ExperiencedEnergyFinancing.com

The HERE Model

Kevin Nunn — Thu, 24 Feb 2011 21:03:06 +0000

Kevin Nunn is a licensed Residential Loan Officer with Comstock Mortgage. This information is intended for Real Estate Professionals within the State of California. Comstock Mortgage is a DBA for Sacramento 1^st Mortgage.

The HERE Model

I chose this name for several reasons. The primary one is that it leverages all of the opportunities that are currently available to immediately invigorate the retrofitting of the energy components of our existing housing stock while filling the gap for the only pieces that were missing.

There are many great innovative concepts that are being worked on right now. This is all very exciting. Eventually these ideas are sure to lead to some incredible opportunities. Unfortunately, though right at this moment this is not doing anything to reduce energy consumption, create jobs, or help with the serious housing crisis our state and nation are currently facing.

When these other programs and approaches are finally released I am sure that they will accomplish everything they are intended to. In the meantime, we need to be dealing with these issues using the tools that are currently at our disposal, but not being properly utilized. The HERE approach is applicable without the need to wait for rule and guideline changes to be implemented.

This is a real solution and it can be implemented right now. In other words… it’s HERE.

Introducing the:

Housing Stabilization
and
Employment Creation
through
Retrofitting
the
Energy Components of our Existing Housing
Model

This solution demonstrates how the opportunities that fit within the current guidelines can be used to not only be the catalyst to reduce the energy consumption of our current housing stock within this state, and not only create a huge number of jobs in the process, but also have a tremendous impact on our housing values and all of the issues that this is creating within California that are really straining the budgets of government at every level. There are many additional benefits to this approach.

For a comprehensive list of the advantages this approach has to offer, please reference “Strategic Advantages of the HERE Model”.

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

Strategic Advantages

Kevin Nunn — Mon, 07 Mar 2011 05:17:46 +0000

The Strategic Advantage of the HERE Model Solution

What does this accomplish?	What are the advantages?
It creates significant motivation to additional market segments to promote energy retrofitting measures	These individuals are in a unique position to educate the public at the specific time when they can most strategically incorporate this opportunity to retrofit the energy related components of an existing house. It does this in a manner that overcomes all of the barriers that typically prevent retrofitting.
It solves multiple issues with the same incentive	This approach will not only create a huge demand for energy retrofitting measures, it will also provide a tremendous boost to the housing market and create far more jobs. Stabilizing housing prices is crucial on so many levels including the impact on revenues to Counties and Municipalities.
This will create far more jobs	Since this approach promotes an understanding of programs that allow very extensive energy retrofit packages to be financed at very favorable terms it will promote more comprehensive measures. Some of these options also allow items that are not energy related to be included which will create further opportunities for the Contractors involved.
These jobs will continue after the incentives are exhausted	These jobs will be sustainable since only the incentives are temporary. The only reason these programs are not utilized more extensively now is because they are not widely understood. This approach will create an understanding of these opportunities that will remain after the incentives are exhausted. The programs that are being used for financing and all of the other advantages will still be here when the funding has been exhausted. These strategies offer significant advantages without the incentives.
These options allow buyers to finance energy upgrades at very favorable terms	This increases the cost effectiveness from a cash flow perspective for consumers. Because the rate and terms are so favorable under this structure, the monthly utility savings will generally exceed the debt servicing for the energy retrofit measures.
They do not have to be limited by appraisal concerns	There are programs that will allow buyers to finance almost 15% of their sales price in energy upgrades without the appraisal having to be increased at all. This removes a common barrier to energy financing.
They do not have to be limited by qualifying concerns	Since one of the most advantageous energy financing structures that can be incorporated into purchase financing is not even factored in to the borrowers qualifying ratios, it is only the viability of the energy measures that needs to qualify.
The work is done after closing	This means that the buyer is the owner of the home when the energy retrofitting is done, allowing them to take advantage of the available incentives and rebates.
The best time to have these upgrades done is right after the home is purchased	One of the obstacles to energy retrofitting is the reluctance of some people to have their private and personal space violated. Some homeowners are very private and do not want Contractors or anyone else in their house. If the work is done right after the close of escrow, this is far less likely to be a barrier. In many of the transactions we have been involved in, the work was completed before the buyer even moved in, making this much easier for the Contractor.
The rebates act as a purchase incentive	When the Federal Homebuyer incentive was in effect, it was clear that it had a significant impact on housing sales. One of the primary reasons for this was that it allowed people to replenish their reserves right after purchasing which made them feel much more secure. By integrating energy retrofitting measures into their purchase process, this program allows potential buyers to achieve this same outcome. As a result, this will have a significant impact on housing sales once it is fully understood. In fact, when combined with some of the programs that are currently available, it can actually result in a higher level of monetization than the Federal Homebuyer Credit.
There is the benefit of a Realtor sales force	There are approximately 175,000 Realtors in the state of California. They are in desperate need of support in selling houses and stabilizing our housing market. That this can be accomplished in a way that also supports their efforts to promote the benefits of energy retrofitting, and the efforts that they have been making in that area for all these years, will result in a huge and incredibly motivated sales force for all of these utility provider, ARRA based programs, when incorporated into the HERE Model.
This also helps to sell houses	Conserving energy and retrofitting our existing housing stock is something that no-one would argue is an extremely important goal. Dealing with all of the issues associated with our declining housing values and vacant properties is also crucial to this state at the moment. An opportunity to apply a solution like the HERE Model offers, that addresses both issues by integrating the energy stimulus fund incentives into the purchase process in a way that stimulates home sales by incorporating energy retrofitting, creates an exponential benefit to everyone in the state of California.
You have trained professionals to help with the process	By including the Realtors and Loan Officers in this process, you are bringing in an element that typically has a very high trust relationship with the clients they serve. When they fully understand the process and benefits of the opportunities provided under these ARRA based energy retrofit incentive programs, and explain that to the consumers, it is going to have a very significant impact on the acceptance of these programs. When the EEM Facilitators are included in this process, you will be incorporating professionals who have extensive experience in explaining the benefits of energy retrofitting and making people feel very comfortable with this process. Ultimately, that is the primary function of their profession.
This promotes programs that will continue well into the future	The HERE Model is based in supporting the incredible opportunities that have existed for years. Unfortunately, they are not fully understood. As a result, they are very underutilized. One of the most strategic benefits of this approach is that it will result in a dynamic wherein every buyer will be offered the opportunity to take advantage of the programs that so few of us have fully understood. The result of this is, even without the incentives, it will become standard for buyers to incorporate energy retrofitting into their purchases just as my buyers have since 1993.
This is a much more strategic option than regulatory approaches	Although I realize that some people believe that Point of Sale mandated approaches are the answer to promoting energy retrofitting, I will hold that anything that offers significant advantages to the public does not have to be mandated. Reciprocally, anything that is mandated is immediately perceived as disadvantageous by the public. They don’t have to be forced to do things that they see as significantly beneficial to them. When there is an option like this approach that promotes innovation and excitement it is going to accomplish far more than regulatory steps could ever hope to accomplish
All of the components to make this work are HERE now	There were really only two things missing to make this approach an overwhelming success. One was the recognition of this incredible opportunity. The other was an adequate number of Loan Officers who were competent and knowledgeable in the specialty financing products that are needed here. To my knowledge there has never been a comprehensive training manual or resource created by a Loan Officer who actually has extensive experience and a practical understanding of how these programs really work. The training I have located that is being offered on these programs is inadequate and inaccurate. Even the training HUD themselves is offering contains flaws and inaccuracies. (Some examples of these inaccuracies are pointed out on the page I created titled “Current Dynamic.”)

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

Simple Explanation of the Steps Involved

Kevin Nunn — Tue, 01 Mar 2011 06:31:39 +0000

Prospective Buyer is prequalified by a Loan Officer who is familiar with these specialty products. The Loan Officer informs the client of the opportunities available under this structure.	The prospective buyer may have been connected to the Loan Officer in a number of ways including a referral from a Realtor, Contractor, or Rater. The Loan Officer assists them in determining their best financing structure and limitations. The Loan Officer then provides this information to the client’s Realtor.
The Realtor assists the client in locating a suitable property and getting an offer accepted	The Realtor will be conscious of the buyer’s desire to take advantage of the opportunities to retrofit the energy efficiency of the home they are purchasing. They will consider this when showing properties.
When the offer is accepted, the Loan Officer will make a determination regarding the best course of action based on the expected extent of the Energy Upgrade package	If the expectation is that an Energy Efficient Mortgage (EEM) will be the Energy Financing mechanism, they will refer the buyer to a Facilitator to take care of everything pertaining to the energy package. The Facilitator will ensure that the Contractor being used is approved by the applicable utility provider to qualify them for the rebates. They will also coordinate the necessary HERS II Rating (required for the EEM), and assist with the paperwork. The Contractor will perform the required “Measure In” assessment at this point and provide the bid. This process should be followed even if an EEM is involved in conjunction with a 203K.
	If the Energy Package will utilize either a Full 203K or a Streamline 203K, the Loan Officer will coordinate with the Contractor to secure all necessary bids and required paperwork.
After Escrow has closed	The Contractor will complete the work, and perform the required “Measure Out” assessment. They will inform the buyer regarding the qualifying rebate level.
After all work is completed	The Home Owner (the work was not performed until after* escrow has closed. The Buyer is the Owner at this point)* files for their rebate, and the Contractor is paid under the applicable process based on the financing structure.

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

Clearing up the Misunderstandings

Kevin Nunn — Wed, 23 Feb 2011 20:52:24 +0000

What is Represented	The Reality
An Energy Efficient Mortgage is limited to $8,000	Until June of 2009 FHA allowed an EEM to be 5% of the sales price to a maximum of $8,000 with a minimum of $4,000 allowed even if that exceeded 5% of the sales price (or appraised value). An EEM can now go to 5% of the sales price without the $8,000 cap (the $4,000 default was also removed). There are some additional limits that come into play as spelled out in the attached FHA announcement. (2009-18) Most Mortgage Companies have adopted these higher limits, a couple are still holding to the old $8,000 cap. (Please refer to Understanding the General Lending Dynamic).
Since Appraisers won’t include the additional value for energy upgrades, you can’t include energy retrofitting in a buyer’s financing anyway.	Under the EEM program, 100% of the cost of the qualifying energy upgrades can be added to the loan without this being considered in the appraisal at all. It renders the appraisal a total and complete non-issue where these retrofit items are concerned. The financing may exceed the after completed appraised value by an additional 6.15% when a Full 203k or Streamline 203K is being used. (I realize that everyone says you can exceed by 10% with a 203K. I will get to that myth.)
Energy Efficient Mortgages add too much time to an escrow.	When the program is done properly it should not add any time to the escrow. Since I am going to show everyone how to do them correctly on this site, there will be no excuse for a transaction to be delayed with these.
Title Companies are not willing to hold the funds under the program.	Although I have run into a few Escrow Officers that did not understand the program, I have never had one that did not ultimately agree to support this program once it was properly explained. (If you run into an Escrow Officer that does not fully understanding this program, please direct them to the section I created on this site for them.)
Solar Panels (PV) can be financed with a Streamline 203K	The HUD guidelines are very clear about this not being allowed although I have seen some beautiful presentations recently that represent this can be done. If anyone has managed to get PV financed in a Streamline 203K they found an Underwriter who did not realize this is prohibited. This may lead to some issues if the file is reviewed by HUD.
Solar Panels (PV) may *not* be financed under the 203K Programs at all.	I think this myth is primarily based in the phenomenon that very few Loan Officers have access to the full version of the 203K Program. I find that many Loan Officers state as fact things that only apply to them. Since they are not able to offer the full 203K and the Streamline 203K will not allow PV, they will often state definitively that Solar is not allowed in the 203K. The reality is that we can finance Solar in the full version of the 203K loan.
You can finance up to 110% of the after completed value with a Full 203K or Streamline 203K.	Anyone who states this has probably never done a 203K loan since there is a worksheet that has to be filled out for these, and the worksheet makes it very clear that you can only get to a maximum of 106.15% of the after completed value for your base financing. Although I realize that even the HUD guidelines say this all over the place, the reality is that the loan amount may be calculated off of a basis of 110% of the after completed valuation for the property. The buyer is then required to pay 3.5%. Without stacking an EEM on the Streamline 203K or Full 203K you will never exceed 106.15% of the after completed value for the base loan.
It takes a minimum of 60 to 90 days to close a 203K or 203K(s) loan.	I don’t care what any of the conflicting guidelines may indicate nor how pretty the presentations are from the “experts” who don’t really know the program. If everyone involved knows how to properly use this program it should not take anywhere near this long to close a Streamline 203K or a Full 203K. This includes making sure the Contractors really understand their role and the timelines regarding these products. If it took me 60 days to close a Streamline 203K I would be absolutely embarrassed. Ironically, one of the people I have seen “instructing” Contractors on the Streamline K touts how he closed one in just over 60 days while stressing how important it is that you find someone who “really knows what they are doing on these loans”. Just as an example of how silly that sounds to someone who does know how to do this product; I sat down with a client for the first time on December 23^rd of ’09 and we recorded her transaction on January 15^th. That is 23 days from start to finish with 2 major holidays in the middle and *it was a Streamline 203K*. If someone actually knows how to do these loans, a normal closing time should be 30 to 45 days. Under 30 days and they deserve to brag about it. Over 60 and they should be attending training, not giving it.
You can finance $35,000 in upgrades, Energy Package or Repairs with a Streamline 203K.	You will never finance $35,000 in repairs with a Streamline 203K. I know that it says you can all over the guidelines and those who claim to know this program repeat this everywhere. Anyone who really knows this program also knows that you will NEVER be able to finance $35,000 in Streamline K items or upgrades. (For a detailed explanation of this please refer to the Streamline 203K Fact Sheet). You would be surprised how many times this becomes an issue because it is not properly explained.
The Energy Efficient Mortgage allows a buyer to qualify for more because it allows “Stretch Ratios”.	This is another one of those things that is stated in the guidelines, but it is generally not exactly true in real world applications. Please see (“Understanding the Realities of the Stretch Ratio Provision on EEMs”).
The reason why the Energy Efficient Mortgage (EEM) has never caught a lot of traction in other parts of the country is because Buyers will never include an EEM when they buy a house since they are already anxious about the payments and overwhelmed by the process.	This is a ridiculous statement. In 18 years of dealing with real buyers I have never had a single one that did not choose to include an EEM when it made sense to do it based on the improvement in efficiency that could be achieved. Ironically, one of the primary motivations for them to include this is the added security of having newer and more dependable features on their house and the additional affordability created by the projected reduction in their energy bill in relation to the increase this created in their payment. I can only assume that the “Experts” that are making this statement have never actually sat down in this situation with real buyers. I posted a video on this site to show exactly how that conversation goes with my clients. The reason EEMs are not included on just about every FHA transaction that is done in this country is because there has not been a practical guide to doing this program until now.
A 203K is an “Energy Financing Mortgage” that is very underutilized.	A 203K is a rehabilitation loan that can be used to finance energy upgrades. This is a seriously big hammer to use in most situations. With an Energy Efficient Mortgage you can include 5% of the Sales Price (up to the appraised value). With a Streamline 203K you can include around $32,000 in energy related upgrades (and some items not related to energy). The EEM can be used in conjunction with this. On a $300,000 sale or refinance you can finance around $50,000 for energy measures. It is only cases where Solar (PV) is being included or there is a very extensive project being done where a 203K will typically make sense.
There were less than 200 EEMs done in the whole nation last year.	I do not know where people get these ridiculous figures. There are several EEM facilitators. I know for a fact that 2 of them in this area did over 500 EEMs last year themselves. (That represents a very impressive 250% market share if only 200 where done in the whole nation last year.)

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

Available Energy Financing Options

Kevin Nunn — Tue, 01 Mar 2011 17:03:42 +0000

Available Energy Financing Options

Energy Financing is not a “One size fits all” area. There is clearly a desperate need for accurate information regarding all of the Energy Financing Options available. The few examples that I have seen that attempted to compile this information contain some errors and flaws on the programs I am personally very experienced in. As a result, I can understand why people do not want to rely on some of what they are seeing. I also understand that there is some hesitation on the part of people to release this information because they are not confident that it is accurate or complete. Some of the programs presented here I know very well, some I am aware of, but they are programs I do not personally work with.

I decided to include the programs I do not know well also, and just be clear about the extent of my understanding on each of them. I wanted people to know what is available, and where to get further information. I am sharing whatever insights I can on them. As I get further information, I will update this matrix. (I would invite those who are more familiar with them to share their knowledge. If you know of programs that I am unaware of, please provide me with the details. I will update this resource and direct people to where they can access further information.)

Prepared by Kevin Nunn, Comstock Mortgage for the benefit of Contractors, Loan Officers, Realtors, and others interested in the Residential Energy Financing area. It is intended as a general reference for Energy Financing structures.

Program	Notes	Level of Confidence in Information Provided
EEM	Currently this option really only works effectively with FHA or VA financing. In many ways this is, by far, the best financing option for energy upgrades for many people. It is incorporated into their 1^st loan with the same favorable rate and terms. The qualifying amount of the EEM does not get included in the appraisal or qualifying ratios. It is somewhat limited in scope though, since it can only be used in conjunction with a new 1^st loan and it is somewhat restrictive on the amount of upgrades that may be included. It may be used in conjunction with the 203K and Streamline 203K loans. I have included extensive information regarding this program on this site. Hopefully this will mitigate some of the misinformation that is being circulated regarding this strategic option.	It is very likely that I have done more Energy Efficient Mortgages than any other Loan Officer in the nation. In addition I have done extensive teaching and consulting regarding this program. I will put my knowledge up against anyone when it comes to the EEM. I am very confident in regards to the accuracy of the information pertaining to this program.
Weatherization Program	This is a program that can be a great enhancement to the EEM when just a little more funding is needed. This is a great program in general but it can be somewhat confusing, particularly to Escrow Officers. I would strongly suggest you read the detailed explanations of the potential issues and how to avoid them on the Caution, Weatherization Ahead!	I have included the Weatherization component on many transactions over the years.
Streamline 203k	Realistically only $28,000 to $31,500 can be included in energy upgrades or other improvements due to Contingency Reserve Considerations. Typically this is 10 to 20% of the actual projected scope of work. Technically, the reserve is not required. To my knowledge though, no lender will currently allow a Streamline 203K without a contingency reserve including my company. (However, I will reduce the required contingency to 10% for an energy package). Also, the full amount of the bids, contingency, and fees cannot be financed as this is generally represented. This amount is added to the sales price or as-is appraised value, before the down payment is calculated. Even if the total of the bid, contingency, and fees totals $35,000 the amount that is financed will never exceed $33,775 as the buyers Down Payment requirement would be increased by $1,225. The Streamline version will not allow Solar as it does not permit any structural items. Up to 106.15% of the after improved value may be financed as opposed to 96.5% on a standard FHA Loan. This may be exceeded by an additional 5% when an EEM is included. May be used for purchase or refinance. Minor differences apply to the allowable percentages on a refinance. This program covered in much greater detail on Streamline 203K area.	I have done many of these and am often called upon to fix these by other lenders who have attempted to do one and have run into difficulties. I have done extensive training for Realtors, Loan Officers and Underwriters on this product. I realize that a lot of what I’m going to tell people regarding this option is very different than what is typically represented and even what some of the guidelines state. I am very confident in the information that I am providing regarding this program.
203K	The same basic guidelines as the Streamline 203K apply with the following differences. No limit on amount financed for Energy Improvements although the amount financed may not exceed 106.15% of the after improved value. (This actually means that 9.65% of the value may be added for energy upgrades without an additional value consideration since the maximum loan on a standard FHA loan would be 96.5%) May finance up to the applicable FHA loan limit for the County (currently $580,000 for Sacramento County). Solar Panels (PV) may be included in the Full 203K. Although you can technically exceed the applicable County FHA loan limit with Solar, other restrictions render this virtually impossible in most instances. The EEM program may also be stacked on the 203K to allow for an additional 5% in qualifying energy upgrades without appraisal considerations. For clarifications please see my specific program description area for this program.	This is not a product that I get a lot of demand for since the Streamline 203K is usually sufficient, however I am pretty confident in the information I am providing pertaining to this program. With the considerations being given to renewable options in the HERS II software and the ability to integrate this into the HERE model, I expect that we will be doing a lot more of these.
Cash-out Refinance	Requires sufficient equity. May be a great option based on the current interest rates depending on the what a homeowner currently has on their house. When integrated into the HERE model it can be a great opportunity for someone to offset the refinance costs and enjoy the additional comfort, affordability and reliability of a home with updated energy features.	This is pretty straight forward and basic, there is not a need for me to provide a lot of technical information pertaining to this approach.
Reverse Mortgage	This is another area that seems to have been completely overlooked. There is a tremendous opportunity to upgrade or repair the energy components of the housing of our seniors who may desperately need this and not have a means currently to accomplish it. I will be presenting a specific and advantageous structure for this opportunity within the next few days. When integrated into the HERE model it can be a great opportunity for a senior to offset the loan costs and enjoy the additional comfort, affordability, and security of a home with updated energy features. In some ways one of the most unfortunate results of not pursuing a strategy like the HERE model has been the number of seniors who are living in houses with substandard or non-functioning energy related components that could utilize the equity line option of a Reverse Mortgage to take out just enough to address these issues and make their home more comfortable, off-set the loan costs with the rebates, and actually reduce their energy bills by enough that they could utilize the cash flow from the energy savings to pay off the balance on the equity line if they were so inclined.	This is a product that is a bit of a specialty. Although I have the ability to do these through my company, I generally refer them to those individuals who specialize in this product to ensure that the clients are getting the highest level of service and expertise. The specifics of the financing structure within the Reverse Mortgage area I will be adding in the next few days, I vetted with the people I am confident have legitimate expertise in this area. Reverse Mortgages are ideally suited to the HERE model.
VA EEM	The mortgage may be increased by · up to $3,000 based solely on the documented costs · up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or · more than $6,000 subject to a value determination by VA.	I have done a few of these over the years. Under $6,000 it is pretty easy. I would not attempt to exceed the $6,000 as I feel that it would be impractical within the VA required procedures.
Mist Program	This program is being offered through an organization called CHF. Initially, it was going to be offered just in the rural counties. I was recently informed that it will be offered in Sacramento County, I am not sure about other urban areas. This is a program that is being funded through stimulus funding. There is a total of 18.5 million dollars available for this including 2 Million being contributed by the organizations themselves. They will be offering very low interest rate loans. These will be secured by the equipment, not the property. Details on this program may be found at: http://www.chfloan.org/Programs/Energy/energy_program.html Please note that Contractors must apply and be approved to participate in this program. When I reviewed this program, there were several concerns that I had regarding some of the specifics in relation to financing considerations. I have not received a response to my concerns yet, although I did notice some changes have been made to some of those items.	CHF is an organization that is very established and I have worked with them extensively over the years on affordable housing programs they administered. They are very competent in this area and I am sure they will get the details worked out. Since I do not believe that they have funded any loans yet, I do not have any first hand knowledge regarding this specific option. I would suggest though, that you watch this opportunity as it develops. It has the potential to fill some important gaps in financing options.
FNMA HomeStyle Renovation	This is FNMA’s version of the Full 203k program. It can be done for both owner occupied and non-owner occupied properties. Very few lenders offer this product. That is unfortunate because it offers some significant advantages for some situations and is one of the rare opportunities for investors to upgrade the energy efficiency of their properties. Up to 50% of the after completed value may be improvements and upgrades. Energy related components may be included; however, they must be supported in the appraisal.	This is a product that I am currently unable to offer. I am hoping to have this product back very soon. I have not done a lot of these, but I have certainly done enough to be pretty confident in my knowledge pertaining to them.
Line of Credit	Requires that a homeowner have sufficient equity in their home. In cases where they do, this can be an excellent opportunity for them to take advantage of the incentives and programs currently available for energy related retrofitting. In many cases, the energy savings will cover the payment on the equity line. I am not sure what the highest loan to value is that is currently available on Equity Lines while still offering reasonable interest rates. I can offer Equity Lines but choose not to currently since I feel that there are better options available to people than what I can offer at the moment for this product. I do know that they can get as high as 85% of the value since I have been referring all clients who are looking for Equity Lines to US Bank, and I know that they will now go up to 85% again.	Although I have done many equity lines over the years, I am not currently competitive on this particular product with other options that are available to people. As a result, I have been referring any clients that need Equity Lines to US Bank. Specifically I refer them to a lady named Kris Inlow. I am sure that there are many great options for this. If you need someone who I have a lot of confidence in, Kris can be reached at kris.inlow@usbank.com (and no, I do not ask for nor receive any referral fees from Kris. I am just grateful that she has been so good to the people I have referred over to her).
Title 1	Up to $25,000. Very few lenders offer this. Term 5 to 25 years rate 6.95% to 11.95%. This can be an advantageous option in some cases. Currently there are very few sources for this.	This is a product that I used to do but do not currently have a source for. I know that there are a few credit unions that offer them but people must meet the membership criteria. There may be other sources, but I have not located them.
SMUD	Offer secured and unsecured options. Currently 8.75 secured and 10.75%. Full qualifying. They follow the CPUC model in regards to projected useful life for financing terms.	I don’t offer SMUD financing. It is available only through them. I do know that the qualifying criteria can be a little tight.
ViewTech	Stated Income, 15.99% to 16.99% in Northern California depending on credit score. Unsecured $5,000 to $20,000. http://www.viewtechfinancialservices.com/Financing.htm	I know nothing at all about this from first hand basis. I do know that this can be a very expedient way for someone to finance energy upgrades.
EGIA	Up to $25,000 to 100% of installed cost. http://www.egia.com/DesktopDefault.aspx?Portal=22	I do not know anything about this other than this option exists.
Signature Loans	Homeowners secure an unsecured loan from a banking institution.	The rates are going to be high, but this is an option. If someone is anticipating some money soon that would give them the ability to pay this off quickly, this can offer some advantages since the fees are low in relation to other loans.
Solar Lease Programs	Company retains ownership and receives incentives. Homeowner leases equipment.	Solar financing is something that is available under the full 203k program and/or EEM. Other than that, I do not currently have a lot of information in regards to opportunities around this. I do know that some companies are currently offering lease options. I will update this area as I learn more about it.
FNMA Energy Efficient Mortgage Program	This program was recently introduced. It does not appear to have any practical application whatsoever. Under the way the program is structured now it appears that it would conflict with Private Mortgage Insurance. If the resulting LTV would be low enough to not require PMI it would make more sense for someone to just use the difference to pay for the energy upgrades.	Since I cannot find any applications wherein this appears to offer any real advantages, I have not elected to offer this to my clients so I cannot speak from firsthand experience.
401K Loan	This can be a very viable option for some people. They can take a loan against their 401K and use the money to pay for the energy upgrades. They could use the energy savings to repay the 401K Loan. I would, however, suggest that anyone who is considering this strategy first consult their financial advisor.	Obviously, this is not something I participate in. I do know that this can be a very strategic method to finance energy upgrades. It is often overlooked.

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Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

Current Dynamic

Kevin Nunn — Wed, 23 Feb 2011 21:01:03 +0000

Current Dynamic with Loan Officers Regarding Energy Financing Product

It is crucial that we have sufficient numbers of Loan Officers who are competent in these specialty products. Unfortunately, there are currently too few to meet the demand that a structure like the HERE model will create. The shortage of Loan Officers with legitimate expertise in this area has also created an environment where a few individuals have been able to represent themselves as having an expertise that they did not necessarily possess. This has created significant misunderstanding and frustration. This is a platform that will create a resource for Loan Officers to become knowledgeable and confident to become involved in promoting these opportunities.

Loan Officers generally fall into one of the following five categories with respect to Energy Financing Programs:

Competent and Experienced	Unfortunately, there are very limited numbers of Loan Officers in the nation who know these programs well. These Loan Officers are inundated with loan requests and do not have the extra capacity to share their knowledge with others. As a result,the lack of informed Loan Officers continues to be a problem.
Very interested in offering these opportunities but not confident in their ability to do them correctly.	The vast majority of the Loan Officers, who identified the demand and wanted to become involved, decided not to do so. When they realized that the guidelines are confusing, ambiguous, and full of contradictions, they had far too much integrity to attempt to learn these products at the expense of their clients and everyone else. I am providing the information on this site, in part, because these are the individuals who we need to get involved so there is adequate capacity to meet the demand. At the end of this document, I include two recent examples of HUD providing inaccurate information in Training Webinars offered to Loan Officers.
Overstating their Knowledge	There are some Loan Officers who have identified this area as a means to develop their business. They do not have much, if any, legitimate real-world experience with these specialty programs. They are reading the guidelines and trying to understand how they work. Unfortunately, they are also providing faulty information to Contractors, Realtors, Consumers and others, thereby creating confusion and frustration for those that rely on their represented “expertise.” This has particularly hurt Consumers and Contractors. Furthermore, it is now starting to damage the programs as people erroneously conclude that it is the programs, not the explanations, that are flawed.
Oblivious	There are numerous Loan Officers who are not aware of these products or how they can benefit the Home Buyers/Owners.
Working for companies that don’t offer these options	There are still a few companies that do not offer these products. This will change as they react to the demand created in the marketplace.

What I am creating here is a practical and comprehensive guide to these programs drawn from my extensive and documentable experience. I am not only clarifying these programs. I am also sharing all of the knowledge I have gained over 18 years of providing these programs to my Home Buyer and Home Owner clients. I would encourage you to refer to my biography for confirmation of my experience in this arena. I am not interested in promoting myself. I just could not stand by any longer and watch what was occurring when I had knowledge that could benefit so many people.

It is my hope that good Loan Officers will gain the confidence to offer these opportunities. If the people who have sabotaged these efforts through perpetuating misinformation are exposed by the correct information, I am not going to feel too badly about that. The entire energy financing effort, as well as the many who could have but did not benefit through energy upgrades as well as through jobs, have been seriously hurt by these “experts” and this misinformation.

Below are several examples of the errors in the information presented to interested Loan Officers. I am not trying to disparage HUD. They have been visionary in creating these programs in the first place. HUD clearly recognizes that the Loan Officers across the nation are interested in learning these programs, and they should be commended for stepping up and offering these opportunities. I just want everyone to understand why so many good Loan Officers are not comfortable with offering these specialty products.

MISINFORMATION

CORRECT INFORMATION

The HUD HOC (Home Ownership Center) in Denver provided a webinar on Thursday February 17, 2011, on the 203K program. In that webinar they presented that an Energy Efficient Mortgage (EEM) could be included with a Streamline 203K or a Full 203K. They stated that the EEM allowed up to $8,000 in qualifying energy upgrades with a minimum of $4,000. The Denver HOC is one of 4 Centers throughout the U.S. for HUD.

In June of 2009, HUD changed their guidelines pertaining to the limits on EEMs. The $4,000 minimum default was removed. The $8,000 cap was also removed. For specific guidelines on how the current limits are calculated, you can read the letter HUD issued when they raised the limit (2009-18). Or, you can go to the EEM Fact Sheet, which spells this out in detail.

The HUD HOC (Home Ownership Center) in Santa Ana provided a webinar on Thursday February 17, 2011 on the Energy Efficient Mortgage Program. In this webinar, they explained the new calculations for the maximum EEM that may be included. They went over the various calculations. It appears that they then performed a random calculation where they subtracted the Sales Price from the Median Sales Price figure, leaving them with $5,000. This is not one of the required calculations. They should have arrived at a maximum EEM of $15,000 allowed based on their example, but they arrived at $5,000 instead. I have absolutely no idea where they got that idea. This is training coming directly from HUD.

This is directly out of the letter that raised the maximum limit. For detailed explanations of these calculations you can go to the EEM Fact Sheet on this website. You will see that there is no calculation that involves subtracting the Sales Price from the “median area price.” The maximum amount of the portion of the EEM for energy improvements is the lesser of 5% of:

•          the value of the property, or
•          115% of the median area price of a single family dwelling, or
•          150% of the conforming Freddie Mac limit.

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

Facilitators are the Key

Kevin Nunn — Mon, 14 Feb 2011 07:44:32 +0000

Facilitators are the Key

It is believed by many that more Energy Efficient Mortgages have been done in the Sacramento Region than the rest of the nation combined. Since this is not specifically tracked it is not possible to confirm it. One thing is certain though, this region has done a very significant share of all EEMs that have been done to date.

I have to laugh when people suggest that this is the result of my efforts over all of these years as if I am some modern day Johnny Appleseed. This is certainly flattering, and I hope I have played a role through my efforts. The reality, though, is that the real credit belongs to the capable EEM Facilitators that we utilize a lot in this region, and the strong support of the local Realtor Association in hosting training events and functions over all of these years.

Facilitators basically function as a “Project Manager” for this specialized component of the transaction. They make this process very easy for us. Although Loan Officers create tremendous goodwill and loyalty among Clients and Realtors by allowing buyers to benefit from the EEM opportunity, the direct financial benefit for including an EEM is negligible.

I listened to an “Expert” Consultant tell a room full of people at a CPUC Financing Workshop in San Francisco that the reason why the EEM had never really caught traction was because no buyer was going to add additional expense into their home loan when they were already scared and nervous about the process and payment. In the real world, I have never had a single buyer in 18 years that had an opportunity to do an EEM that didn’t choose to do it. In fact, concerns over their budget and home maintenance expenses is one of the primary reasons they do choose to pursue this when properly explained. The real reason that most Loan Officers and Realtors avoid EEMs is that they are unaware that Facilitators are available to manage all of the details and coordination of EEM’s and ensure that the transactions will not be delayed.

I provided flow charts of the Energy Efficient Mortgage under the HERE model and the traditional model. When you look at the complexity of the process, it is understandable why so many Realtors, Loan Officers, and Contractors are resistant to EEMs. However, when a Facilitator is involved, you will probably understand why everyone who actually does these, and understands the Facilitator model, experiences this as an incredible and easy program. For those who understand the program based only on the way it is described in the guidelines I can appreciate why they do not realize how well this can actually work.

There are several capable Facilitators, and I don’t know them all. However, I have had the pleasure of working with Bobbi Glassel at Synergy EEM, Tom Caruthers at Federal Energy Services, and Keith Cherry at Cherry EEM Management over the years. All of them have proved to be a tremendous asset to the process when we have clients that can benefit from an EEM.

When I was trying to figure out how to explain how essential the facilitators are to this process, I asked my Transaction Coordinator to share her opinion on this. I decided to include her response as she wrote it.

“Facilitators are an integral part of our team when we have EEMs. They are a resource that makes the process much smoother and more complete. They hold the buyers hand from the beginning until the work is all completed and the Contractor has been paid. The Facilitators assist in coordinating the rating and ensuring that the work is completed in a timely manner that is satisfactory to the new homeowner. Buying a home is a very stressful and intimidating process for a lot of people. They are already overwhelmed with decisions they need to make. The Facilitator presents and explains the energy options in an easy to understand format that simplifies the choices and makes the decisions much easier for the buyer.

Our clients have had nothing but praise and gratitude to have a Facilitator present to answer questions and reinforce what we have already told them. The best part is that the Facilitator coordinates to schedule the Contractor in to do the work on the house once the loan is closed. They make sure the homeowner is happy with the results and then they follow through with us to make sure that the Contractor funds are released from escrow. It is a symbiotic relationship in which all parties gain in the end while we get to focus on doing what we do best – providing the financing for the client.”

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

EEM Table with Facilitator when Utility Program is included

Kevin Nunn — Wed, 23 Feb 2011 01:58:10 +0000

EEM Process Table using the HERE Model with a Facilitator

The Energy Efficient Mortgage is not a second mortgage; it is included in the first loan. This provides significant advantages in regards to the appeal of this option to the public. It means that the energy upgrades can be financed at the same favorable rate and terms as a first loan product, resulting in a very compelling utility bill savings to upgrade cost ratio.

The challenge is integrating it into the first loan in a way that does not create delays and minimizes the additional complications to the purchase or refinance process. When the additional layer of complexity associated with including one of the ARRA based utility rebate programs is added into this, it could understandably deter Loan Officers, Realtors, and Contractors from this opportunity.

The EEM Facilitators are the solution. They specialize in managing the EEM portion of the transaction. The following table will demonstrate the flow of this process.

Realtor	Lender	Facilitator	Contractor	HERS Rater	Title Company
Provides Fully Executed Contract to Lender
	Provides contact information and address to Facilitator Informs Escrow Officer of EEM
		Orders Measure-In Home Rating from ContractorHERS II Rating from HERS II Rater, and arranges access with the Realtor
Provides Property Access for the HERS II Rater and the Contractor			Does Whole-Home Assessment and Provides work scope recommendations to the Facilitator	Performs the HERS II Audit and provides the information to the Facilitator
		Assists the buyers to determine the work scope and secures signed bid for the Contractor
		Prepares the necessary EEM paperwork and provides it to the lender
	Incorporates EEM into the loan and forwards the funds to the Title Company				Holds back the EEM funds
		Informs the Contractor when escrow has closed so the work can begin
			Coordinates work with new owners
			Informs the Facilitator when the work has been completed and performs the Measure-Out assessment
		Orders the acknowledgement inspection from the HERS II Rater
				Confirms to Facilitator that the work has been completed
		Provides the Lender with the required paperwork to authorize the release of funds
	Notifies the Title Company to release the Payment to the Contractor				Releases payment to the Contractor
			Assists the new home owners with paperwork to secure their rebate or has Facilitator assist with this part

Although this is certainly a different structure than Contractors are normally accustomed to, it offers some significant advantages. A very high percentage of these result in retrofits being done.

The payment is being held in escrow before the work is even started.

Most of the client interaction is handled by the EEM facilitator.

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

EEM Table with a Facilitator w/o Utility Program

Kevin Nunn — Wed, 23 Feb 2011 01:58:52 +0000

The Energy Efficient Mortgage Process when a Facilitator is utilized.

The challenge is integrating it into the first loan in a way that does not create delays and minimizes the additional complications to the purchase or refinance process.

The EEM Facilitators are the solution. They specialize in managing the EEM portion of the transaction. The following table will demonstrate the flow of this process.

(Please note; this is the model for a traditional EEM process without the Utility rebate program. Please refer to the “EEM Table with Facilitator when Utility Program is included” for considerations specific to financing the EEM when buyer is using SMUD HPP or similar program.)

Buyer	Realtor	Lender	Facilitator	HERS Rater	Contractor	Title Company
	Refers buyer to lender to be pre-qualified.
		Pre-qualifies Buyer and identifies their best financing structure. Explains Energy Financing opportunities. Advises Realtor of limits and financing structure.
	Informs Lender when an offer has been accepted.
		Provides buyer’s information to facilitator, Informs the Escrow of EEM.
			Contacts Buyers to explain their role, orders HERS rating, coordinates with Realtor to provide access to the Rater.
	Meets Rater at the property and gives them access.
				Provides rating to Facilitator.
			Requests bids from Contractors.
	Arranges access to the property for Contractor(s).
					Inspects the property.
					Provides the bids to the facilitator.
			Works out options for buyers based on the applicable EEM budget, HERS Rating, and Contractor bids
			Reviews the options with the buyer and gets their signatures on the option they choose and applicable contractor bid. Prepares Contractor paperwork needed by lender. Submits all paperwork to the lender so they can incorporate it into the loan.
		Incorporates EEM funds into the loan and sends them to the Title Company with the Loan Funds where they can be held until the work is completed.				Holds the EEM Funds.
			Informs the Contractor that Escrow has closed and puts them in contact with the new Home Owner to get the work completed.
					Does the work for the new Home Owner. Informs Facilitator upon completion.
			Notifies rater that property is ready for re-inspection to verify work completion. Gets acknowledgement signed by new Home Owner.
				Re-inspects property and provides acknowledgement to Facilitator.
			Submits all appropriate completion paperwork to Lender.
		Contacts title company and instructs them to release the payment to the Contractor.				Pays the Contractor.
Enjoys a more comfortable, energy efficient, and affordable home.	Gets many future referrals from a client that feels that they went way above and beyond to allow them the opportunity to include the Energy Retrofitting into their purchase.	Gets major points with the Realtor and Home Buyer for creating this opportunity and demonstrating their commitment to the clients they serve. In reality there was very minimal extra work done by them.	Gets a lot of satisfaction in seeing how incredibly happy buyers are that are able to take advantage of this opportunity.	Gets a steady supply of work.	Gets work without having to market to individual homeowners. Has almost 100% jobs secured in relation to bids done. Has the benefit of the Facilitator taking care of the paperwork.

The facilitators I have worked with in this area have always insisted that the Contractors used are SMUD approved. There are two primary reasons for this. One is to ensure that the buyers could take advantage of all available rebates. The other is to help ensure the quality of the Contractors being used.

The facilitators provide some additional benefits within this process. They are able to assist with any issues that may arise between the buyers and the Contractor.

As you will notice, there is actually very little effort for the Realtor, Lender, or Contractor when a Facilitator is involved in this process.

The amount added to a Homebuyer’s mortgage for the Energy Efficient Mortgage is not included for qualifying purposes nor is it factored into the appraisal. As a result, the mortgage process can move forward while the EEM is being facilitated. Provided that the EEM paperwork is returned to the lender by the time the lender is ready to underwrite the loan, the EEM does not create any delays in the transaction.

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

For Financing Information, Go to Lenders

Kevin Nunn — Thu, 03 Mar 2011 20:37:48 +0000

Can you imagine if there were individuals with no actual experience in HVAC installation that were telling everyone how to install an HVAC unit based on what they read in the guidelines. It’s possible that there might be some misinterpretations and practical considerations that would have a serious impact on the outcome. Personally, I would not want to depend on the explanation from someone who had never actually installed a single system if I were to attempt to install a unit myself, or explain this process to someone else.

Unfortunately, this is exactly what I am seeing occur in the financing area. Just like people who have never installed an HVAC unit may see this as a very simple task, people who have never done an EEM or a 203K may arrive at the same conclusion.

Those involved in installing HVAC systems would know that every single project has its own nuances. Over time you learn how to deal with whatever challenges come up. Lending is exactly the same in this regard.

I would strongly suggest that you get information on Mortgage Loan Products from professionals who have experience using these specific programs. The guidelines and text must be presented in the proper context, and based on a practical understanding of the programs and how they actually work in the real world.

I realize that many people do not grasp the complexity of these specialty programs. I understand that they are trying very hard. It is important that we start getting accurate information out on these great opportunities. That information needs to come from the professionals who are experienced with them.

When you see information regarding financing programs, I would suggest that you check to see just how many of those specific loans the person providing the information has successfully provided themselves. I would put a whole lot more confidence in this than the ability to interpret what is read.

Sacramento 1st DBA Comstock Mortgage – Lic : 01390474
Kevin Nunn – NMLS 305826 / DRE 01158674

ExperiencedEnergyFinancing.com

The HERE Model

The HERE Model

Strategic Advantages

Simple Explanation of the Steps Involved

Clearing up the Misunderstandings

Available Energy Financing Options

Current Dynamic

Facilitators are the Key

Facilitators are the Key

EEM Table with Facilitator when Utility Program is included

EEM Process Table using the HERE Model with a Facilitator

Realtor

Lender

Facilitator

Contractor

HERS Rater

Title Company

Provides Fully Executed Contract to Lender

Provides contact information and address to Facilitator

Informs Escrow Officer of EEM

Orders Measure-In Home Rating from ContractorHERS II Rating from HERS II Rater, and arranges access with the Realtor

Provides Property Access for the HERS II Rater and the Contractor

Does Whole-Home Assessment and Provides work scope recommendations to the Facilitator

Performs the HERS II Audit and provides the information to the Facilitator

Assists the buyers to determine the work scope and secures signed bid for the Contractor

Prepares the necessary EEM paperwork and provides it to the lender

Incorporates EEM into the loan and forwards the funds to the Title Company

Holds back the EEM funds

Informs the Contractor when escrow has closed so the work can begin

Coordinates work with new owners

Informs the Facilitator when the work has been completed

and performs the Measure-Out assessment

Orders the acknowledgement inspection from the HERS II Rater

Confirms to Facilitator that the work has been completed

Provides the Lender with the required paperwork to authorize the release of funds

Notifies the Title Company to release the Payment to the Contractor

Releases payment to the Contractor

Assists the new home owners with paperwork to secure their rebate or has Facilitator assist with this part

EEM Table with a Facilitator w/o Utility Program

For Financing Information, Go to Lenders