# Presentation: 902161

## Energy Efficient

-  Mortgages

- EEM

## What is an Energy Efficient Mortgage?

- An EEM is a loan made *in conjunction* with a VA purchase loan for an existing dwelling, or a refinance loan secured by that dwelling to add energy efficiency improvements.

***Also known as an “EEM”***

## Energy-Efficient Modifications

**Energy-Efficient Modifications**

**Solar heating systems**
**Solar heating and cooling systems**
**Caulking and weather stripping**
**Furnace efficiency modifications**
**Clock thermostats**
**New or additional insulation**

**(Continued)**

## Energy-Efficient Modifications*

- <date/time>

**Water heater insulation**
**Storm windows and/or doors**
**Heat pumps**
**Vapor barriers**

**Energy-Efficient Modifications***

**(Continued)**

****This list is not all inclusive.  If you are unsure whether or not an improvement is considered energy efficient for VA purposes, contact your nearest ***_[VA Regional Loan Center](http://www.homeloans.va.gov/contact.htm)__._

## Underwriting Considerations

- Energy efficient improvements up to $3,000

- Resulting increase in loan payment will normally be offset by a reduction in utility costs.

## Underwriting Considerations

- Improvements more than $3,000, up to $6,000

- Does decrease in monthly utility cost offset the increase in monthly mortgage payment?

- Obtain cost savings information from utility companies, state agencies, manufacturer, or other resources.

## Underwriting Considerations

- Energy efficient improvements over $6,000

- Is the veteran’s income sufficient to cover the higher loan payment?

- Is the increase in monthly mortgage payments likely to exceed the projected reduction in utility costs?

- Use discretion when considering:

## Underwriting Considerations

- Interest Rate Reduction Refinance Loans (IRRRL)

*Generally, underwriting is not required on an IRRRL.  However, if the addition of EEMs causes the new loan payment to increase by 20% or more, the underwriter must certify that the veteran qualifies for the higher payment.*

## Closing Documentation Required

- Energy efficient improvements up to $3,000

- Evidence of the cost improvements
- copy of the bid(s) or
- contract itemizing improvements and cost.

## Closing Documentation Required

- Evidence of cost of improvements and
- Certification that increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs.

**Closing Documentation Required**

## Closing Documentation Required

- The increase must be supported by the appraisal and Notice of Value.  Appraisal is ordered “as repaired”.

**Closing Documentation Required**

## Closing Documentation Required

- If the new monthly mortgage payment increases by 20% or more, provide the underwriter’s certification that the veteran borrower qualifies for the higher payment.

**Closing Documentation Required**

## EEM Escrows

- For improvements not completed prior to closing:

**Provide evidence of an escrow or earmarked account:**
**Formal escrow is not required.**
**Escrow must be 1 1⁄2 times the bid.**
**VA Form 26-1820, Report and Certification of Loan Disbursement**
**Complete item 23.**

## Reference

- <date/time>

**Reference**

**VA Lender’s Handbook, Chapter 7, section 3**

**Download at: **_[www.warms.vba.va.gov/pam26_7.html](http://www.warms.vba.va.gov/pam26_7.html)_** **

## Thank you for your interest in the VA Home Loan Program!

- We appreciate your support!