1. FHA Programs: Rehabilitation Loan,
EEM, & Solar and Weatherization
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2. FHA Specialty Programs
U.S. Department of Housing And
Urban Development
December 2010
Company
LOGO

3. Today’s Agenda
 FHA Rehabilitation Loan Programs (203k’s)
 Regular Rehabilitation Loan
 203(k)
 Streamline Rehabilitation Loan
 Streamlined 203(k)
 Energy Efficient Mortgage
 EEM
 Solar and Weatherization Programs

4. Two Rehabilitation Programs
 Regular Rehabilitation
 Also known as 203(k)
 Streamline Rehabilitation
 Also known as Streamlined 203(k)
 Announced in 2005
 Mortgagee Letter 2005 – 50
 Both available for purchase or refinance

5. Two Rehabilitation Programs (Cont.)
 Both allow for repairs to be financed
 One loan
 Repair costs funded at time loan
closes
 Sale proceeds disbursed at closing
 Lender or escrow holds repair funds
 Funds disbursed as work completed
 May require FHA inspections and/or
lender inspections

6. How It Works
 Borrower required to meet FHA’s
minimum cash investment
 Based on total combined purchase price or
appraised value plus rehabilitation costs
 Minimum 3.5%
 Downpayment if purchase
 More if sales price exceeds appraised
value
 Equity if refinance

7. How It Works – Continued
 Loan amount determined based on “110% of
After Improved Value” or “As Is Value plus
cost of repairs
 Whichever is less
 Both programs require work to be complete
 Within six (6) months of closing
 Landscaping and “luxury items” not allowed
under either program

8. How It Works – Continued
 Maximum 96.5% loan-to-value (LTV)
 Determined based on purchase price or
appraised value (whichever is less)
 Purchase or refinance if owned < 12
months
 Appraised value if refinance and owned >12
months
 Excluding upfront mortgage insurance
premiums

9. Example:
Purchase Price/Appraised Value $300,000.00
Rehabilitation Cost $ 14,700.00
Total Needed Financing Repairs $314,700.00
Required Investment (3.5%) 11,014.50
Base Loan Amount $303,685.00
*Note: Required investment only $514
more with rehabilitation loan
*Note: Upfront Mortgage Insurance added
to base loan amount

10. Rehabilitation Program Comparisons
 All features on Regular Rehab not
available on Streamlined Rehab
 Streamline Rehab intended to facilitate
uncomplicated repairs
 Both are great tools for “Real Estate
Owned” properties
 Both are great tools for “First Time
Homebuyers”
 Easier transition from renter to homeowner

11. Rehabilitation Program Comparisons
 Streamline Rehab  Regular Rehab
 No minimum required  $5,000 minimum
repair threshold repair cost threshold
 Maximum limit on  No maximum limit on
repairs = $35,000 repairs
 No general contractor or  General contractor and
architectural drawings normal architectural
required drawings required
 Allows for two payments  Maximum five
per contractor payments total to
general contractor

12. Rehabilitation Program Comparisons
Streamline Rehab Regular Rehab
 No special FHA  FHA Inspector
required inspections required for all repairs
 Under $15,000  All loan amounts
 Must use  Must use
licensed/bonded licensed/bonded
contractor contractor
 Self-help  Self-help
discouraged discouraged

13. Rehabilitation Program Comparisons
Streamline Rehab Regular Rehab
 Accessibility  Accessibility
improvements improvements
 Persons with  Persons with
disabilities disabilities
 No contingency  10% contingency reserve
reserve required required
 Lender may require  Lender may require more

14. Streamlined Rehab Eligible Repair Items
 Repair/Replace
 Roofs, gutters, downspouts
 Heating, ventilation, and A/C systems
 Plumbing and electrical systems
 Flooring
 Windows, doors, exterior siding
 Well; septic systems

15. Streamline Rehab Eligible Repairs
(Continued)
 Minor remodeling
 Not structural
 Painting
 Exterior/Interior
 Lead based paint abatement
 Free standing appliances
 Range, refrigerator, washer/dryer, etc.
*NOTE: This list is not all-inclusive

16. Ineligible Work Items Under the
Streamlined Rehab
Major rehabilitation
 Relocation of load bearing wall
 Room additions
 New construction
Repairs requiring detailed drawings
or architectural exhibits
Repair of structural damage

17. Regular Rehabilitation Eligible
Repairs (203 (k))
 Same items as in Streamlined Rehabilitation
(Streamlined Rehab 203(k) loan)
 See previous list (not all inclusive)
 Structural changes
 Room additions
 Additional living units (if allowed by city)
For more information on the 203(k) program
please visit:
http://www.hud.gov/offices/hsg/sfh/203k/203k--df.cfm

18. Final Notes On Rehab Programs
 Repair funds not used
 Not given to borrower
 Applied as principal reduction to mortgage
 No change of terms of mortgage
 Repair funds insufficient to complete work
 Borrower must pay out of own funds or may
reapply for another rehabilitation loan if eligible
 Regular Rehabilitation program can finance up
to six months of mortgage payments
 Not available on Streamline Rehabilitation

19. Energy Efficient Mortgage
(A.K.A. EEM)
May be used with other FHA
mortgages
No special underwriting or appraisal
requirements
May be able to finance 100% of the
energy improvement
 Based on lesser of three calculations

20. Energy Efficient Mortgage (A.K.A.
EEM) – Continued
 Lesser of three calculations used to determine
amount of maximum financed energy
improvement
 5% of the property value
 115% of the median area price
 150% of the Freddie Mac conforming loan limit

21. Energy Efficient Mortgage
(A.K.A. EEM) – Example
 Appraised Value/Sales Price $300,000
 Energy improvement costs $10,000
5% of value $300,000 x .05 = $15,000
115% of $265,250 median price = $305,000
150% of GSE is $417,000 = $625,500
 The maximum allowable financing for EEM
funding would be 115% calculation or $5,000
 Lesser of the three
 Would have to adjust energy improvements to fit
within limits or borrower pays difference

22. “Other” Repairs & Improvements
 Repairs & Improvements required by appraiser as
essential for property eligibility and to be paid by the
borrower
 May be added to sales price before calculating
mortgage amount
 Sales contract must identify borrower as responsible
for paying or completing repairs
 Amount added is lesser of three calculations
 Amount the value of the property exceeds sales price
 Appraiser’s estimate of repairs and improvements
 Amount of contractor’s bid (if available)

23. Energy – Related Weatherization
 Mortgage amount may be increased for cost of
items by
 $2,000 without a separate value determination or
 Up to $3,500 if supported by a value determination
by FHA approved appraiser or DE underwriter or
 More than $3,500 subject to value determination
by FHA approved appraiser or DE underwriter and
a separate site inspection
 Items include
 Thermostats, insulation, storm windows/doors,
weather stripping, caulking, etc.

24. Solar Energy Systems
 The cost of both active and passive solar
energy systems may be added directly to the
mortgage amount
 Before adding the Up Front Mortgage Insurance
Premium (UFMIP)
 After applying applicable Loan-to-value limits
 Statutory mortgage limit may be exceeded by 20% to
accommodate the cost of the system
 Limited to the lesser of
 Solar energy systems replacement cost
 It’s effect on the property’s market value

25. Where to Get More Information
 1 – 800 – CALL – FHA (1 – 800 – 225 – 5342)
 A source for all FHA questions
 Industry partners and Consumers
 www.hud.gov
 On-line resource for info about FHA and FHA
programs
 On-line source for all other HUD programs, grants,
forms, press releases, etc.
 User friendly
 www.fhaoutreach.gov/FHAFAQ
 On-line resource to frequently asked questions

26. www.hud.gov

27. www.hud.gov

28. www.fhaoutreach.gov/FHAFAQ

29. The U.S. Department of Housing and Urban
Development
would like to thank the
California Association of Mortgage Professionals
And
Oregon Association of Mortgage Professionals
for your interest in
FHA and FHA programs