An escrow account may be established for no more than three months after loan closing to allow for installation of the energy efficient improvements. The escrow account may be administered by the lender, a utility company, a non-profit organization or a government agency. The escrow account must be insured and be established at a financial institution supervised by a Federal agency. The lender will first process the mortgage loan application and qualify the borrower using our standard underwriting requirements and qualifying ratios. No appraisal of the energy efficient improvements is necessary and the borrower need not meet any further credit standards.
Closing can then occur.
B. HUD will insure the mortgage before the energy efficient improvements are installed, provided the lender establishes an escrow account and deposits to it the funds to pay for the energy efficient improvements. The escrow account shall be for a period of no more than 90 days. If the improvements are not installed with 90 days, the lender must apply the funds held in escrow to a prepayment of the principal balance of the mortgage. The escrow account may be established by the lender and administered by either the lender, a utility company, a non-profit organization or a government agency. However, the lender is responsible for assuring HUD that the escrow has been cleared.