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Energy Rated Homes of Iowa is making energy efficiency an exciting new market for mortgage lenders and mortgage brokers.

Through the use of the latest technology, Energy Rated Homes™ of Iowa analyzes the cost of energy usage in a home. As consumers become aware of the potential savings they will incur from purchasing a highly energy efficient home, the demand for Energy Efficient Mortgages (EEMs) will escalate.

Energy Efficient Mortgages

EEMs are loans that allow the borrower better qualifying ratios when purchasing highly energy efficient homes. Under agreements with HUD, Freddie Mac, and Fannie Mae, HERS documents performance standards and provides lenders with the choice of stretching the qualifying ration by 2% or adding energy savings estimates to the PITI. VA allows a lender to add the actual savings to the underwriting calculation. Here is the loan process:

A home energy rating is ordered through the real estate agent, buyer or seller. Buyers, sellers, real estate agents, or lenders may pay for the rating, but loan proceeds may not be used.
A loan application is made by the borrower with an EEM lender. Minimum ratings for eligibility are four starts for new homes.

Energy Ratings also pave the way for new loan products that allow customers to finance home energy improvements as part of their permanent financing. Iowa lenders have an opportunity to lead the nation in introducing the Energy Improvement Mortgages (EIMs) under pilot program approved by secondary market agencies.

Energy Improvement Mortgages

EIMs allow borrowers to finance some cost effective energy improvements for existing homes, providing that energy performance increases by at least 10 points. Loan amounts are limited to the present value of the savings or the installed cost of the improvements, whichever is lower. Here is the EIM process:

Borrower makes application with an EIM lender and arranges for an energy rating, including menu of recommended improvements.
Borrower obtains at least one bid for improvements chosen from the menu.
A 120 day escrow account is established for improvements, including a 10% contingency supplied by the borrower.
A post improvements rating is performed. Surplus escrow funds are returned to the lender and the surplus contingency to the borrower.

Becoming a StarTrac Lender

Mortgage lenders and mortgage brokers can become StarTrac Lenders by taking advantage of a short training program on the rating system and the new loan products. StarTrac Lenders and brokers may use the Energy Rated Homes™ logo in their advertising to home buyers, builders and Realtors®.

| Iowa StarTrac Program | ERHI Home Page |

Energy Rated Homes of Iowa
1001 South 18^th Avenue
Marshalltown, Iowa 50158
Phone: (319) 560-9446
Fax: (319) 439-5416
E-mail: cpapesh@micaonline.org
E-mail2: papesh113@hotmail.com

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Iowa Association of Municipal Utilities
webmaster@iamu.org