigroup and JP Morgan Chase -- have begun rewarding homebuyers for making energy-efficiency improvements to their houses.

Citigroup's mortgage division, for instance, began offering $1,000 off closing costs for buyers using its Energy Efficient Mortgage. Bank of America also created an Energy Credit mortgage, which gives buyers a $1,000 credit on closing costs when they buy homes that meet Energy Star requirements for efficiency. JPMorgan Chase got on the bandwagon as well, offering a larger credit line and a small discount on closing costs for homes that use a specific type of energy efficient spray-foam insulation.

Part of the reason for the boom in green lending is due to growing environmental concern among individuals, of course, but as Sara Schaefer Muñoz reports in the Wall Street Journal, another reason is that banks have realized they can add the estimated savings on utility bills to a borrower's income. Muñoz quotes Mark Wolfe, executive director of the Energy Programs Consortium, as saying the $600 a homeowner would save on utilities from energy efficiency in his new home would allow him to borrow an extra $10,000 in a 30-year mortgage.

It's not just the big banks that are getting into the green game. Indigo Financial Group, a smaller lender based in Michigan, has been offering energy efficient mortgages to customers in Michigan, Indiana, Illinois and Florida since 2005, and added Kentucky and Missouri to the list this year.

Some states have created programs to encourage energy efficiency improvements for homes, which generate an estimated 20 percent of the country's greenhouse gas emissions, according to government figures. Pennsylvania, Kansas and New York all offer low- or reduced-interest loans for green home improvements.