Loan Modification

New FHA ?PowerSaver? loan coming soon

By Peter G. Miller

HUD is working on new FHA mortgage called the PowerSaver. As of yet there are no FHA guidelines to review but there are hints regarding how the new mortgage option might work.

Speaking in Washington, HUD Secretary Shaun Donovan says “in a few weeks, HUD will be selecting lenders to offer a product called FHA Powersaver — the first federal financing program focused on single-family home retrofits.

“Powersaver will allow homeowners to borrow up to $25,000 to make energy efficiency and renewable energy improvements to their homes — stimulating demand for jobs and for contractors to do this important work.”

Because we do not yet have FHA guidelines in hand, we’ll need to see how this program differs from current FHA offerings. For instance, you can get an FHA Title 1 loan for as much as $25,000. If you borrow less than $7,500 there’s no mortgage or deed of trust, meaning that closing costs are reduced significantly.

Or, if you want to buy and fix-up a property and have financing in place when you purchase then you could consider an FHA 203K rehabilitation mortgage. With this type of loan you finance up to 100 percent of the after-improved value at the time you close, as much as $35,000 above the acquisition price of the mortgage.

But, even if the PowerSaver program is like current rehab offerings it still should be welcomed.

There is a huge need to change the way American homes are powered. This has a lot to do with politics as much as the environment, but whatever the rationale retro-fitting existing homes is something that ought to be encouraged.

We can do a lot to make homes not just more energy efficient but energy self-sufficient and even energy productive. The idea is into take houses off the power grid to the extent possible — if not converting homes to actual power producers.

For instance, you see an increasing number of homes with solar panels. You are also beginning to see the introduction of geothermal hot water systems.

Solar panels have been around for a number of years and have become more efficient over time. They are capturing more energy per dollar of cost.

Geothermal hot water systems are very interesting because they derive heat from the earth. Such systems have been used in Oregon for many years because it’s easy to reach shallow hot areas below a house. In theory, however, if you drill deep enough you can get geothermal energy anywhere.

So, yes, let’s welcome a new FHA loan program. If it means we have to build fewer power plants then the savings will be enormous. If it means that houses can generate more electricity — and if increasing numbers of people use electric vehicles — then we can become increasingly free from foreign energy sources, and that’s something we ought to cheer.

Full post as published by FHA Mortgage Guide on January 24, 2011 (boomark / email).