Energy Efficient Mortgage
Energy Efficient Mortgage Pilot Draft
Energy efficient homes
are more affordable, thanks to lower operating costs. Fannie Mae's Energy
Efficient Mortgage pilot translates the monthly energy savings achieved in
an energy efficient home into additional mortgage funds available to the
borrower and recognizes the value energy efficient measures add to the
home.
The Fannie Mae Energy
Efficient Mortgage (EEM) pilot is an underwriting variance that can be
used with many Fannie Mae mortgage products. The guidelines of the
selected Fannie Mae product apply, with the EEM pilot providing a variance
to the qualifying ratios (debt-to-income and loan-to-value) and allowing
for an adjustment to the appraised value.
How lenders benefit:
- A larger mortgage
can be offered to qualifying borrowers;
- The underwriting
variance can be used with most Fannie Mae first mortgage products,
including conventional fixed-rate and adjustable-rate mortgages, thus
enabling the lender to offer the products best suited for each
borrower;
- The value of the
energy efficient component of a home can be calculated by the lender,
eliminating the uncertainty of this value in areas where comparable
homes are not prevalent for use by the appraisal community;
- Multiple resources
are available to determine the energy efficiency of the home, as
multiple rating methods and prescriptive programs can be used.
How borrowers benefit:
- Energy efficiency
reduces operating and maintenance costs and adds to the value of the
home;
- The monthly savings
resulting from energy efficiency is directly applied to the borrower's
maximum monthly mortgage payment, qualifying the borrower for a larger
mortgage;
- Energy Ratings
and/or Prescriptive Programs provide assurance that the home
meets/exceeds standards for energy efficiency;
- The EEM can be used
for purchase or refinance and for homes that are energy efficient in
their current state as well as properties in need of energy
improvements;
- Up to one hundred
percent (100%) of the energy improvements can be financed.
Key Facts
|
Eligible
Properties |
|
|
Term |
As defined by the
Fannie Mae product being offered with the underwriting variance. |
|
Maximum Loan
Amount |
Fannie Mae
conforming limits, with the energy improvements financed for an
existing home not to exceed 15% of the home’s value. |
|
Valuation |
The appraised
value obtained using the sales comparison approach is adjusted to
include:
- The present
value of the expected energy savings, or
- Where energy
improvements will be added, the installed cost of the energy
improvements.
|
|
Underwriting: DTI |
The expected
monthly savings is added to the maximum allowable PITI. |
|
Underwriting: LTV |
|
|
Down Payment |
The borrower has
the option to increase the down payment relative to the cost of the
energy improvements or can finance 100% of the improvements. (100%
financing of the improvements could result in additional PMI
requirements and/or changes in the product or rate for which the
borrower will qualify.) |
|
Measuring Energy
Efficiency |
Several approved
methods are available to evaluate energy-efficiency:
- Home Energy
Raters certified by the HERS® Council and/or by RESNET provide a
rating of the energy efficiency of the home and estimate the
resulting cost savings using average utility rates and usage
data.
- Prescriptive
programs are available from EPA (Energy Star Builder Option
Packages), Edison Electric Institute (EEI’’s Eseal), with
options also available from local utilities and HBA’s.
Prescriptive programs are currently limited to new construction
and require random energy ratings.
|
|
Energy Efficient
Baseline |
|
For more information
If you have any
questions, please contact Trish O’Loughlin at 202-752-1432 or Dave Carey
at 978-468-9932. |
