As we are all aware, qualifying for a mortgage these days is anything but easy. What if it was made even more complicated?

Recently a bill, called the Sensible Accounting to Value Energy Act, was co-sponsored by Sens. Michael Bennet (D-Colo.) and Johnny Isakson (R-Ga.). If enacted, the bill would require all government-sponsored lenders (so that includes FHA, Fannie Mae and Freddie Mac – more than 90% of the current mortgage market) to include monthly utility costs in their debt to income ratios. In other words, lenders would have to take into account how much a borrower pays for electricity and gas when determining if he or she could meet the monthly mortgage payment.

Although this concept may have some merit, to introduce it now, when underwriting standards and investor overlays are already at all-time highs, would seriously hinder more people from qualifying for a mortgage. Another concern, if the bill is approved, is that it takes away the free-market impact, which allows lenders to assess their own lending standards and adjust to current market conditions.

Philip Henderson, senior financial policy specialist at the Natural Resources Defense Council, said, “The bill wasn’t meant to inundate smaller lenders with more guesswork, especially when new regulations are already pushing more business to larger banks.” Instead, he said he supported the bill because estimating energy costs are something Fannie, Freddie and the FHA could automate.

To summarize, the issues surrounding this legislation include:

• It legislates underwriting guidelines.
• It takes a variable cost, depending on an individual family’s usage of utilities and adds it to the debt portion of qualifying ratios for mortgages.
• It makes it even more difficult for buyers to obtain mortgage financing.

I will continue to keep you updated, in the meantime please let me know if you have any questions!

By Chris Cope (President, Allen Tate Mortgage (NMLS UID#81979)