Revolutionary mortgages improve energy efficiency

Stephen Ponce-Pore is out to change the world one Energy Star Mortgage at a time.

Bold statement? No doubt about that. Likelihood of happening? Potential is great if you look at the number of calls fielded by Bank of Colorado’s energy programs manager from both homeowners and financial institutions across the nation wanting to learn more about this brand-new mortgage. So far it’s offered only in Colorado.

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First, a little background on Ponce-Pore to help you understand how this all came to be and why it has the potential to, well, indeed change the world.

Ponce-Pore did not set out to become a mortgage lender. He studied biology and environmental conservation at the University of Colorado and obtained a master’s in sustainable systems at Slippery Rock University in Pennsylvania.

He went on to found Applied Conservation Technologies, a structural energy conservation firm that provided energy audits, energy-efficient home improvements – and, yes, financing.

He enjoyed lending so much he has worked in that industry for the past 15 years. Now ensconced at the Bank of Colorado, he took his knowledge of home loans and green building, combined it with homeowners’ growing demand for energy-efficient homes and came up with the Colorado Energy Star Mortgage.

On board with the new loan program, in place since November, is the Colorado Governor’s Energy Office and Northern Colorado Energy Star Homes, which to date includes 37 builders.

How it works

In a nutshell, this is how the Energy Star Mortgage works – and, by the way, it’s available for new construction, purchase of older homes, remodeling projects, even debt-consolidation loans, provided energy improvements are included.

Let’s say you’re shopping for a home. Maybe you find one that was built as an Energy Star home already, meaning it is at least 15 percent more energy efficient than homes built prior to the 2004 International Residential Code. You’re good to go.

Or perhaps you find an older home that meets your criteria but you want to make it as energy-efficient as possible: insulation, weather-stripping and new furnace, or maybe even solar panels. In this instance, you need to contact an energy auditor certified by the Residential Energy Services Network and/or Building Performance Institute. The auditor inspects the home and makes recommendations for improvements to decrease energy consumption. As long as the improvements meet or exceed established criteria, you’re good to go as well.

“Fundamentally, we’re changing the way we buy and sell homes. Why would anyone want to live in a leaky, broken-down home when for the same amount of money they can live in a weather-tight, energy-efficient home?” asked Ponce-Pore.

So now you’re probably asking, how can that be? The same amount of money? Yeah, right.

Take a typical $200,000 mortgage. With the Energy Star Mortgage, the Governor’s Energy Office contributes $1,000 and the Bank of Colorado ponies up another $1,000 to help you buy down the interest rate by one point, which can mean a quarter to a half percent shaved off the interest rate.

“Over the life of a loan, that can be huge,” Ponce-Pore said.

Huge enough, in fact, to pay for the cost of making energy-efficiency upgrades. And huge enough that the monthly mortgage payment is less than the same mortgage without the upgrades and no buy-down.

The Energy Office’s participation in this program is good for three years, Ponce-Pore said. After that, he is hopeful that municipalities will step in to partner on the loan program.

“I really believe that right here in Colorado, we’re going to change the way people get loans,” he added. “This program uses local money, local investment, local contractors, local products. We’ve got what we need right now. Right here. But do we have the will?”

Time is right

John Clarkson, manager of Benchmark Custom Homes, said he thinks the time is right. “It’s actually cheaper to own and operate a home using the Energy Star Mortgage program.”

For years, building green came with a higher price tag. But today, Clarkson said, thanks to vendors and tradespeople getting on board, it’s possible to build an Energy Star home that costs just 1 percent to 2 percent above one constructed to conventional building code.

Traditional Energy Star mortgages have been around for years, Clarkson said, but should not be confused with the one promoted by Ponce-Pore. “What Stephen has going on is a way more powerful program. I already have people who’ve been on the fence (about buying a home) who are starting to look at it.”

This Energy Star loan program, Ponce-Pore said, is designed for the middle-class homebuyer. To date he has closed on five loans, has six in the process of closing and has an additional half-dozen applications.

“I’m getting calls from around the nation,” he said. “They want to know why this is happening in Colorado? The governor’s office listened and funded it; my bank gave me the freedom to go about that and support it. As time goes by, we hope to have other banks involved in this project.”

Ponce-Pore said the downside for banks is they earn less per loan. The upside is the potential for doing more loans than before. “And we’re doing a heckuva lot of good for the community by encouraging energy-efficient homes.”

And that is how Ponce-Pore hopes to change the world, one mortgage at a time.