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Stylized Text: Home Energy Ratings.

Financing Energy Efficiency: An EEM Handbook


Chapter 23
Maximum Loan Amounts an LTV and TLTV Ratios


Energy conservation
and rehabs
A Mortgage may finance the purchase of a property that is to be retrofitted with energy conservation components, rehabilitated, renovated or refurbished. If the Seller considers the cost of such improvements in setting the terms of the Mortgage, the purchase price may be considered the price paid for the Mortgaged Premises by the purchaser plus the actual cost of improvements. The appraisal must state the estimated market value after completion of the improvements and be supported by a satisfactory completion certificate. (See Form 442 for suggested format.) 

(a) Energy retrofit not completed before Mortgage delivery
Unless Escrows are established in accordance with the requirements of Section 22.17 or for energy retrofit in accordance with the requirements of this Section 23.8(a), all improvements must be completed before delivery of the Mortgage to Freddie Mac. If the improvements are energy conservation components retrofitted to the Mortgaged Premises and the retrofit has not been completed before delivery of the Mortgage to Freddie Mac, the Seller/Servicer may disburse the funds required for the completion of the improvements into an Escrow account (meeting the requirements of Section 23.8(b)) in the Borrower's name and then deliver the Mortgage to Freddie Mac.

(b) Seller Warranties
By delivering a Mortgage secured by a property that has an incomplete energy retrofit (as described above), the Seller warrants that the following requirements are met: 

  1. The improvements will be satisfactorily completed within 120 days after the Delivery Date. 
  2. An Escrow account in the Borrower's name has been established and disbursements from that account are controlled by the Seller or the Servicer. 
  3. The amount of the Escrow account is not less than the funds required to complete the improvements and not more than 10 percent of the original amount of the Mortgage. 
  4. An Escrow agreement exists in the Seller's file which includes a description of the energy work to be completed and a provision stating that , in the event of default or if the improvements are not completed within 120 days after the Deliver Date, the Seller or the Servicer must either close the Escrow account and apply the remaining balance in the Escrow account to curtail the Mortgage if the work on the improvements has not begun, or complete the improvements if the work has begun. 
  5. Upon completion of the improvements, the Seller or the Servicer will have the property inspected and will retain in the Mortgage file a Form 442 certifying completion of the improvements. 
When completing Form 11 or Form 13SF, the Seller should enter the date of Mortgage funding for "Date of Note," not the anticipated date of final disbursement of Escrow Funds. 


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