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FHA’s Energy Efficient Mortgages

FHA’s Energy Efficient Mortgages. Purpose of the EEM. To Help Achieve the National Energy Goals To Help Create Affordable Housing. What is an Energy Efficient Mortgage?. A borrower can finance 100% of the cost of an eligible cost effective energy package

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FHA’s Energy Efficient Mortgages

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  1. FHA’s Energy Efficient Mortgages

  2. Purpose of the EEM To Help Achieve the National Energy Goals To Help Create Affordable Housing

  3. What is an Energy Efficient Mortgage? • A borrower can finance 100% of the cost of an eligible cost effective energy package • The property does not need to be re-appraised • The borrower does not have to be qualified with the additional mortgage mount • The greater of 5% of property value (not to exceed $8,000) or $4,000 can be added onto the approved mortgage amount

  4. What is an EEM • Cost effective - the present value of the energy saved is MORE than the cost of the energy package (including maintenance) • The maximum mortgage amount for an area can be exceeded by the amount of the energy package

  5. EEM vs. EEH • EEM is a mortgage product adding additional dollars to the loan amount. • EEH is a house built to 2000 IECC. • EEH allows for ‘stretch ratios’ when qualifying the borrower.

  6. What Properties Are Eligible? • 1- 4 units • Existing construction • New construction • SF, townhouses, condos, manufactured houses, duplexes

  7. What FHA Loans Can Be Used? • 203(b) • 203(h) • 234 • 203(k) • Purchase or Refinance, including streamline refinance

  8. Who Can Get an EEM? • Owner-occupants • Non-profits

  9. The Home Energy Rating • An analysis of the present energy usage and the proposal of an energy package designed to improve energy efficiency. • A physical inspection of a house, generally including diagnostic tests. • A computer analysis.

  10. Home Energy Rating • Existing construction • Compared to a reference house built to 2000 IECC • New construction • Rated from plans and specs • Compared to 2000 IECC home • Energy package - those improvements over 2000 IECC

  11. Who Does the Home Energy Rating? • A HERS (home energy rating system) provider • An energy consultant • A utility • A governmental agency • A non-profit experienced in energy ratings • An entity approved by local, state, or federal government to provide ratings

  12. The Energy Package • A combination of energy improvements that are cost effective. • HERS report outlines improvements, costs and energy savings. • All items in energy package must be completed. • Approved changes are OK if the revised energy package is still cost effective. • Fee can be included in the Energy Package.

  13. Loan Limits • Statutory mortgage limit can be exceeded by the amount of the EEM.

  14. Getting the Work Done • Borrower should get bids before closing • EEM dollars are put into a non-interest bearing escrow account - or if combined with a 203(k), put into the Rehab Escrow Account • 90 days to complete work (6 months if a 203(k)) • Contractor cannot be Rater or HERS

  15. Getting the Work Done • Post test/compliance inspection when work is complete • If work is OK and meets PV test, money is released • If the work does not meet the PV test, borrower will have to re-do or add improvements

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