1. FHA Energy Efficient Mortgage Program EEM

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Energy Efficiency Renewables at Time of Sale or
Refinance using FHA/HUD Programs
1. FHA Energy Efficient Mortgage Program (EEM)
2. FHA Weatherization Program
3. FHA 203 STREAMLINE (K) Limited Repair Program
4. FHA Solar Program at time of sale or
refinance (Currently being Designed)
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FHA Energy Efficient Mortgage Program (EEM)
HUDs Energy Action Plan and Energy Efficient
Mortgages
Presented by Dan Perkins Energy Smart Homes
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Eligible Loan Types
Most FHA loan products Existing
Residential Purchase or Refinance Owner
Occupants NO Investors
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Program Guidelines for EEM

• 5 of Purchase Price up to 20,000
• 100 Financing of Cost Effective eligible
  energy improvements
• No Additional Liens energy improvements layered
  into the base loan amount
• Loan Limits may be exceeded by the total cost of
  the energy improvements. San Diego limit is
  697.500 the additional 20,000 does not require
  qualifying or additional down payment

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Qualifying Borrower for EEM
Borrower automatically qualifies
Appraisal
Appraisal is automatically increased By the value
of the energy improvements
Financing Additional Energy Improvements
Cost-Effective
The monthly energy savings must be greater than
the payment increase based on a CEC approved
Certified HERS Home Energy Rating System
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Mortgage funds are held in an special Escrow
Holding Account until the Notice of Completion
is issued
HERS Energy Rating

• Certified Energy Rating is usually a Buyer Cost.
• (Range from 250 to 400)
• Payment prearrangements
• may be paid at time of Rating
• may be paid in escrow as a closing cost or
• may be made part of the mortgage at the Lenders
  discretion

Repairs are Installed After the Close of Escrow
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Potential Energy Improvements

• Central Heating/ Cooling (addition or
  replacement)
• Dual Pane Low E Windows Sliding Glass Door
• Replace Wall Heating unit(s)
• Exterior Doors Sun Screen
• Test Seal Ductwork for Leaks

• Attic Wall Insulation
• Whole House Fan
• House Leakage Diagnostic Testing
• Water Heater Replacement
• Solar DHW (Domestic Hot Water)

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FHA Weatherization Program
May be combined with the Energy Efficient
Mortgage,
Mortgagee Letter 2005-21 - HUDs Energy Action
Plan and Energy Efficient Mortgages
QUALIFING Down Payment and Income Qualifying
required Weatherization Program may not exceed
loan limits The total of the energy improvements
is layered into the base loan amount
PROGRAM LOAN LIMITS 2000 or less Firm Fixed
Bed Proposal from Licensed Contractor(s)
Underwriter may request separate value
determination 2,001 to 3,500 or more Firm
Fixed Bid Proposal(s) from Licensed
Contractor(s)The appraiser must review
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CONTRACTOR BID PROPOSAL REQUIRED A licensed,
bonded insured contractor's Fixed Firm Bid
Proposal for cost of work or services, or
Borrowers copy of a statement showing the cost of
materials Borrower may not receive compensation
for his or her labor.  ENERGY RATING NOT
REQUIRED The utility bills will be lower after
energy improvements have been installed, does
not require a HERS Energy Rating to validate
Cost-Effective REPAIRS ARE COMPLETED AFTER THE
CLOSE OF ESCROW Weatherization Program funds are
combined into the Energy Efficient Mortgage
Escrow Holding Account and held until all Energy
Improvements have been completed. WEATERIZATION
PROGRAM CONTRACT LETTER OF COMMITMENT Bid
Proposal(s) must be attached and accompany the
Borrowers Contract Letter of Loan Commitment
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Weatherization ELIGIBLE REPAIRS Attic/Wall
Insulation Storm Windows/Doors (Dual Pane
Windows) Thermostats Insulation of Ducts
Pipes Weather Stripping/Caulking Insulation
Wrap for Water Heaters
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FHA 203 STREAMLINE (K) LIMITED REPAIR PROGRAM
WHO CAN GET A STREAMLINGE (K) LOAN? Purchase or
Re-finance-Owner Occupants - No Investors 1 4
Units-Existing Residential - Condos ((not co-ops)
- Manufactured homes - Mixed-Use
Properties  PROGRAM LOAN LIMITS\ Up to 35,000
with Contractor Firm Fixed Bid Proposal
 QUALIFING Down Payment and Income Qualifying
required Streamline (k) may not exceed loan
limits The total of the energy improvements is
layered into the base loan amount
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• 203 Streamline K
• ELIGIBLE REPAIRS
• Almost any Discretionary-Non-Structural Repairs
• Renovations and Weatherization
• Repair Pest/Dry Rot
• Replace or Repair Roof, Gutters Downspouts
• Replace Floor Coverings
• Septic/Well Repair or Replacement
• Repair Decks Patios
• Improvements for persons with Disabilities
• Minor Remodeling such as kitchens Heat Air or
  Dual Pane Windows
• Appliances such as Washer/Dryer, Refrigerator,
  Stove, Microwave

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• INELIGIBLE IMPROVEMENTS
• Major structural repairs-New construction (adding
  a room)
• Repairs requiring detailed plans or specs
• Any repair taking longer than 6 months-Repairs
  requiring more that 2 draws-No landscaping

Repairs are Installed After the Close of
Escrow The Streamline (K) funds are held in an
Escrow Holding Account - Contractors may have
Draws.

• LENDER UNDERWRITING
• FHA-approved Lender must receive Contractors and
  Borrower required documentation before loan
  approval.
• Not all FHA-approved Lenders fund the Streamline
  (K)

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• CONTRACTOR(S)
• The Borrower selects the Contractor(s)
• Contractors must be licensed and bonded and
  insured.
• The Lender may review the contractor's
  credentials
• Written Bid Proposals are required must include
  labor, materials and/or services and required
  permits
• "Cost plus" or "time and material" contracts are
  prohibited
• Must agree in writing to complete the working for
  the amount of the cost estimate and within the
  allowed time
• DRAWS
• There will be no more than 2 draws per
  contractor- Initial Draw no more than 50 for
  materials only
• Final Draw Notice of Completion  
• SELF-HELP
• Self-Help" arrangements are strongly
  discouraged

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• ENERGY IMPROVEMENTS
• Energy Efficient Mortgage 5 of Purchase Price,
  up to 20,000
• 203 Streamline (K) Requires qualifying Cap
  maximum 35,000
• Weatherization Requires qualifying not over limit
  maximum 3,500
• Solar (under consideration) Possibly exceed loan
  limit w/cap or 20 of
• appraised value (i.e. 600,000 _at_ 20 120,000
  in solar system)
• Appraised value 600,000
• EEM Added vale 20,000 no qualifying
• 203 Streamline K 30,000 qualifying
• Solar not approved yet 30,000 possibly no
  qualifying
• Total Loan 680,000

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The Procedure

• Buyer locates home
• Determine work needed
• Call for HERS Rating
• Analyze savings and loan limits
• Find FHA lender
• Get contractor Bids
• Submit bid documents to lender for approval
• Open Escrow added funds deposited in separate
  Escrow account
• Work starts at close of Escrow
• Contractors/Buyer sign Notice of Completion for
  funding

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The Facilitator

• Locates HERS Rater (typical fees 200 to 400
  paid by Buyer)
• Schedules Rating (may include contractor)
• Analyze HERS Rating savings
• Schedules Contractors for bids
• Completes FHA/HUD documentation
• Coordinates funding
• Tracks savings (looks at energy bills one year
  later)
• Paid by contractors as a line item for
  Documentation

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Potential for the San Diego Market
Existing Residential Sales Monthly (Normal
Market) 5,000 Existing Residential Sales Monthly
(Current Market) 3,000 FHA Projected Share of
Market 40 2009 mo. 1,200 possible
2,000 Energy Efficiency Improvements Average
15,000 Potential 30,000,000 monthly
360,000,000 annually Not including solar
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Obstacles

• Lenders and Buyers not familiar with the programs
• Find experienced help for Lenders and Escrow
• Underwriters must be familiar with these FHA
  programs
• Training Facilitators
• Qualified Contractors
• Supply of HERS Raters

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Solutions

• Lenders and Buyers not familiar with the programs
• Workshops for Lenders facilities provided by
  Title Companies
• Workshops for Buyers Agents promoting GREEN
  HOMES
• Find experienced help for Lenders, Escrow
• Training Facilitators
• Qualified Contractors
• Supply of HERS Raters

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• Lenders and Buyers not familiar with the programs
• Workshops for Lenders facilities provided by
  Title Companies
• Workshops for Buyers Agents promoting GREEN
  HOMES
• Find experienced help for Lenders, Escrow
• Available in the Real Estate industry
• Training Facilitators
• Available in the Real Estate industry
• Qualified Contractors
• Supply of HERS Raters

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• Lenders and Buyers not familiar with the programs
• Workshops for Lenders facilities provided by
  Title Companies
• Workshops for Buyers Agents promoting GREEN
  HOMES
• Find experienced help for Lenders, Escrow
• Available in the Real Estate industry
• Training Facilitators
• Available in the Real Estate industry
• Qualified Contractors
• Contractors bid then wait for CoE 30, 60 or 90
  days to do the job but the money is in the
  bank/Escrow waiting for Notice of Completion.
  If Contractors screw up their out of a future job
• Supply of HERS Raters

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Typical Consumption therms and kWh

• The average clothes washer uses about 8 kWh/month
• The single family average use for electric dryers
  is 55 kWh/month
• Use for gas dryers is 2.5 therms/month
• Annual lighting energy use is assumed to be 38
  kWh/month
• Nation wide hot water consumption is about 55
  gallons per day
• California hot water consumption is 35 less
  about 35 GPD
• Diagnostic testing of air leakage is rarely used
  in California, in part because of the limited
  credit available.
• California energy demand per capita is flat while
  nation wide is up
• SDGE Average Residential Monthly Average
  Therms
• kWh 550 40

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Thank You
Dan Perkins Dan_at_EnergySmartHomes.net 760-639-094
5 or 760-315-2055