Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Thursday, December 22, 2005

Energy Efficient Mortgages a No-Brainer

Fannie Mae's EEM is the type of program that should be on the Socially Responsible Investor's radar. An EEM is a loan (usually a 2nd loan) to a homeowner with the proceeds going to purchasing energy efficiency upgrades. Lenders love this for the following reasons:

  • 100% of the project can be financed
  • It lowers the operating cost of the property
  • Much of the time, the decreased operating expense more than offsets the cost of the loan payment
  • If the loan is originated within their guidelines, Fannie Mae is standing by to purchase those loans. In other words, it's not an exotic instrument requiring lenders to keep the loan on their books

When Fannie Mae purchases these loans, they are then packaged and sold to investors just like the rest of Fannie's portfolio. Everybody wins: the homeowner gets lower operating expenses, the bank gets to originate a loan, Fannie gets to package and re-market it, the investor gets a FNMA-backed investment at market rates, the energy contractors get a sale, and the planet gets a less resource-intensive building.

Yet, lack of appropriate marketing has relegated these instruments to the fringes. EEM's need to be made sexy, like driving a Prius.

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