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House Built of Old Tires Searching for a Mortgage

Houses built of discarded materials may be environmentally friendly, though difficult to mortgage.  Families looking to refinance their mortgages don’t face quite the uphill battle that Jon and Laura Hagar have in their search for the right lender.  That’s because the Hagars’ house in rural Hot Sulphur Springs, CO, is made of 17,000 old tires.  The Hagars’ 2,700 SF house is built of stacked tire bales – five-foot-wide blocks of compressed tires – that form the exterior walls.  The gaps between are filled with cans, bottles, plastic plates and other junk.  The trash is covered with concrete, clay and stucco, while the south-facing windows capture light, heat and mountain views.  “We lovingly call it the trash house,” Laura Hagar said of the house her family moved into at the end of 2008.

The Hagars’ dilemma represents a niche mortgage market for houses constructed of earth, tires, concrete and trash by environmentalists who want to conserve energy and re-use materials that might otherwise end up in landfills.  The problem is that the housing bust has made banks reluctant to finance these houses because it is difficult to study sales of comparable homes when deciding how much to lend.

The Hagars received a $240,000 line of credit from Red Rocks Credit Union to finance the house’s construction.  At the time, a credit appraiser – though unable to find a comparable house among recent sales – valued the Hagars’ house at $500,000, in line with a listing for a straw-bale house in the area.  With interest rates currently at historic lows, the Hagars are trying to refinance their house with a long-term, fixed-rate mortgage.  Their loan officer responded via email, “I think we have really hit a brick wall here.”  Because lenders can’t value the property, they cannot give the Hagars the mortgage they want.

The Hagars’ credit union hasn’t given up yet and is looking at the secondary mortgage market.  The house is so unique that the mortgage might not be attractive to investors, which means the credit union would have to keep the loan on its own books.  With regulators looking at the health of small financial institutions, Red Rocks prefers to make loans than can be sold easily to raise cash.

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