As we find ourselves in a new year, we are filled with new found hope and possibilities. For those engaged in the high-performance building market, all of our pioneering efforts are being realized and a sustaining future is now possible. The best part is we don’t have to give up any modern convenience to create smart, sustainable communities and homes to meet the global demand of the 21st Century climate challenge.
We imagine a world where quality of life is embraced and we cultivate simplified, less consumptive lifestyles; and sustainable communities that endure for generations to come. A new lending culture is now possible where economic rewards, (i.e., lower interest rates, faster paybacks, green value premiums) are bestowed on those who reduce environmental impact and eliminate the need for more nuclear and coal fired plants to be built. A world can exist where technological advancement replaces the need for wars to be fought over precious resources and we are all safe, secure and thriving.
In order to actualize this future world high-performance, sustainable building development needs to be deployed in mass and because we must become less dependent on fossil fuels. Our current building infrastructure, including our utility grids, bridges and much of our existing buildings and residential neighborhoods need critical deployment.
Developers and builders are identifying the need to implement higher-performance building standards, especially since stricter building codes are being enforced; and government and private sector’s efforts now afford improvements for waste and energy reduction.
Economic advantages of lower energy usage and carbon emission for projects that produce as much energy as they are using, i.e., net-zero buildings, are still in infancy and slowly being adopted. This emerging market can be slow and painful for many early adapter builders and consumers due to financial market constraints; lack of standards and lending incentives, education and training; and private capital investors that require higher quality collateral.
No one knows how many high-performance buildings have been funded collectively in the past years, or where the majority of these loans are being serviced. Of equal importance, there is no relevant data available reflecting if these homes are continuing their building performance and energy savings as predicted, over time; and how well these loans are performing overall, compared to conventional loan portfolios.
Market fragmentation and low inventory for high-performance project loans has caused them to be absorbed in conventional-secondary market loan portfolios. The private capital sector, is slowly rebounding and more construction and jumbo (high balance loans over $417k) loans are becoming more available. According to their May 2015 Financial Report, Freddie Mac, states in 2006 over 56 percent of the mortgage market was funded through private label capital investors, but as of the date of their publication, it was down to an estimated 5 percent, with secondary market, Government Sponsored Entities (GSEs, Fannie Mae, Freddie Mac, FHA, VA) funding the majority of the real estate market at 95 percent.
Another report issued by Inside Mortgage Finance, states there are only 12 major lenders in the secondary market. These lenders typically offer retail and wholesale loans and the majority of these lenders also service the loans.
Is there any good news? The silver lining is the playing field for private capital is becoming more attractive and competitive allowing for more private label loan products to emerge. This is great news for the emerging green, high-performance market! But, we need to work together tomass and source funding to provide new financing mechanisms and rewards for investors, builders-developers and building owners.
How do we prove emerging market transformation and the economic opportunities associated with high-performance building? One way to accomplish these objectives is to drive green financing to private equity markets and create new funds that encompass expanded guidelines and incentives, and to be able to track the successful performance of these loans.
As with any new emerging market, mortgage lenders and appraisers haven’t handled high-performance home transactions appropriately. Often lenders ignore
environmental concerns and stick to outdated guidelines that don’t fit our 21st Century lifestyles, or advanced technology. When it comes to adding premiums on appraisal valuations or offering incentives to interest rate or fee commitments, this lending model is non-existent in today’s market.
There has never been a better time to implement a CALL TO ACTION in the high-performance building community. Without the builder-developer commitment to advance net-zero inventory and allocate funding with new private investment capital, we won’t be able to offer financial rewards beyond energy savings to consumers.
It’s time to TAKE ACTION, JOIN FORCES and mobilize project inventory to drive incentivized capital and expanded loan qualifying guidelines in private capital markets! High-performance building deserves special treatment and new capital to match higher-quality portfolios!
Green Energy Money, Inc., and strategic lending partners will be attending and presenting our CALL TO ACTION plan and rollout of high-performance lending platforms at at this year’s RESNET Conference
The conference will be held February 29th– March 2nd in Scottsdale, AZ.
Please join us On March 1st 4:00pm -5:30pm.