The Energy Efficient Mortgage (EEM) is a Program that was created by HUD and originally introduced in 1993. It allows a person to include qualifying energy conserving upgrades into their purchase or Refinance Loan. It is not actually a “Mortgage”. In fact, I often refer to it as the Energy Efficient Mortgage Enhancement Program to reduce this confusion since this more accurately describes the program. It is not a 2nd loan. It is strictly a program that allows a buyer to include qualifying energy upgrades in their 1st loan.
Although it is technically allowed with many types of financing, it works best with FHA. It has some benefit with VA financing. The FNMA version of the program does not currently appear to me to offer any real benefit and you will probably not see many of these.
This program provides tremendous benefits to a buyer and it has been grossly underutilized over the years. With the current emphasis on energy conservation measures this is finally starting to really take off. You will be starting to see a lot of these.
If only an EEM is used this should not be confusing for you. If the Weatherization component is added, it can be very confusing. I am going to do what I can to simplify this (I created a whole separate page to explain the Weatherization considerations for Escrow Officers in detail).
With an EEM only:
There will be additional money funded by the lender for the amount of the EEM. This money needs to be treated like an Escrow Holdback. I realize that your company will likely have a very strict policy prohibiting Escrow Holdbacks. Please check with your management before you assume that applies to EEMs. On a few occasions I have dealt with Escrow Officers who were adamant about this issue.They have always discovered that this policy did not include obstructing a Federal Program, that supports the California State Programs, and an agenda that is so crucially important to so many people. Not only because of the benefit that it creates to the home buyers and the environment, but also because of the essential role this plays in creating much needed jobs. If by some chance this is not understood by your management, I am providing instructions to the Realtors and Loan Officers regarding who they should contact to help emphasize the importance of this. My experiences though,have shown that Escrow Companies have been very supportive of this effort and willing to play their part once they understood what this program really is. I know that the program guides state that the EEM money may be held by the Escrow Company or the Lender. There are only a couple of Lenders that I am aware of that are capable of holding these funds.
If the Weatherization program is included please refer to the page explaining the special considerations you must be aware of.
Funders can do a lot to help you by providing clearer instructions and breakdowns. I am emphasizing this in the Loan Officer section.
Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674
