source:
  type: regulation
  id: hud-4000-1-programs-and-products-energy-efficient-mortgages
  authority: HUD Handbook 4000.1 — Programs and Products - Energy Efficient Mortgages (04/29/2019)
  description: "HUD Handbook 4000.1 section \"Programs and Products - Energy Efficient Mortgages\". Gap-fill\
    \ (verbatim, title-diff). \n"
obligations:
- id: hud-4000-1-programs-and-products-energy-efficient-mortgages-full
  canonical_id: hud-4000-1-programs-and-products-energy-efficient-mortgages-full
  section: HUD Handbook 4000.1
  description: "Programs and Products - Energy Efficient Mortgages: c. Energy Efficient Mortgages (04/29/2019)\
    \ \nThe Energy Efficient Mortgage (EEM) program allows the Mortgagee to offer financing \nfor cost-effective\
    \ energy efficient improvements to an existing Property at the time of \npurchase or refinancing,\
    \ or for upgrades above the established residential buildin…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - hud
  - 4000-1
  - curated
  primary_source:
    tier: 1
    authority: HUD Handbook 4000.1 — Programs and Products - Energy Efficient Mortgages (04/29/2019)
    source_class: hud-handbook-4000-1
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: "c. Energy Efficient Mortgages (04/29/2019) \nThe Energy Efficient Mortgage (EEM)\
      \ program allows the Mortgagee to offer financing \nfor cost-effective energy efficient improvements\
      \ to an existing Property at the time of \npurchase or refinancing, or for upgrades above the established\
      \ residential building code \nfor New Construction. \nCost Effective refers to the costs of the\
      \ energy efficiency improvements that are less than \nthe present value of the energy saved over\
      \ the estimated useful life of those \n(A) Eligible Property Types \nEEM may be used with: \n• New\
      \ Construction Properties (one- to four-units); \n• Existing Construction Properties (one- to four-units);\
      \ \n• condominiums (one unit); or \n• Manufactured Housing. \n(B) Eligible Programs and Transactions\
      \ Types \nThe EEM program can be used in conjunction with any mortgage insurance under \nTitle II,\
      \ including: \n• 203(b) \no Purchase \no No cash-out refinance \n• 203(h) Mortgage Insurance for\
      \ Disaster Victims \n• 203(k) (Standard and Limited) \n• Weatherization policy (Existing Construction\
      \ only) \nEnergy Package \nThe energy package is the set of improvements agreed to by the Borrower\
      \ based on \nrecommendations and analysis performed by a qualified home energy rater. The \nimprovements\
      \ can include energy-saving equipment, and active and passive solar and \nwind technologies. The\
      \ energy package can include materials, labor, inspections, and the \nhome energy assessment by\
      \ a qualified energy rater. If the Borrower desires, labor may \ninclude the cost of an EEM Facilitator\
      \ (project manager). \n\n \n(A) Cost-Effective Test \nThe financed portion of an energy package\
      \ must be cost effective. A cost-effective \nenergy package is one where the cost of the improvements,\
      \ including maintenance \nand repair, is less than the value of the energy saved over the estimated\
      \ useful life of \nthose improvements. \n(B) Cost-Effective Test for New Construction \nFor New\
      \ Construction, the financed portion of an energy package includes only those \ncost-effective energy\
      \ improvements over and above the greater of the following: \n• the latest energy code standard\
      \ that has been adopted by HUD through a \nFederal Register notice; or \n• the applicable IECC year\
      \ used by the state or local building code for New \nMore information on this energy code can be\
      \ obtained from the Department of \nEnergy or the International Code Council. \n(C) Changes to the\
      \ Energy Package after Mortgage Closing \nIf the work that is done differs from the approved energy\
      \ package, a change order \nalong with a revised home energy audit must be submitted to the Direct\
      \ Endorsement \n(DE) underwriter for approval. If the changes still meet the cost-effective test,\
      \ no \nfurther analysis is required. If not, the funds for the work not included in the approval\
      \ \nenergy package must be used to pay down the mortgage principal. \niv. Home Energy Report/Assessment\
      \ \nThe Borrower must obtain a home energy assessment. The purpose of the energy \nassessment under\
      \ the EEM program is to identify opportunities for improving the energy \nefficiency of the home\
      \ and their cost effectiveness. The assessment must be conducted by \na qualified energy rater,\
      \ assessor, or auditor using whole-home assessment standards, \nprotocols and procedure. \n(A) Qualifications\
      \ of Energy Raters/Assessors \nQualified home energy raters/assessors must be trained and certified\
      \ as one of the \n• Building Performance Institute Building Analyst Professional; \n• Building Performance\
      \ Institute Home Energy Professional Energy Auditor; \n• Residential Energy Services Network Home\
      \ Energy Rater; or \n• energy rater, assessor or auditor who meets local or state jurisdictional\
      \ \nrequirements for conducting residential energy audits or assessments, \nincluding training,\
      \ certification, licensure and insurance requirements. \n\n \nThe home energy report must reflect\
      \ one of the above professional credentials by the \nrater/assessor. \n(B) Home Energy Report \n\
      The home energy report reflects recommendations of energy-saving improvements \nfor the Borrower’s\
      \ consideration. Included with the recommendations are estimates of \nenergy savings and cost-effective\
      \ analysis for each of the suggested improvements. \nThese estimates consider energy costs in today’s\
      \ dollars (present value). The \nMortgagee must use the energy-savings information from the home\
      \ energy report to \ndetermine that the cost-effective test is met for the financed energy package.\
      \ \n(C) Home Energy Report for New Construction \nOn newly constructed housing, the home energy\
      \ report must identify improvements \nthat are over and above the greater of the following: \n•\
      \ the requirements of the latest energy code standard that has been adopted by \nHUD through a Federal\
      \ Register notice; or \n• the applicable IECC year used by the state or local building code for\
      \ New \nThe Mortgagee must obtain a copy of the home energy report. This report must not be \ngreater\
      \ than 120 Days old. \nThe Mortgagee must submit two forms HUD-92900-LT, FHA Loan Underwriting \n\
      and Transmittal Summary, as described in the Underwriting Section below. \nv. Maximum Financeable\
      \ Energy Package \nThe maximum amount of the energy package that can be added to the Base Loan Amount\
      \ \nis the lesser of: \n• the dollar amount of a cost-effective energy package as determined by\
      \ the home \nenergy audit; or \n• the lesser of 5 percent of: \no the Adjusted Value; \no 115 percent\
      \ of the median area price of a Single Family dwelling; or \no 150 percent of the national conforming\
      \ mortgage limit. \nEnergy Efficient Mortgage Calculator Tool \nThe Mortgagee must calculate the\
      \ dollar amount of a cost-effective energy package as \ndetermined by the home energy audit, as\
      \ shown in Energy Package. The EEM Calculator, \nlocated in FHA Connection (FHAC) on the Case Processing\
      \ screen, will perform the \ncalculation of Maximum Financeable Energy Package. The EEM Calculator\
      \ uses data \nentered for the Mortgage to calculate the maximum energy package. \n\n \nFor a Streamline\
      \ Refinance, the EEM Calculator uses the appraised value from the initial \ntransaction, contained\
      \ within FHA Connection records, as the Adjusted Value. \nvi. Maximum Mortgage Amount \nThe maximum\
      \ final Base Loan Amount is determined by adding the maximum \nfinanceable energy package amount\
      \ to the initial maximum Base Loan Amount. For New \nConstruction, the cost of the financeable energy\
      \ package must be subtracted from the \nsales price when computing the Adjusted Value. \nWhen utilizing\
      \ an EEM in conjunction with a 203(k) or Weatherization, the items \nincluded in the maximum financeable\
      \ energy package must be excluded from the items \nincluded when calculating the initial maximum\
      \ Base Loan Amount under these programs. \nThe maximum FHA Nationwide Mortgage Limit for an area\
      \ may be exceeded by the \nmaximum financeable energy package. \nvii. Underwriting \nThe Mortgagee\
      \ must calculate the Borrower’s debt ratios using the initial Base Loan \nAmount plus the portion\
      \ of the Upfront Mortgage Insurance Premium (UFMIP) \nattributable to the initial Base Loan Amount.\
      \ \n(A) TOTAL Mortgage Scorecard \nFor purposes of submission to the Technology Open To Approved\
      \ Lenders (TOTAL) \nMortgage Scorecard, the Mortgagee must utilize the initial Base Loan Amount\
      \ prior \nto the addition of the financeable energy package. \nIf the Mortgagee obtains an Accept\
      \ or Approve on a mortgage application that does not \ninclude the financeable energy package, FHA\
      \ will recognize the risk rating from \nTOTAL Mortgage Scorecard and permit the increase to the\
      \ Mortgage Payment without \nre-underwriting or rescoring. The Mortgagee must provide a form HUD-92900-LT,\
      \ \nwithout the financeable energy package, showing the qualifying ratios in the case binder. \n\
      A second form HUD-92900-LT must be completed by the underwriter showing \nmortgage amount calculation\
      \ that includes the financeable energy package, as reflected \nin FHAC. The second form must also\
      \ be included in the case binder. \nThe underwriter must attest on the second form HUD-92900-LT\
      \ that they have \nreviewed the calculations associated with the energy efficient improvements and\
      \ found \nthe Mortgage and the Property to be in compliance with FHA’s underwriting \n(B) Manual\
      \ Underwriting \nThe Mortgagee must provide a form HUD-92900-LT, without the financeable energy\
      \ \npackage, showing the qualifying ratios in the case binder. A second form HUD-92900LT must be\
      \ completed by the underwriter showing mortgage amount calculation that \nincludes the financeable\
      \ energy package, as reflected in FHAC. The second form must \nalso be included in the case binder.\
      \ \nThe underwriter must attest on the second form HUD-92900-LT that they have \nreviewed the calculations\
      \ associated with the energy efficient improvements and found \nthe Mortgage and the Property to\
      \ be in compliance with FHA’s underwriting \nAppraisals \nFor Existing and New Construction, the\
      \ appraisal does not need to reflect the value of the \nenergy package that will be added to the\
      \ Property. If the appraisal does include the value \nof the energy package, the value must be subtracted\
      \ from the Property Value when \ncomputing the Adjusted Value. \nOn the 203(k) program, the After\
      \ Improved Value is to be used for the EEM process. \nix. Cash-Out \nThe Borrower may not receive\
      \ cash back from the mortgage transaction. If an excess \nexists, funds must be applied to the principal\
      \ Mortgage balance. \nx. Energy Efficient Mortgage Escrows \nFor all Mortgages on existing Properties,\
      \ except 203(k), if the energy package items are not \ncomplete by the time of closing, the Mortgagee\
      \ must establish an escrow account for the \nremaining cost of the energy improvements in accordance\
      \ with the Repair Completion \nEscrow Requirements. \n(A) 203(k) \nIf the energy package is part\
      \ of a Section 203(k) Rehabilitation Mortgage, then the \nescrowed amounts of the energy package\
      \ must be included in the rehabilitation \nescrow account. \n(B) Borrower Labor \n(C) Form HUD-92300,\
      \ Mortgagee’s Assurance of Completion \nWhen funds to complete the energy package are escrowed,\
      \ the Mortgagee must \nexecute form HUD-92300, Mortgagee’s Assurance of Completion, to indicate\
      \ that the \nescrow for the energy package improvements has been established. \n\n \nxi. Completion\
      \ Requirements for Energy Efficient Mortgages \nWith the exception of 203(k), the energy package\
      \ is to be installed within 90 Days of the \nmortgage Disbursement. If the work is not completed\
      \ within 90 Days, the Mortgagee \nmust apply the EEM funds to a prepayment of the mortgage principal.\
      \ \nFor 203(k) Mortgages, the Mortgagee must follow the 203(k) escrow guidance. \nxii. Inspection\
      \ \nThe Mortgagee, the rater, or an International Code Council (ICC) Residential \nCombination Inspector\
      \ (RCI) or Combination Inspector (CI) may inspect the installation \nof the improvements. The Borrower\
      \ may be charged an inspection fee."
    drafter_attestation: Verbatim section from snapshot 8c03836f77f317e1; boundary human-curated + substring-verified
      (2026-07-23).
  judgment: false
