HUD to Launch Pilot Program to Help Homeowners

HUD to Launch Pilot Program to Help Homeowners

RISMEDIA, November 10, 2010-- HUD on Tuesday announced a new pilot program that will offer credit-worthy borrowers low-cost loans to make energy-saving improvements to their homes. Backed by the Federal Housing Administration (FHA), these new FHA PowerSaver loans will offer homeowners up to $25,000 to make energy-efficient improvements of their choice, including the installation of insulation, duct sealing, doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems.

HUD and FHA developed PowerSaver as part of the Recovery Through Retrofit initiative launched in May 2009. More homeowners are interested in making their homes energy efficient, according to industry forecasts. Yet options are still limited for financing home energy improvements, especially for the many homeowners who are unable to take out a home equity loan or access an affordable consumer loan. HUD today published a notice seeking the participation of a limited number of mortgage lenders in the two-year pilot program slated to begin in early 2011.

“PowerSaver provides lenders with a new product option to serve a potentially growing market,” said David H. Stevens, FHA Commissioner. “We believe there are a number of lenders who will be interested in working with us to help save energy and money for homeowners, while creating jobs and cutting greenhouse gas emissions.”

Lenders will be selected to participate in the PowerSaver pilot based on their capacity and commitment to provide affordable home energy improvement financing. Lenders will be required to serve communities that have already taken affirmative steps to expand home energy improvements. HUD will help lenders identify such markets – which exist in many suburban, rural and urban areas across the country.

PowerSaver loans will be backed by the FHA – but with significant “skin in the game” from private lenders. FHA mortgage insurance will cover up to 90 percent of the loan amount in the event of default. Lenders will retain the remaining risk on each loan, incentivizing responsible underwriting and lending standards. FHA will provide streamlined insurance claims payment procedures on PowerSaver loans. In addition, lenders may be eligible for incentive grant payments from FHA to enhance benefits to borrowers, such as lowering interest rates.

PowerSaver has been carefully designed to meet a need in the marketplace for borrowers who have the ability and motivation to take on modest additional debt to realize the savings over time from a home energy improvement. PowerSaver loans are only available to borrowers with good credit, manageable overall debt and at least some equity in their home (maximum 100% combined loan to value).

To read the full text of FHA’s notice, visit HUD’s website.