EEM Considerations for Contractors
If you are new to Energy Efficient Mortgages (EEMs), the process may seem a little strange at first. It is really a “Hurry up, and wait” experience when you are integrating repairs and upgrades into a purchase process, financed in the buyer’s loan. Since the work is done after closing, but much of the loan process cannot even start without the bids, there is this extreme urgency to get the bids returned followed by a lull as the rest of the loan process is completed. During this time, you should get a projected closing date so you can effectively plan your schedule. If the closing is delayed for any reason you should be updated on that. When Escrow closes, you will typically be dealing with a new homeowner who is eager to see the finished product. I know that the Facilitators try to manage their expectations around this, but they are understandably excited.
Although it is pretty standard for a Facilitator to be used on EEM’s in this area, it is not required. It is possible that you could have a scenario where one is not utilized on an Energy Efficient Mortgage. A Facilitator functions much like a “Project Manager” when it comes to EEM’s. If you read the flowchart that I provided it shows how the EEM process works with a Facilitator involved. You will see just how much they actually do on these, and how little the rest of us have to do when they are involved in the process.
I am not going to discuss the EEM process without the Facilitator involved since I would never want to do one that way. Although I am a huge fan of the EEM and the incredible benefits it offers my clients, I would tell them to get their loan somewhere else if a client wanted to attempt an EEM without a Facilitator. I would strongly advise you to do the same.
A Facilitator will typically charge a fee to prepare your paperwork and facilitate the EEM process. I have never talked to a Contractor who understood what they do and did not feel that this service was an absolute bargain.
Most Lenders who offer FHA financing, offer the EEM. There are a few who don’t.
The EEM will allow up to 5% of the property value to be included for qualifying energy upgrades. However, a few Lenders still apply the $8,000 maximum limit that was removed by HUD a few years ago (Yes, they are allowed to do this if they elect to).
When a buyer includes an EEM in their purchase financing to allow energy upgrades, a HERS II Rating must be done. I have emphasized very strongly to the Realtors and Loan Officers, that ONLY the Whole-Home Assessment is considered for any rebates in the ARRA based rebate programs.
EEM’s are done as part of a 1st Mortgage. There are some very tight timelines. It is crucial that the bids are returned very quickly.
There is no Contingency Reserve on an EEM. Remember that when preparing the bid. The amount held for this is all of the money available.
Properly understood, this program is an absolute gold mine of opportunity for the Home Buyer/Owner, Contractor, Loan Officer, Realtor, and everyone interested in promoting energy conserving retrofits.
Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674
