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Energy Efficient Mortgage

Glossary of Energy Efficiency Financing Terms

Air Change - The replacement of a quantity of air in a space within a given period of time, typically expressed air changes per hour. If a building has one air change per hour, this is equivalent to all of the air in the building being replaced in a one-hour period.

Air Conditioner - A. assembly of equipment for air treatment consisting of a means for ventilation, air circulation, air cleaning, and heat transfer (either heating or cooling). The unit usually consists of an evaporator or cooling coil, and an electrically driven compressor and condenser combination.

Appliance Efficiency Standards - Appliance efficiency standards establish the performance requirements for appliances. These standards apply to refrigerators, freezers, room air conditioners, central air conditioners, gas heaters, water heaters, plumbing fittings, fluorescent lamp ballasts and luminaires, and ignition devices for gas cooking appliances, and gas pool heaters. New national appliance standards are in place for some of these appliances and will become effective for others at a future date.

Appraisal - A report made by a qualified person setting forth an opinion or an estimate of value. The term also refers to the process by which this is obtained. In conventional mortgages and in the HUD-FHA Direct Endorsement Program, the lender receives a copy of the complete report, showing the basis for the appraiser's estimate. In VA cases and in HUD applications processed by HUD, the lender receives only a statement of the estimate of value, without any detailed supporting data.

Audit - (1) Analysis of a specific building's consumption and potential to conserve utility-supplied energy; (2) an energy inspection typically associated with a utility RCS (Residential Conservation Service) audits which were mandated by Congress for larger utilities to provide until July 31, 1990.

Basic Qualifying Ratio - The maximum generally acceptable ratio for a mortgage agency, e.g., for Fannie Mae and Freddie Mac, it is presently 28/36. This ratio is often adjusted upward or sometimes downward for compensating factors such as the borrower's credit worthiness.

British Thermal Unit (Btu) - A unit used to measure quantity of heat defined as the quantity of energy necessary to raise the temperature of 1 lb. of water 1o Fahrenheit.

Building Code - The local regulations that control design, construction, and materials used in construction. Building codes are usually based on health and safety standards.

Building Envelope - The assembly of exterior partitions of a building that enclose conditioned spaces, through which energy may be transferred to or from the exterior, unconditioned spaces, or the ground.

Building Inspector - An employee of. local or state government building department whose responsibilities reviewing building plans and/or inspecting building sites to determine whether or not they meet existing health, safety, and/or energy codes.

CABO-MEC - Council of American Building Officials - Model Energy Code. A nationally recognized standard for minimum levels of energy efficiency in residential buildings (three stories or less) for insulation, windows, heating and cooling equipment, air infiltration, etc. All homes seeking FHA or VA loans must comply with the 1992 edition of this energy code. The Model Energy Code (1989, 1992, 1993, or 1995 edition) is also enforced in many state and local jurisdictions as part of their building code.

Certificate of Reasonable Value (CRV) -VA Fom26-1343, HUD Form 92800-5. A document issued by the VA establishing a maximum value and loan amount for a mortgage to be guaranteed by the VA. The CRV will also be accepted by HUD-FHA to establish the appraised value of the property for a mortgage to be insured by HUD-FHA.

Certification Programs - A program typically operated by utilities, home builders' organizations, or not-for-profit organizations. Energy efficiency standards are developed using local area demographics, construction practices, and area climatic conditions. They usually include thermal envelope efficiency criteria and space conditioning efficiency criteria. Certification programs generally rely on a specified inspection/verification process to ensure a rating consistency. Hoses either pass of fail the inspection for energy efficiency.

Compensating Factors - Any underwriting consideration that would justify the use of higher debt-to-income qualifying ratios. Examples are large down payment, excellent credit history, or a demonstrated ability to accumulate savings.

Condenser - A heat exchanger in which the refrigerant, compressed to a hot gas, is condensed to liquid by rejecting heat.

Conditioned area (or space) - That portion of the building that is heated and/or cooled.

Cost Effective - Producing the most economical outcome for consumers.

Demand-Side Management (DSM) - Utility programs designed to control energy consumption on the customer's side of the meter. Such programs include conservation/energy efficiency, load management, and load building.

Dual-Paned (double-glazed) - Two panes of window glass or other transparent material.

Efficiency - The ratio of the useful energy delivered by a dynamic system (such as machine, engine, or motor) to the energy supplied to it over the same period or cycle of operation. The ratio is usually determined under specific test conditions.

Energy - The capacity for doing work. Forms of energy include thermal, mechanical, electrical, and chemical. Energy may be transformed from one form into another.

Energy-Efficiency Measures - Items that reduce a homes consumption of utility-supplied energy, including devices such as insulation, low-emissivity windows, and renewable energy technologies such as, passive solar design and solar domestic hot water systems.

Energy-Efficiency Rating - A certification of a home's energy efficiency or a relative indication of its energy efficiency on a graduated scale.

Energy Efficient Mortgages (EEMs) - When a homeowner or home buyer applies for a home loan, at the time of purchase or refinance, he or she can roll the cost of needed energy improvements into the mortgage, amortizing the cost of the improvements over the life of the mortgage, based on the expected savings.

Energy Efficient Mortgage Program - The energy improvement programs of the VA, FHA, Fannie Mae, Freddie Mac, and the Farmers Home Administration.. These are national programs that are available to all home buyer and homeowners at the time of purchase or refinance.

Energy Label - Label or sticker stating the energy efficiency rating level of the home.

Energy Rating - A designation of the relative efficiency of a property. In a larger sense, the rating would also include a prioritized energy improvement recommendation, estimates of energy and dollar savings, and documentation of efficiency and savings for the loan file if completed in conjunction with energy-efficient mortgages.

Energy-Saving Construction or Improvement Features - Features that contribute to lowering of energy use in a residence. They include, but are not limited to the following: insulation, e.g. wall, ceiling, floor, slab, crawl, basement, window, door, etc.; air infiltration reduction, e.g., gaskets, caulking, weather-stripping, controlled mechanical ventilation, etc.; heating and cooling equipment, e.g., setback thermostats and high efficiency furnace, air conditioner, water heater, and fireplace; duct loss reduction; glazing, e.g., amount of glazing, R-value, solar fraction, solar orientation; and passive and active solar features.

Energy-Saving Measure - Any device, equipment, material, process, construction method, system, structure, or combination thereof that will result in a reduction of energy usage when compared with conventional energy-related practice in the area of the project.

Exfiltration. - Air flow outward through a wall, building envelope, window, etc.

Fannie Mae - Term commonly used in referring to the Federal National Mortgage Association.

Farmers Home Administration (FmHA) - (now known as the Rural Economic and Community Development) A government agency within the Department of Agriculture that operates under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Mortgage Corporation. (FHLMC) - A quasi-government agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells mortgage participation certificates (PCs) secured by pools of conventional mortgage loans. Popularly known as Freddie Mac.

Federal Housing Administration (FHA) - A division of the Department of Housing and Urban Development. It sets standards for construction and underwriting. FHA neither lends money, plans, nor constructs housing.

Federal National Mortgage Association (FNMA) - A congressionally chartered corporation with private stockholders that purchases residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages. Popularly known as Fannie Mae.

Freddie Mac - Term commonly used in referring to the Federal Home Loan Mortgage Corporation.

Fuel Neutral - Rating system that factors in heating and cooling equipment efficiency without favoring one energy type or technology.

Glazing - A covering of transport or translucent material (typically glass or plastic) used for admitting light. Glazing retards heat losses from radiation and convection.

Heat Gain - An increase in the amount of heat contained in a space, resulting from direct solar radiation, heat flow through walls, windows, of, and other building surfaces, and the heat given off by people, lights, equipment, ad other internal sources.

Heat Loss - A decrease in the amount of heat contained in a space, resulting from heat flow though walls, windows, and other building surfaces and form exfiltration of warm air.

Heat pump - An air-conditioning unit capable of heating by refrigeration, transferring heat from one (often cooler) medium to other (often warmer) medium, and that may or may not include a capability for cooling.

Heating, Ventilating, and Air Conditioning System (HVAC) - A system that provides heating, ventilating, and/or cooling within or associated with a building.

Home Energy Rating System (HERS®) - HERS measure and rate on a scale the relative energy efficiency of any house, regardless of age, efficiency, or fuel use. The rating is based on the efficiency of the thermal envelope and the heating, ventilating, ad air conditioning (HVAC) system and is obtained by on-site inspection and calculations. HERS calculations include estimates of annual energy performance and costs and recommendations for cost-effective energy-efficiency improvements.

HERS Characteristics - (1) Designed to rate, on a scale, the relative energy efficiency of any house -- new and existing, efficient and inefficient; (2) provides a rating based on efficiency of the thermal envelope, space heating and cooling efficiency, and water heating efficiency; (3) estimates annual costs; (4) recommends improvement measures; (5) is fuel neutral; (6) requires on-site inspections and quality control; (7) typically, is state sponsored (or approved) and third-party delivered; (8) has goal of providing voluntary, market-driven incentives to encourage increased efficiency; and (9) provides documentation that a house meets or exceeds a minimum standard for efficiency designated at a point on the scale.

Home Energy Rater - The person trained and possibly certified to inspect a residence to collect all information needed to complete a home energy rating.

Housing and Urban Development, Department of (HUD) - The Department of Housing and Urban Development was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency and give Cabinet status to the administration. of the nation's housing and urban development programs. It is responsible for the implementation and administration of government housing and urban development, low rent public housing, mortgage insurance for residential mortgages (FHA), equal opportunity in housing, energy-efficient mortgages, and research and technology.

Indoor Air Quality - Indoor environmental quality of a site.

Infiltration - The uncontrolled inward leakage of air through cracks and gaps in the building envelope, especially around windows and doors.

Life Cycle Cost - Amount of money necessary to own, operate, and maintain a building over its useful life.

Load Management Program - Programs that have the effect of reducing electric peak demands or shifting electric demand from the hours of peak demand to non-peak time periods.

Passive Solar Technologies - Technologies that combine architecture to benefit from solar radiation incidence on buildings for heating, cooling, and lighting, with good conservation techniques for the building envelope and energy-efficient equipment and controls. Passive solar technologies are typically sunspaces, direct gain systems, and thermal storage walls.

PITI - Principal, interest, taxes, and insurance.

PITI+E - A borrower qualification method that incorporates energy efficiency in the debt-to-income ratios by adding the energy operating cost for the candidate house to other elements of the housing expenses.

Positive Cash Flow - A situation. in which the energy cost savings from an energy-efficiency improvement exceeds the payment for the improvement in a given time period.

Prescriptive Standard - An energy-efficiency standard that specifies the energy-efficiency features that must be included in a building.

Qualifying Ratio - Percentage ratios that compare the borrowers' anticipated monthly fixed housing expense and total monthly .obligations to the borrowers' stable monthly gross income for the purpose of evaluating the likelihood of meeting expenses.

Radiant Barrier - A device. designed to reduce or stop the flow of radiant energy.

Rating Tool - A procedure for calculating total annual energy consumption and costs of a home and for signing a rating that establishes how the efficiency of a given home compares to the efficiency of all other homes.

R-Value - A unit of thermal resistance used for comparing insulating values of different materials. The higher the R-Value of a material, the greater its insulating properties and the slower the heat flows through it.

Scaled HERS - A system that uses a scale of energy efficiency designed to rank any given home against other homes in the area. Non-scaled HERS, often called certification or prescriptive programs, use one or more benchmarks of energy efficiency instead of a continuous scale. Some HERS combine both-using a scale to rate the home and some designation or label linked to a few specific thresholds on the scale.

Secondary Mortgage Market - A system whereby lenders and investors buy existing mortgage or mortgage-backed securities and in doing so provide greater availability of funds for additional mortgage lending by banks, mortgage bankers, and savings and loan associations.

Site Energy - The energy consumed at a building location or other end-use site.

Source Energy - All the energy used in delivering energy to a site, including power generation, transmission, and distribution losses, to perform a specific function such as space conditioning, fighting, or water heating.

Star Rating Approach - Rating system in which stars are given to reflect energy efficiency of a home. For example, a rating of five stars on a scale of one to five stars represents the best rating possible.

Stretched Mortgages - Enhanced qualification ratios.

Submetering - Breaking down the utility metering of a building to determine the proportionate energy use of specific building systems and appliances.

Thermal Envelope - The building's exterior shell - walls, foundation, floors, ceiling, windows, doors, and roof.

Thermostat, Setback - A device containing a clock mechanism, which can automatically change the inside temperature maintained by the heating, ventilating and air conditioning (HVAC) system according too a preset schedule. The heating or cooling requirements can be reduced when a building is occupied or when occupants are asleep.

Unconditioned Space - A space that is neither directly nor indirectly conditioned space, which can be isolated from conditioned space by partitions and/or closeable doors.

Utility Audit - A formal review of a house's energy use conducted by a utility company representative, with recommendations for energy-efficiency measures, such as weather-stripping, caulking, and isolation.

U-value (coefficient of heat transmission) - The rate of heat loss, in British thermal units per hour, through a square foot of a surface (wall, roof, door, or other building surface) when the difference between the air temperature on either side is 1o Fahrenheit. The U-value is the reciprocal of the R-Value.

Veterans Affairs (VA) - An independent agency of the federal government created in 1930. The Serviceman's Readjustment Act f 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low-downpayment mortgages to eligible veterans by guaranteeing the lender against loss.

Water Heater - An appliance for supplying hot water for purposes other than space heating or pool heating.

Weatherization - Retrofitting a houses envelope with basic energy efficiency measures, such as weather-stripping, caulking, and insulation.

Whole-House Fan - A system capable of cooling a house by exhausting a large volume of warm interior air when the outside air is cool.

Zone - (1) In the context of a heating, ventilating, and air-conditioning (HVAC) system: a space or group of spaces served by an HVAC system or portion of an HVAC system controlled by a single thermostat or other control device; (2) A space or group of spaces within a building with sufficiently similar comfort conditioning requirements so that comfort conditions can be maintained throughout by a single control device.

Glossary Source: Going National with HERS and EEMs: Issues and Impacts, March 1992, National Renewable Energy Laboratory, Golden, CO., NREL,7P-26-261-4706.