David Balfour

In this afternoon's TAR Digest, I read the following article. I have included the source, so I hope I am following protocol appropriately.

After the article, I will discuss why I feel like the famous William Wallace, mentioned in my title for this post.

**Daily Real Estate News | July 8, 2010 | Share Fannie, Freddie Cautioned on Energy Loans
A new federal program that encourages municipalities to lend homeowners money to add energy-efficient features to their properties has gotten a thumbs down from the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac,

The program called Property Assessed Clean Energy or PACE allows local governments to sell municipal bonds and let homeowners use special property-tax assessments to pay off the cost of improvements over 15 to 20 years.

FHFA has raised concerns that these are first-lien loans, which subordinates first mortgages. It told Fannie and Freddie to avoid financing homes with this kind of debt. PACE supporters say the program is no different from property-tax assessments to pay for sewers and road improvements.

U.S. Reps. Henry Waxman (D., Calif.) and Barney Frank (D., Mass.) have called on government agencies to modify the program so neither taxpayers nor mortgage investors are likely to lose money.

Source: The Wall Street Journal, Nick Timiraos (07/07/2010)**

So, here is why I am experiencing frustration. There is already a wonderful loan program available, for these types of improvements. And, it's nothing new. It's been around since 1995, a standard FHA program, and is an absolutely wonderful way to "go green", save money and POSSIBLY SAVE AN OTHERWISE 'DEAL BREAKER' CONTRACT FOR BOTH THE BUYER AND THE SELLER.

The FHA Energy Efficient Mortgage is a magificent program. Here is an example of what can be accomplished:

Buyer John Doe is purchasing a home built in 1988 from Sally Smith. All the terms are agreed upon, and the inspection contingency process begins. The HVAC system in the home is no longer working properly, and its age creates a situation where it cannot be repaired. The home needs a new HVAC unit. Sally Smith was not prepared for that expense, and John Doe isn't willing to budge. Normally, the deal ends right there.

With this program, the buyer (or seller) can have a Home Energy Audit performed. This is an FHA APPROVED professional who reviews the home for potential efficiency upgrades. Things like insulation, duct sealing, and all the way up to NEW HVAC units may be a part of this. The auditor uses careful calculations to determine which upgrades MAY BE INCORPORATED INTO THE BUYER'S FHA MORTGAGE. The buyer will experience A REDUCTION OF MONTHLY EXPENSES, as the utility bill will decrease (based on averages) by more than the mortgage payment increases for the upgrades. The upgrades DO NOT change the amount of down payment needed or the debt-to-income ratio. The buyer gets a BETTER HOME FOR LESS EXPENSES, the seller is able to still the home under the agreed upon terms, and the home offers a better quality of life for its occupants.

Now here's the kicker. Many of the items are offering IRS TAX CREDITS to the new homeowner, allowing up to (I believe) $1500. The energy audit is delivered to the lender's underwriter completely FHA approved. It's SO EASY. Here is a link to the program. Note that the link is FHA.GOV....nice and official.

The problem? Lenders aren't allowing us to take advantage of this awesome program. In this area, anyway, it has been VERY difficult to find a lender willing to write the loan. In today's world of REO, AS-IS sales, this is an incredible opportunity. Ergo, here I am, on my horse, waving my club and yelling, "FREEDOM", without a proper army to make a change. I agree with concerns about the PACE program, though I am not here to suggest it is not appropriate for everyone and I do not claim to be knowledgable on it. But, the FHA EEM program is a GREAT program. Lenders, please consider bringing it on. :)