Transcending Antiquated Rainwater Lending Policies

A CALL TO ACTION

We can survive without electricity, but clean, reliable water is a critical resource that humans simply can’t live without.  Growing demand in underserved drought-ridden regions where municipality water infrastructure is unavailable has become problematic.

The mortgage industry and regulatory agencies have not addressed this critical issue or provided allowable loan guidelines for water market-based solutions to meet the growing demand.  Homeowners need access to affordable financing for alternative, appropriate water systems.

Regulatory policy maker’s duty to serve their communities, and alignment with appropriate 21st Century technological advancement, needs to be a top priority.

Rainwater harvesting systems, or cisterns, date back for centuries, prior to the birth of modern civilization.  Rainwater harvesting has fast become a viable solution for our current global water shortage crisis.

Water falling from the sky, properly treated (rainwater systems use advanced UV and water filtration technology) is scientifically proven to be a much safer, healthier, cheaper and reliable method than groundwater well resources.

You also can’t fill a well if it runs dry. In fact, many homeowners with wells are forced to incur substantial capital outlays to drill a new well.  Potable city water can be trucked in to temporarily accommodate families when wells run dry; or can alternatively provide a back-up solution to top off rainwater systems if drought conditions arise.

Today’s antiquated lending policies, (Fannie Mae, Freddie Mac and FHA provides most mortgage industry standards), require homeowners to obtain an additional comparable rainwater system home that has sold on the multiple-listing system (MLS) in the past year in order to qualify for the loan; or install a back-up system (drill a well), a cost-prohibitive and expensive option. These requirements are virtually impossible to achieve in many communities as most homes incorporating rainwater are custom built and aren’t sold on the MLS.

On the other hand, properties with wells aren’t required to obtain a comparable property (well) sale and can be compared to properties with municipality water supplies. It’s important to note that a few decades ago properties with wells weren’t allowed in secondary mortgage markets like Fannie Mae. As housing markets expanded, these guidelines shifted, but still required potable water testing on the well water prior to closing for many years.

Did you know that Lending guidelines for groundwater well systems no longer require a potable water test to ensure safe water?

Lending guidelines for groundwater well systems no longer require a potable water test to ensure safe water. In states where fracking has become common, this is a dangerous game that poses public health threats for families with wells who may not know their water is contaminated until they become sick.

Fannie Mae underwriting policies lack clear guidance concerning rainwater systems; are ambiguous at best, and need to be revised. Few mortgage lenders are willing to embrace our current water crisis and lack the proper education and data regarding the risk mitigation that rainwater systems can provide.

Lenders and mortgage investors fail to comprehend the economic and high risk factors that groundwater well water systems represent. At the present time, most lenders will not allow or fund projects with rainwater as the sole source of water, period.

GEM has received numerous requests for support from several communities and families in Central Texas that are forced to drill a well to qualify for financing in order to install a rainwater system. These families will most likely never use these wells (sulfur water requiring major chemical treatment) and will incur higher costs to drill deeper in order to tap already depleted reservoirs in this region.

Three communities in the Hill Country (100 homes), located approximately 10-15 miles from Austin, offer land purchases to residential buyers with sole source rainwater harvesting requirements written in their covenants and deed restrictions. Overall, the trend for opting out of well drilling and incorporating rainwater is fast becoming a marketable and cost effective solution for many US regions.

Certain states and cities are rewarding homeowners by offering property tax reductions and rebates associated with rainwater, alternative conservation systems; affording improved incentives for homeowners to offset their costs. Federal incentives should be implemented as water supplies and drought conditions become more threatened. Metal roofs are an important measure for capturing rainwater and can provide improved potability and delivery. Federal tax credits for metal roofs are available and can further offset costs.

Many municipalities surrounding major US cities can’t provide water due to lack of funding for infrastructure costs or water scarcity. Several Texas municipalities, (Hayes & Williamson counties – over 1.5 million people) have imposed new well permit regulations and water restrictions for well permits due to the boom in new housing starts.

What will these families do if their only water solution is rainwater supply and they can’t qualify for financing? It’s a vicious circle of regulatory financing and city legislative water policies and restrictions; often conflicting one another.

In 2005 the Texas Water Development Board issued their 3rd Edition Texas Rainwater Harvesting Manual (TRHM) clearly defining their advocacy and support for rainwater systems. The report includes engineering reports, resources, and guidance that other state policy makers and financial institutions and regulators can adopt.

A few interesting points the TRHM includes in the report:

• The water is free; the only cost is for collection and use. The end use of harvested water is located close to the source, eliminating the need for complex and costly distribution systems.
• Rainwater provides a water source when groundwater is unacceptable or unavailable, or it can augment limited groundwater supplies.
• The zero hardness of rainwater helps prevent scale on appliances, extending their use; rainwater eliminates the need for a water softener and the salts added during the softening process.
• Rainwater is sodium-free, important for persons on low-sodium diets.
• Rainwater is superior for landscape irrigation.
• Rainwater harvesting reduces flow to storm water drains and also reduces non-point source pollution.
• Rainwater harvesting helps utilities reduce the summer demand peak and delay expansion of existing water treatment plants.
• Rainwater harvesting reduces consumers’ utility bills.
• When assessing the health risks of drinking rainwater, consider the path taken by the raindrop through a watershed into a reservoir, through public drinking water treatment and distribution systems to the end user.

New rainwater state legislation in states such as Colorado and Utah where collecting rainwater was previously illegal, are improving their policies. Colorado imposes laws preventing any catchment of precipitation. However the state implemented new water catchment legislative policies declaring, it is illegal to divert rainwater falling on your property expressly for a certain use unless you have a very old water right or during occasional periods when there is a surplus of water in the river system. In 2013 Utah updated and extended their rainwater collection laws, which were previously outlawed until 2011.

After years of heated debates and negative publicity, Hawaii Veterans finally won the battle to finance their rainwater systems. The Veterans Association, (VA) issued new guideline policies in 2014 to allow veterans in Hawaii to obtain loans for rainwater sole source systems. Unfortunately, the VA did not approve rainwater systems in any other state.

However, these guidelines should provide regulators and lending institutions with clear guidance that has been successfully implemented. Important aspects of the VA rainwater requirements include: the lenders responsibility to order water testing by a laboratory acceptable to the state’s Department of Health; and the systems must meet state water quality and engineering requirements. But shouldn’t well systems also have to meet the same requirements?

GEM is currently championing rainwater system advocacy with other stakeholders. We propose new concessions and guidelines for Fannie Mae and other national mortgage lenders to adopt and implement. We need our communities and businesses to support this initiative calling for clear, transparent lending guidance and approval.

The call to action offers an opportunity for stakeholders to sign a petition and upload letters to advocate for new rainwater system deployment and policy reform.

Let’s think and act smart and responsibly to protect our national resources and communities; together we have a voice that can be heard and supported! Also see Water – 21st Century Gold GEM Blog