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Eighteen lenders are participating in a two-year pilot program backed by the Federal Housing Administration (FHA) that offers home owners low-cost loans to make energy-saving improvements to their homes.
The PowerSaver loans program will offer home owners up to $25,000 to make energy-efficient improvements — including insulation, duct sealing, new doors and windows, HVAC systems, water heaters, solar panels and geothermal systems — according to the U.S. Department of Housing and Urban Development and the U.S. Department of Energy.
The pilot program is designed to assist about 30,000 home owners and create more than 3,000 jobs.
The loans will be available in Charlottesville, Va.; the greater Chicago area; 16 municipalities in Maryland; Cape Cod and Martha's Vineyard, Mass.; Omaha and Lincoln, Neb.; Portland, Ore.; Allegheny County, Pa.; Eagle County, Colo.; Indiana; Minnesota; South Carolina; and Texas.
PowerSaver financing will be similar to a home equity loan that must be paid off at the time of sale, or in some cases, when refinancing occurs. It will use the existing FHA Title 1 home improvement program, with additional incentives and requirements.
The combined loan-to-value ratio of the mortgage and energy refit loan cannot exceed 100%. Participating home owners must have a minimum 660 credit score and the total debt-to-income ratio cannot exceed 45%.
FHA mortgage insurance will cover up to 90% of the loan amount in the event of default. Lenders will retain the remaining risk on each loan, which the Administration hopes will encourage responsible underwriting and lending standards.
HUD developed PowerSaver as part of the Recovery Through Retrofit initiative launched in May 2009 by Vice President Joe Biden’s Middle Class Task Force to develop federal actions expanding green job opportunities and boosting energy savings by improving home energy efficiency.
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NAHB submitted comments on the program that reflected the findings of an NAHB task force on financing options, training and education needs and potential problems.