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U.S. Housing and Urban Development (HUD) has selected 18 national, regional and local lenders to participate in a new two-year pilot program. The program will offer qualified borrowers, in certain parts of the country, low-cost loans if in turn they make energy-saving improvements to their home.
The Federal Housing Administration (FHA) backs this program and these new PowerSaver loans will offer up to $25,000 for making improvements to their home that are considered energy-efficient. They will have improvement options to chose from such as: installation of insulation, duct sealing, replacing doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems.
During a tour of a family-run company that does home energy inspections and upgrades in Long Island New York, HUD Secretary Shaun Donovan and U.S. Department of Energy Secretary Steven Chu announced the lenders that will be participating in this program.
“We believe the market is right for a low-cost financing option for families who want energy-saving technologies in their home,” said Secretary Donovan. “PowerSaver hits on all cylinders by helping credit-worthy homeowners finance these upgrades, cut their energy bills and boost the local job market in the process. While FHA and these lenders are jumpstarting this pilot, we hope its success will lead to a growing private sector interest in making these types of loans.”
Secretary Chu said, “Today, we are breaking down barriers and making energy efficiency more accessible and more affordable. It’s the right thing to do for our environment, for our economy and for the pocketbooks of American families.”
The remodeling industry indicates that surveys have resulted in an expanding demand among homeowners interest to improve the energy-efficiency in their homes. However, there are problems in financing these kinds of improvements because many homeowners are unable to take out home equity loans or they don’t have the means to obtain an affordable consumer loan.
The PowerSaver program is set to assist around 30,000 homeowners in the beginning. HUD is predicting that through the implementation of this pilot program more than 3,000 jobs will be created and if the program is successful and the market demand for the loan program goes up the impact may be greater.
The lenders were chosen based on their dedication to work in cooperation with established home energy retrofit programs. States, cities, utilities and home performance contractors have provided these well-established programs. Areas of the country participating in the Energy Department’s Better Building Program make up these markets but they are not limited to areas participating in this program.
The FHA backs these PowerSaver loans but certain requirements will be put in place. 90 percent of the loan amount in event of default will be covered by FHA mortgage insurance. The lenders will be responsible for the remaining risk on the loan, incentivizing responsible underwriting and lending standards.
This program has been cautiously designed to target homeowners who have the capability and ambition to take on more modest debt while understanding the benefits and savings that will aggregate from making these energy-efficient improvements. The PowerSaver loans will be made available to borrowers who have good credit, already manageable debt and some equity in their home.
HUD created the PowerSaver loan as part of the Recovery Through Retrofit that started in May 2009 by Vice President Biden’s Middle Class Task Force. It was put in place to create federal actions that would broaden green job opportunities in the U.S. and raise energy savings by advancing home energy efficiency. The announcement of this program is part of an interagency attempt including 11 departments and agencies and six White House offices.