How I Very Effectively Incorporate the EUC Rebates into the Financing of Home Buyers using the EEM Program
Handing it off to the Participating Contractor
Supporting documentation:
Lenders do Financing, Contractors do EUC Programs
There is some confusion regarding how we integrate the Energy Upgrade California Program and the Energy Efficient Mortgage (EEM) Program.
The EEM is a financing mechanism that can be used to finance energy improvements when someone is using FHA or VA financing to purchase or refinance a house. The Energy Upgrade California (EUC) Program is a rebate based incentive program that encourages home owners to do energy improvements on their houses. We are not involved with the EUC process directly. I have just worked with the utility companies and other interested parties to assist them in understanding how they can allow home buyers to take advantage of these incentives and rebates. This is possible because programs like the EEM, 203K, Streamline 203K, FNMA HomeStyle Renovation, and other residential financing programs that can incorporate energy retrofitting opportunities do not allow any of the work to be started until the change in ownership has already occurred. At That point the buyer has become the home owner of record. Creating an understanding of this dynamic was a little bit challenging. Once that was accomplished, it only required a couple of very minor procedural adjustments to make it possible.
Although none of the actual work is initiated until after escrow has closed and the buyer has become the legal property owner of record, the funds have already been allocated for these upgrades. There are limitations on how long these funds can be held after the close of escrow before the work must be initiated and completed. If we had to wait until after escrow closed to submit the application to the Utility Provider EUC Administrator, the time it would take to process this would delay the initiation of the work beyond what is acceptable for these funds to be held before the work is initiated. Under the guidelines governing these finance programs there are very specific requirements governing this.
Unfortunately, the application required that the home owners account number be included which would delay the submission of the application until after escrow closed. When I explained to a couple of the utility providers and administrators how this created a barrier they were very helpful in working with me to create an acceptable solution. They agreed that the participating BPI Contractor could submit the application with a notation that it was a purchase transaction and the utility account number would be provided with the measure out report. The specific wording they arrived at for this was “This is a Purchase Transaction, new owner account number will be provided in the Post Retrofit JRT”.
As I mentioned before, we are not getting involved with the Utility Company Rebate process at all. We are just ensuring that the financing programs we have always used to help our buyers include energy reducing improvements into their purchase loans are being structured in a way that the buyers can take advantage of these rebates after escrow has closed. We are coordinating our efforts with the participating contractors. We have worked closely with them to explain what is needed for this and we have been fortunate enough to find some of the participating contractors who can appreciate the things that we need on our end to make this possible. This has allowed our buyers to benefit from these rebates and it has allowed us to provide a lot of work to these contractors in the process.
When I have made reference in this video to us assisting the buyers with their paperwork; it is strictly the EEM paperwork that I am referring to. The Utility Provider rebate paperwork and process is something that the Contractor assists them with just like they do with any other EUC based project.
The EEM has limits on how much is available for a buyer to pay for energy related improvements. There are some excellent ways to couple this with other programs to allow for much more extensive retrofitting. This just has to be done in ways that are compatible with the loan programs restrictions and takes into account the dynamic that exists in a home purchase process.
Posted by Kevin Nunn of Comstock Mortgage on 10-4-11
