source:
  type: guide
  id: hud-4000-1-ii-c-energy-efficient-mortgages
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Energy
    Efficient Mortgages (04/29/2019)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Energy
    Efficient Mortgages (04/29/2019).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-c-energy-efficient-mortgages-full
  canonical_id: hud-4000-1-ii-c-energy-efficient-mortgages-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Energy Efficient
    Mortgages (04/29/2019)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Energy
      Efficient Mortgages (04/29/2019)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'c. Energy Efficient Mortgages (04/29/2019) i. Definitions The
      Energy Efficient Mortgage (EEM) program allows the Mortgagee to offer financing
      for cost-effective energy efficient improvements to an existing Property at
      the time of purchase or refinancing, or for upgrades above the established residential
      building code for New Construction. Cost Effective refers to the costs of the
      energy efficiency improvements that are less than the present value of the energy
      saved over the estimated useful life of those improvements. ii. Eligibility
      (A) Eligible Property Types EEM may be used with: • New Construction Properties
      (one- to four-units); • Existing Construction Properties (one- to four-units);
      • condominiums (one unit); or • Manufactured Housing. (B) Eligible Programs
      and Transactions Types The EEM program can be used in conjunction with any mortgage
      insurance under Title II, including: • 203(b) o Purchase o No cash-out refinance
      • 203(h) Mortgage Insurance for Disaster Victims • 203(k) (Standard and Limited)
      • Weatherization policy (Existing Construction only) iii. Standard Energy Package
      The energy package is the set of improvements agreed to by the Borrower based
      on recommendations and analysis performed by a qualified home energy rater.
      The improvements can include energy-saving equipment, and active and passive
      solar and wind technologies. The energy package can include materials, labor,
      inspections, and the home energy assessment by a qualified energy rater. If
      the Borrower desires, labor may include the cost of an EEM Facilitator (project
      manager). II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 8. Programs and Products - Energy Efficient
      Mortgages (04/29/2019) Handbook 4000.1 433 Last Revised: 11/26/2025 (A) Cost-Effective
      Test The financed portion of an energy package must be cost effective. A cost-effective
      energy package is one where the cost of the improvements, including maintenance
      and repair, is less than the value of the energy saved over the estimated useful
      life of those improvements. (B) Cost-Effective Test for New Construction For
      New Construction, the financed portion of an energy package includes only those
      cost-effective energy improvements over and above the greater of the following:
      • the latest energy code standard that has been adopted by HUD through a Federal
      Register notice; or • the applicable IECC year used by the state or local building
      code for New Construction. More information on this energy code can be obtained
      from the Department of Energy or the International Code Council. (C) Changes
      to the Energy Package after Mortgage Closing If the work that is done differs
      from the approved energy package, a change order along with a revised home energy
      audit must be submitted to the Direct Endorsement (DE) underwriter for approval.
      If the changes still meet the cost-effective test, no further analysis is required.
      If not, the funds for the work not included in the approval energy package must
      be used to pay down the mortgage principal. iv. Home Energy Report/Assessment
      The Borrower must obtain a home energy assessment. The purpose of the energy
      assessment under the EEM program is to identify opportunities for improving
      the energy efficiency of the home and their cost effectiveness. The assessment
      must be conducted by a qualified energy rater, assessor, or auditor using whole-home
      assessment standards, protocols and procedure. (A) Qualifications of Energy
      Raters/Assessors Qualified home energy raters/assessors must be trained and
      certified as one of the following: • Building Performance Institute Building
      Analyst Professional; • Building Performance Institute Home Energy Professional
      Energy Auditor; • Residential Energy Services Network Home Energy Rater; or
      • energy rater, assessor or auditor who meets local or state jurisdictional
      requirements for conducting residential energy audits or assessments, including
      training, certification, licensure and insurance requirements. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 8. Programs and Products - Energy Efficient Mortgages (04/29/2019)
      Handbook 4000.1 434 Last Revised: 11/26/2025 The home energy report must reflect
      one of the above professional credentials by the rater/assessor. (B) Home Energy
      Report The home energy report reflects recommendations of energy-saving improvements
      for the Borrower’s consideration. Included with the recommendations are estimates
      of energy savings and cost-effective analysis for each of the suggested improvements.
      These estimates consider energy costs in today’s dollars (present value). The
      Mortgagee must use the energy-savings information from the home energy report
      to determine that the cost-effective test is met for the financed energy package.
      (C) Home Energy Report for New Construction On newly constructed housing, the
      home energy report must identify improvements that are over and above the greater
      of the following: • the requirements of the latest energy code standard that
      has been adopted by HUD through a Federal Register notice; or • the applicable
      IECC year used by the state or local building code for New Construction. (D)
      Required Documentation The Mortgagee must obtain a copy of the home energy report.
      This report must not be greater than 120 Days old. The Mortgagee must submit
      two forms HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary, as described
      in the Underwriting Section below. v. Maximum Financeable Energy Package The
      maximum amount of the energy package that can be added to the Base Loan Amount
      is the lesser of: • the dollar amount of a cost-effective energy package as
      determined by the home energy audit; or • the lesser of 5 percent of: o the
      Adjusted Value; o 115 percent of the median area price of a Single Family dwelling;
      or o 150 percent of the national conforming mortgage limit. Energy Efficient
      Mortgage Calculator Tool The Mortgagee must calculate the dollar amount of a
      cost-effective energy package as determined by the home energy audit, as shown
      in Energy Package. The EEM Calculator, located in FHA Connection (FHAC) on the
      Case Processing screen, will perform the calculation of Maximum Financeable
      Energy Package. The EEM Calculator uses data entered for the Mortgage to calculate
      the maximum energy package. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 8. Programs and Products
      - Energy Efficient Mortgages (04/29/2019) Handbook 4000.1 435 Last Revised:
      11/26/2025 For a Streamline Refinance, the EEM Calculator uses the appraised
      value from the initial transaction, contained within FHA Connection records,
      as the Adjusted Value. vi. Maximum Mortgage Amount The maximum final Base Loan
      Amount is determined by adding the maximum financeable energy package amount
      to the initial maximum Base Loan Amount. For New Construction, the cost of the
      financeable energy package must be subtracted from the sales price when computing
      the Adjusted Value. When utilizing an EEM in conjunction with a 203(k) or Weatherization,
      the items included in the maximum financeable energy package must be excluded
      from the items included when calculating the initial maximum Base Loan Amount
      under these programs. The maximum FHA Nationwide Mortgage Limit for an area
      may be exceeded by the maximum financeable energy package. vii. Underwriting
      The Mortgagee must calculate the Borrower’s debt ratios using the initial Base
      Loan Amount plus the portion of the Upfront Mortgage Insurance Premium (UFMIP)
      attributable to the initial Base Loan Amount. (A) TOTAL Mortgage Scorecard For
      purposes of submission to the Technology Open To Approved Lenders (TOTAL) Mortgage
      Scorecard, the Mortgagee must utilize the initial Base Loan Amount prior to
      the addition of the financeable energy package. If the Mortgagee obtains an
      Accept or Approve on a mortgage application that does not include the financeable
      energy package, FHA will recognize the risk rating from TOTAL Mortgage Scorecard
      and permit the increase to the Mortgage Payment without re-underwriting or rescoring.
      The Mortgagee must provide a form HUD-92900-LT, without the financeable energy
      package, showing the qualifying ratios in the case binder. A second form HUD-92900-LT
      must be completed by the underwriter showing mortgage amount calculation that
      includes the financeable energy package, as reflected in FHAC. The second form
      must also be included in the case binder. The underwriter must attest on the
      second form HUD-92900-LT that they have reviewed the calculations associated
      with the energy efficient improvements and found the Mortgage and the Property
      to be in compliance with FHA’s underwriting instructions. (B) Manual Underwriting
      The Mortgagee must provide a form HUD-92900-LT, without the financeable energy
      package, showing the qualifying ratios in the case binder. A second form HUD-92900-
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 8. Programs and Products - Energy Efficient Mortgages
      (04/29/2019) Handbook 4000.1 436 Last Revised: 11/26/2025 LT must be completed
      by the underwriter showing mortgage amount calculation that includes the financeable
      energy package, as reflected in FHAC. The second form must also be included
      in the case binder. The underwriter must attest on the second form HUD-92900-LT
      that they have reviewed the calculations associated with the energy efficient
      improvements and found the Mortgage and the Property to be in compliance with
      FHA’s underwriting instructions. viii. Appraisals For Existing and New Construction,
      the appraisal does not need to reflect the value of the energy package that
      will be added to the Property. If the appraisal does include the value of the
      energy package, the value must be subtracted from the Property Value when computing
      the Adjusted Value. On the 203(k) program, the After Improved Value is to be
      used for the EEM process. ix. Cash-Out The Borrower may not receive cash back
      from the mortgage transaction. If an excess exists, funds must be applied to
      the principal Mortgage balance. x. Energy Efficient Mortgage Escrows For all
      Mortgages on existing Properties, except 203(k), if the energy package items
      are not complete by the time of closing, the Mortgagee must establish an escrow
      account for the remaining cost of the energy improvements in accordance with
      the Repair Completion Escrow Requirements. (A) 203(k) If the energy package
      is part of a Section 203(k) Rehabilitation Mortgage, then the escrowed amounts
      of the energy package must be included in the rehabilitation escrow account.
      (B) Borrower Labor Escrows may not include costs for labor or work performed
      by the Borrower (Sweat Equity). (C) Form HUD-92300, Mortgagee’s Assurance of
      Completion When funds to complete the energy package are escrowed, the Mortgagee
      must execute form HUD-92300, Mortgagee’s Assurance of Completion, to indicate
      that the escrow for the energy package improvements has been established. II.
      ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs
      Forward Mortgages 8. Programs and Products - Energy Efficient Mortgages (04/29/2019)
      Handbook 4000.1 437 Last Revised: 11/26/2025 xi. Completion Requirements for
      Energy Efficient Mortgages With the exception of 203(k), the energy package
      is to be installed within 90 Days of the mortgage Disbursement. If the work
      is not completed within 90 Days, the Mortgagee must apply the EEM funds to a
      prepayment of the mortgage principal. For 203(k) Mortgages, the Mortgagee must
      follow the 203(k) escrow guidance. xii. Inspection The Mortgagee, the rater,
      or an International Code Council (ICC) Residential Combination Inspector (RCI)
      or Combination Inspector (CI) may inspect the installation of the improvements.
      The Borrower may be charged an inspection fee. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages'
  judgment: false
