Eco-Friendly Homes Attract Mistrust From Mortgage Banks


HOT SULFUR SPRINGS, Colorado — Like many Americans, Jon and Laura Hagar are looking for a lender to refinance their home loan. But the banks are wary of the Hagars. Their rural Colorado home is made from 17,000 old tires.

A niche mortgage mess is brewing in houses made of dirt, tires, concrete and trash. Environmentally conscious people built them, hoping to conserve energy and reuse what might otherwise end up in landfill.

Such sentiments in some cases have failed to live up to the new resolve of the banking sector in the wake of the housing crisis. Banks have become much more picky about looking at comparable home sales to decide if and how much to lend. Owners of strange homes may be out of luck.

The Hagars built their 2,700-square-foot house by stacking tire bales – blocks of compressed tires five feet wide – to form the exterior walls. They sealed the spaces between the balls with cans, bottles, plastic plates and other trash and moved in towards the end of 2008.

“We affectionately call it the trash,” says Ms. Hagar. The Hagars covered all this waste with concrete, clay and stucco and installed south-facing windows to capture the light, warmth and views of the snow-capped slopes.

To pay, the Hagars contracted a $ 240,000 line of credit in 2007 with the Red Rocks Credit Union in suburban Denver. In the old days of easier credit, appraiser Lori Slota couldn’t find another tire-baled house that had recently been sold, but said the house would be valued at $ 500,000 when complete, citing the list of a straw bale house as well as other houses. in the zone.

Last year, when the house was finally finished and interest rates were at record highs, the Hagars began trying to refinance themselves into a long-term, fixed-rate mortgage. But in February 2009, they got the bad news from loan officer Bill Schimel, who wrote in an email, “I think we’ve really hit a brick wall here.

As far as is known, no house made from tire balls has sold recently in the state of Colorado. The lenders told the Hagars that they could not assess the property and would not give them a regular mortgage.

Obtaining financing for unusual homes has never been easy. Near Granby, Colorado, Richard Messer chose not to look for a conventional mortgage because there was nothing conventional about what was inside its walls: 50 tons of paper from Coors beer packaging used as insulation. Mr. Messer got a loan of $ 60,000 from friends to help pay. “The problem for anyone trying to make a unique home is the financing,” he says.

Wayne Bryant, a 56-year-old steam fitter, has spent much of the last year looking for a way to refinance a $ 417,000 construction loan for his underground home in the San Juan Mountains in the south. -western Colorado. The first appraiser to examine his property didn’t even come from Denver to examine it, saying he made a few phone calls and determined there were no comparable deals in the area, Mr. Bryant.

Homes made from unconventional materials can be difficult to sell when it comes to refinancing, especially if there are no comparable homes in the area. WSJ Anton Troianovski reports.

Sometimes, says Bryant, he and his wife feared losing their home. (Their construction lender, Fred Arnold of Owner Builder Loan Services, says he foreclosed on several log homes in 2009 when borrowers couldn’t refinance.)

Wells fargo

& Co. near Durango got an acceptable appraisal and agreed to give the Bryants a mortgage.

“People like us who want to build these types of homes, we are basically at the mercy of the mortgage companies,” said Bryant.

Brad Blackwell, Wells Fargo’s national sales manager for Western markets, said lenders scrutinize home values ​​much more closely than in previous years before granting a loan, making it more difficult to obtaining mortgages for people living in unusual properties.

“It is simply a fact of the mortgage lending environment in general that determining the value of a property is more important than ever today,” said Mr. Blackwell.

To complicate matters, the government-backed mortgage finance giants

Fannie mae


Freddie mac

adopted a new code of conduct for assessors last spring. In the past, mortgage brokers could use appraisers who had developed a niche by tracking down odd homes.

The new code prohibits mortgage brokers and real estate agents from any role in the selection of appraisers. Over the years of go-go, appraisers have often complained about being pushed by brokers to inflate the estimates. The rules are far reaching as Fannie and Freddie now represent over 70% of the mortgage market.

Pagosa Springs, Colorado, mortgage broker Connie Giffin is a victim.

During the boom, she made up to $ 295,000 a year just to organize funding for what she calls eco-friendly homes.

She helped appraisers assess unusual homes by guiding them to comparable properties in a database she maintained. To fund a seven-bedroom dome-shaped home in Yuma, Ariz., Ms. Giffin directed the appraiser to state domes.

Among the comps listed in the appraisal: a property 400 km away with a dome-shaped observatory.

Under the new rules, Ms. Giffin is no longer allowed to work with appraisers for loans that can be purchased by Fannie or Freddie.

Last year her total was $ 16,000, and this year Ms. Giffin says she is practically bankrupt. She transformed her office into an art gallery.

The Hagars are still hoping. Don Arkell, vice president of Red Rocks, says he’s looking for a way to refinance their loan and he’s still testing the secondary mortgage market. He’s worried the house is so unusual that he won’t be able to sell the loan to investors, which means the credit union should keep the loan on its own books. With regulators concerned about the health of small banks, Red Rocks is focused on providing loans that can be easily sold if it needs to raise funds.

“It’s dark enough for people in hard-to-value properties,” he says.

Write to Anton Troianovski at [email protected] and Nick Timiraos at [email protected]

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