Don Keelan: Climate Change May Make It Difficult To Get A Mortgage

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This is a comment from Don Keelan, a retired chartered public accountant based in Arlington.

Anyone who has faced the myriad problems of closing a mortgage may want to prepare for the next wave of complexity and cost. Again, climate change is the driving force.

For starters, some of the world’s central banks are forcing their member banks to study the possible impact on existing loans if projected catastrophic climate change scenarios come true: underwater coastlines, over-reliance on fossil fuels, adverse temperature changes, unacceptable levels of greenhouse gases. gas emissions, etc.

Inevitably, the banking and mortgage finance industry will pass on its demands on homeowners to comply with new lending standards aimed at mitigating the effects of climate change.

A homeowner seeking mortgage financing must already provide numerous documents to secure and close a mortgage loan.

It is not unusual to provide: property rights insurance policy, surveys, utility checks on mortgaged property, evidence of compliance with local zoning and other municipal ordinances, credit report (scores), income and asset checks, appraisals, termite-free checks. (not a problem in Vermont) and ID.

And here are the possible new requirements that the homeowner will eventually have to face. First, was the proposed mortgage property fully insulated? And if so, it will be necessary to provide empirical evidence from a licensed insulation expert (see below).

If the house was not insulated, then in order to carry out the insulation work, it will be necessary to withhold part of the mortgage dollars. Provided, of course, that the closure of the mortgage will take place.

The second criterion that will be required for a mortgage obligation is the installation of a Level 2 charging station (this has already been prescribed for the construction of a new home). This requirement, which can cost around $ 700, must be met prior to closure, or funds will be withheld until installation is complete.

The third, most expensive and complex possible new requirement will be to replace all heating, cooking, and drying equipment with fossil fuels. The cost of this change can be reduced if biofuels are suitable to replace # 2 heating oil or natural gas and propane gas. Otherwise, mortgage lenders will be forced to insist that any mortgage loan provide funding to replace existing fossil fuel equipment.

What’s unique is that mandates for change will not come from the government, at least for now, but from the banking sector. This is not unlike the way large corporations are required to bring more variety to the management of their organizations. Pressure comes from influential investors and the NASDAQ stock exchange.

At Nike, McDonald’s and Starbucks, to name a few, their senior executives are now compensated for how well they provide diversity and engagement in their executive leadership. Periodic reporting on this should be provided to the boards of directors and shareholders of the companies.

And the impact of advocating for change isn’t just outside of government. Here in Vermont, a Vermont Climate Council Subcommittee on Fair Transitions noted the following in column from May 29, 2021 in the Rutland Herald: “As Vermont takes steps to promote a green economy, we must ensure that people do not lose their fossil fuel jobs, but rather move to another job — ideally a union job.”

The author, Daniel Bombardier, continues: “The state should enact a card verification law to simplify the process of unionizing employees at their workplaces. The state should also stipulate that any contractors working on green energy projects greater than 500 kW pay their workers the wages prevailing in Vermont. ”

Ms. Bombardier, in addition to being a member of the Vermont Climate Council Subcommittee, is also the AFL-CIO Vermont Secretary / Treasurer. Serving on a government committee with a conflict of interest is no longer an issue in Vermont.

It’s time to refinance your existing mortgage or get a new one. Mandates will come not only from the government, but also from other sources.

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