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HUD says that it expects the loan's cost to be a major selling point. In its FAQs for Consumers, the agency states: PowerSaver loans will be less expensive and easier to

access than other kinds of financing for home improvements, such as credit cards and

home equity loans. This is because FHA is providing mortgage insurance and other

incentives to lenders to lower costs for homeowners.

FHA does not set the program's mortgage rates; that's done by lenders competing for business. However, the presence of FHA mortgage insurance does lower the risk tolenders, making the loans more attractive to originate and keeping rates down. In additionto the interest, there is an annual mortgage insurance premium of 1% of the loan amount.The loan amortization takes place over a 15- to 20-year period, depending on the type of improvements chosen. There is no prepayment penalty and, because the funds arefunneled into home improvement projects, the interest is tax-deductible for those whoitemize.

How is getting a PowerSaver loan different?

Unlike other FHA loans, only an exterior inspection is required instead of a full appraisal.This reduces the cost of taking out a PowerSaver loan. Parties who profit from your improvement, like your builder or contractor, are allowed to pay for discount points,which would lower your home equity loan's interest rate. Your costs may be financed intoyour new loan if you have enough home equity.FHA strongly encourages a home energyaudit prior to beginning a PowerSaver project. It can locate areas of potential savings andhelp you make the best choices in home improvements.

PowerSaver loans are not for underwater homeowners. The combined total of the newPowerSaver loan plus the current first mortgage cannot exceed the appraised value of the

property (the appraisal does include the added value of the prospective improvements).

Where can you find a PowerSaver lender?

The Powersaver is in its early stages, and will run as a pilot program for two years.Initially, eighteen lenders have been authorized to offer the PowerSaver loan as part of the pilot.FHA mortgage blogger John Burke says it defeats the purpose of the programwhen it isn't widely available. "The PowerSaver program simply it isn't offered on a widescale," he says, "As of the April 21st, there are only 18 participating lenders and in mymind that's a problem. If you really want to help homeowners, don't restrict programs likethis to only a handful of lenders."

HUD says it limits the program to a few lenders initially because it wants to give the pilotthe best chance of succeeding. The chosen FHA lenders meet several requirements,including a track record with similar lending initiatives, adequate computer systems andaudit capabilities, and the demonstrated ability to work collaboratively with public sector agencies.

The first eighteen lenders are:



* Admirals Bank * AFC First Financial Corporation* Bank of Colorado* City of Boise, Idaho* Energy Finance Solutions

* Enterprise Cascadia* HomeStreet Bank * Neighbor's Financial Corporation* Paramount Equity Mortgage, Inc.* Quicken Loans* SOFCU Community Credit Union* Stonegate Mortgage Corporation* Sun West Mortgage Company, Inc.* The Bank at Broadmoor * University of Virginia Community Credit Union, Inc.* Viewtech Financial Services, Inc.

* WinTrust Mortgage* W. J. Bradley Mortgage Capital Corporation

Other programs offered by a larger number of lenders include FHA Energy-EfficientMortgages (EEMS) and 203(k) rehabilitation loans. With the huge variety of homeowner financial positions and needs, additional financing options can help increase the number of home energy improvements nationwide. For many homeowners and communities, thePowerSaver loan may offer the most appealing choice.

Gina Pogol

Gina Pogol has been writing about mortgage and finance since 1994. In addition to adecade in mortgage lending, she has worked as a business credit systems consultant for Experian and as an accountant for Deloitte. She graduated with High Distinction from theUniversity of Nevada with a BS in Financial Management.

Industry fact sheet • http://portal.hud.gov/ •http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_12645.pdf

http://Interview, Dan Keller

http://Interview, John Burke

FAQs for comsumers • http://portal.hud.gov •http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_12643.pdf

http://portal.hud.gov/

http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_12645.pdf







