A Lenders Guide to Energy Efficient Mortgages EEMs

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A Lenders Guide to Energy Efficient Mortgages
(EEMs)
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What is an Energy Efficient Mortgage (EEM)?

• An EEM is
• an FHA/VA loan program that recognizes the energy
  efficiency of a home
• allows 100 financing of cost effective energy
  upgrades into the mortgage
• can be used when purchasing or refinancing an
  existing home
• the borrower does not have to qualify for this
  amount and no additional down payment required

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Why Should a Lender Finance an EEM?

• Larger and More Profitable Loans
• When underwriting FHA and VA EEMs, lenders can
  exceed the federal loan limits up to the amount
  of the energy improvements.
• This equates to higher loan amounts which
  higher loan origination fees, etc.

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Why Should a Lender Finance an EEM?

• New Business from Trade Ally Partnerships
• Yes, thats us!
• Developing relationships with home energy rating
  programs, energy efficient builders, utilities
  and vendors of energy efficient products creates
  business opportunities for lenders.
• Bottom Line
• The EEM product creates an increased client pool
  from referrals.

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Why Should a Lender Finance an EEM?

• Lenders Can Qualify More Buyers
• More people can qualify to purchase an energy
  efficient home than could qualify for the same
  house if it were not energy efficient or roll the
  cost of the energy upgrade of an existing home
  into the mortgage loan.

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Why Should a Lender Finance an EEM?

• No Great Increase in Paperwork
• We know seems too good to be true!
• Under new Fannie Mae, Freddie Mac, FHA and VA
  guidelines, the underwriting process is
  reasonable and straight forward. Only one new
  form is required and that form is prepared by us,
  the home energy rater!

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Why Should a Lender Finance an EEM?

• Lower Utility Bills Lead to Lower Client Defaults
• Since your customers will have lower utility
  bills, they will have more financial resources to
  put towards their mortgage.
• This should result in fewer defaults.
• Source Florida Solar Energy Center.
  http//www.fsec.ucf.edu/en/consumer/buildings/rati
  ngs/eem/overview.htm

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Why would a buyer use these programs?

• By making energy efficient improvements to an
  existing home, the buyer benefits immediately
• Live in a more comfortable and quieter home
• Lower utility bills, making home ownership more
  affordable
• Home will be cooler in summer and warmer in
  winter
• Home will have increased value based on the
  improvements
• Upgrades are financed at the low mortgage rate

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Why EEMS?
Disconnected Ducts (not that uncommon)
Open Return
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Lack of Insulation Heat Flows to the Outside
on a Cold Day Or to the Inside on a Hot Day
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Crumpled Ducts Is there a cold room in the house?
Heated Air Leaking into Unconditioned Space!
Unsealed Ductwork-where is that attic dust going?
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Who wants to breathe this air?
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Who can qualify?

• Anyone who qualifies for an FHA or VA loan will
  automatically qualify for an EEM.
• The EEM may be used with sections 203b, 203k and
  203k streamline rehabilitation programs, 234c
  condominium projects, and 203h mortgages for
  disaster victims.

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Financing Limits

• 5 of property value,
• not to exceed 8,000, or
• 4,000, whichever is greater
• Area Loan Limit for Stanislaus County is
  approximately 276,000 for CY 2009
• Subject to change

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How much does an EEM report cost?

• The cost will vary by region with a range from
  250 - 600.
• The variables include size of home, diagnostics
  performed.
• The process includes a site visit by a certified
  rater, data collection and entry into an energy
  modeling program (CHEERS Rate Tool).

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The Cheers Rate Tool Report
Your Client
Your Client
Your Client
Your Client
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Who Pays for the EEM Report?

• Any of the principals in the real estate
  transaction may pay for the Analysis.
• The fee may be paid
• at time of site visit
• paid as a non-recurring closing cost, or
• financed as part of the cost effective
  improvements in the EEM funds.

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Do the added EEM funds increase the monthly
mortgage payment?

• Yes, this increase is offset by the increased
  operating efficiency of the home.
• Mortgage Payment
• But
• Utility Bills

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Who chooses which improvements are included in
the EEM?

• The buyer selects a package from cost effective
  upgrades. This requires a consultation between
  the Certified Rater Analyst and the buyer.

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Will this cause a delay in closing the loan?

• Using an EEM should not delay the loan process in
  any way.
• However, this process should get started as soon
  as possible after escrow has been opened.

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When are the improvements installed?

• Improvements may be installed only after close of
  escrow.
• The EEM funds can be held by either the Lender or
  the Escrow Company in a holdback account.
• The improvements must be installed within 90 days
  (FHA) or 120 days (VA) after close.

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Who does the improvement work?

• The work is typically performed by local licensed
  contractors.
• The buyer/owner may select their own contractors
  and must provide firm bids to the lender before
  loan documents are drawn.

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Questions?
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Douglas Beaman Associates

• If you have any questions please feel free to
  contact us
• Brian Beaman, brian_at_dougbeaman.com
• Kelly Beaman, kelly_at_dougbeaman.com
• Doug Beaman, doug_at_dougbeaman.com
• OR
• [phone]
• 608 13th Street, Modesto, California