Financing Energy Efficiency: An EEM Handbook

U.S. Department of Housing and Urban Development
Tampa Area Office

HUD CIRCULAR LETTER TAM-96-01
March 14, 1996

FROM: Nikki A. Spitzer, Director, Single Family Housing Division

CONTENTS: Energy Efficient Mortgages

Energy Efficient Mortgages

In accordance with ML95-46, Energy Efficient Mortgages (EEM) may now be processed in Florida. The EEM recognizes the energy cost savings of energy efficiency improvements that increase the energy efficiency of a home. The resulting utility cost savings will allow homeowners to devote more of their income to mortgage payments. The improvements may include energy efficient equipment as well as active and passive solar technologies.

Under the EEM program, 100 percent of the eligible energy efficient improvements may be financed into the mortgage, subject to certain dollar limitations. The program does not require an appraisal of the energy improvements nor further credit qualification of the borrower.

To be eligible, the energy efficient improvements must be "cost effective". The cost of the improvements (including maintenance costs) must be less than the total present value of the energy saved over the useful life of the improvements. The cost of the improvements and the estimate of the energy savings must be determined based upon a physical inspection of the property by an accredited home energy rating system (HERS) or qualified energy consultant. At this time, the Department of Energy (DOE) has not published the final rule concerning HERS evaluations. In the interim, the Florida Building Energy Rating System (BERS) will be used until such time that DOE final rule is published.

In order to process an EEM case, the lender must require a BERS Residential Class I evaluation and certification. The certification must provide the total expected yearly energy savings and expected yearly maintenance costs for the property. This information will be used to determine the Present Worth of Estimated Savings.

Lenders may obtain a list of Certified Class I Raters, for new and existing residential properties, by contacting the following:

State of Florida, Department of Community Affairs
Building Rating Energy Program
2555 Shumard Oak Blvd.
Tallahassee, FL 32399-2100
Telephone: 904-487-1824