April 06, 2011

On March 31st, HUD released a notice in the Federal Register announcing the final structure of the FHA PowerSaver Home Energy Retrofit Loan Pilot Program.  The pilot program, originally announced last November, is designed to test the feasibility of a nationwide, affordable mortgage product for home energy retrofit loans, and to gather a robust set of data on the impact of home energy efficiency improvements.  The pilot program would allow qualified lenders to offer FHA insured loans of up to $25,000 for energy efficiency improvements for eligible single-family residences, including condominiums.

HUD is currently identifying interested, FHA-approved lenders for the program.  To be eligible, lenders must have previously submitted an Expression of Interest, be approved FHA Title I or Title II program lenders, have experience with similar lending initiatives, have adequate computer systems and audit capabilities, and have the capacity to work collaboratively with public sector agencies.  Up to 90 percent of each loan will be covered by FHA mortgage insurance in the event of default, while the remaining 10 percent will be retained by the lender.  All individual borrowers participating in the program must have a credit score of 660 or higher, and must have a debt-to-income ratio of 45 percent or lower.

The pilot program will allow loans to be originated during a two-year period, beginning on May 2, 2011.  HUD may extend the duration of the pilot program if necessary.

States that serve as eligible markets for the pilot program include parts of Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, North Carolina, Nebraska, New Hampshire, New Jersey, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington State, Wisconsin, and the Virgin Islands, and all of Maine, Missouri, New York, and Oregon.  Additionally, areas where the Home Performance with Energy Star program is available may also be served by lenders under the pilot program.