Energy Efficient Mortgages PDF Print E-mail

 

Section 2123 of the Housing Economic Recovery Act of 2008 (HERA) (Public Law 110-289, approved July 30, 2008) amended Section 106 of the Energy Policy Act of 1992 concerning
the maximum additional amount that can be added to an FHA insured mortgage for energy efficient
improvements. These mortgages with additional amounts for energy efficient improvements are
known as Energy Efficient Mortgages (EEMs). This Mortgagee Letter provides guidance to
approved mortgagees on the new statutorily authorized maximum mortgage amounts for FHA
insured EEMs.
In addition to the base FHA maximum mortgage amount limit, which is calculated on the
value of the home, the mortgage loan amount for an EEM can be increased by the cost of effective
energy improvements. The maximum amount of the cost of the energy efficient improvements is
set out below.
The maximum amount of the portion of the EEM for energy improvements is the lesser of
5% of:
• the value of the property, or
• 115% of the median area price of a single family dwelling, or
• 150% of the conforming Freddie Mac limit.
FHA has issued several Mortgagee Letters (MLs) that address eligibility requirements that
must be met when originating EEMs. Specifically, FHA directs mortgagees’ attention to the most
recent ML, 2005-21, for guidance on originating EEMs. 2005-21 includes underwriting instructions
and information regarding Home Energy Rating Systems (HERS) that are used to determine the
cost of the energy improvements and estimated energy savings. Mortgagees are reminded that the
cost of effective energy improvements may be added to the base FHA maximum mortgage amount
if the cost is less than the Present Value of the energy saved.
If you have any questions regarding this mortgagee letter, please call FHA’s Resource
Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments
may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).