The Federal Housing Administration has selected 18 lenders to test borrower demand for loans that can make their homes more energy efficient.
Under the two-year pilot program, FHA will insure loans of up to $25,000 that are used for energy saving renovations including the installation of new heating and cooling systems.
Housing secretary Shaun Donovan expects the pilot program will generate 30,000 loans and the private sector will eventually bring it up to scale and produce millions of these "PowerSaver" loans.
But first, the pilot program has to prove that the energy savings are larger than the monthly cost of the PowerSaver loan so it "pays for itself," the secretary said on Thursday.
FHA will insure 90% of the loan amount and the lender has to bear 10% of the risk. These loans will "only be available to borrowers with solid credit, manageable overall debt and some equity in their homes," Donovan told reporters on a conference call.
The borrower must have credit score of at least 660 and a total debt to income ratio that does not exceed 45%. The combined loan-to-value ratio of all loans on the home, including the PowerSaver loan, cannot exceed 100%.
In developing the pilot, FHA decided to make the PowerSaver loans available in communities that are working with the Department of Energy on energy saving initiatives.
The agency selected mostly regional lenders that are active in those communities. Quicken Loans is the only national lender.
DOE also has developed a rating system that contractors and testers can use to show homeowners what specific renovations will produce the most energy savings. "We are encouraging all the lenders to use" this rating system, Donovan said.
The 18 FHA PowerSaver approved lenders are: Admirals Bank, AFC First Financial Corporation, Bank of Colorado, City of Boise (Idaho), Energy Finance Solutions, Enterprise Cascadia, HomeStreet Bank, Neighbor's Financial Corporation, Paramount Equity Mortgage, Inc., Quicken Loans, SOFCU Community Credit Union, Stonegate Mortgage Corp., Sun West Mortgage Company, Inc., The Bank at Broadmoor, University of Virginia Community Credit Union, Inc., Viewtech Financial Services, Inc., WinTrust.
