Can green mortgages help the lending industry overcome the subprime market crash?
One of the national real estate trends, even in these times of subprime lending market woe, is green building. And with their industry struggling, some major mortgage lenders are trying to lure green-minded homeowners in with discounts for upgrades that make a home more eco-friendly.
Companies like Citigroup Inc. (C), Bank of America (BAC) and JP Morgan Chase & Co. (JPM) are among the lenders pushing special programs for what are now being called "green mortgages." Citi and Bank of America are both offering $1,000 off of closing costs/fees for meeting certain standards, and JP Morgan Chase is offering $500 with spray-foam insulation. But it's not all just about Mother Earth. The Wall Street Journal reports that there is more behind this do-gooding than just concern for the planet:
The new products and incentives are aimed at a market worried about increasingly high energy prices. And amid the turmoil in subprime lending, analysts say, energy-efficient mortgages can be a more secure way to qualify marginal borrowers, since these homeowners are saving money on utility bills.
But just because the lenders have ulterior motives is no reason to completely write off these new green mortgages. Rolling the costs of environmental upgrades into a (usually second) mortgage is one way that more people can improve the energy-efficiency of their homes. These mortgage loan products are structured the same way as other fixed or adjustable rate mortgages, making it palatable for some who are wary of borrowing right now.
States are getting in on the act as well. Pennsylvania, New York and Kansas are among states that offer subsidized green mortgages that can help homeowners "green it up." The good news is that, not only do such improvements help the planet, but they also save homeowners money. And the mortgage loan industry is hoping that it will attract a few more borrowers to help them out.
Who know? Maybe green mortgages will soon include amounts for things like adding solar panels and other uses of alternative energy, in addition to providing savings for energy-efficiency upgrades.
Disclosure: I do not own stocks in any of the above. I do have an online savings account with Citi, though.