II.A.8.l. Weatherization (09/14/15)

Owned by Kacey Olson
Nov 21, 2018
3 min read

© HUD Single Family Housing Policy Handbook 4000.1

The weatherization product permits the Borrower to finance the cost of eligible energy-related weatherization improvements, in conjunction with a purchase or refinance.

Included in this section are:

i. Eligibility
ii. Completion Requirements for Weatherization Measures

i. Eligibility

(A) Eligible Programs and Transaction TypesWeatherization improvements may be financed in conjunction with the following:

  • Section 203(b)
    • purchase transaction
    • no cash-out refinance transaction
  • Section 203(h) Mortgage Insurance for Disaster Victims
  • Energy Efficient Mortgages (EEM)

For financing of weatherization under the 203(k) Rehabilitation Mortgage Insurance Program, refer to 203(k) Rehabilitation Mortgage Insurance Program.

(B) Eligible Property TypesWeatherization improvements may be used on the following property types:

  • existing Properties (one- to four-units)
  • condominiums (one unit)
  • Manufactured Housing (single unit)

(C) Eligible Weatherization ItemsEligible energy-related weatherization items include the following measures:

  • air sealing (including weather-stripping doors, caulking window and plumbing penetrations)
  • insulation (attic, floors, walls, basement)
  • duct sealing and insulation
  • smart thermostats and equipment controls
  • windows and doors
  • low flow water fixtures
  • carbon monoxide monitors and other combustion appliance safety measures

(D) Maximum Dollar AmountThe maximum allowable cost of energy-related weatherization items that can be financed is:

  • $2,000 (not to exceed actual cost) without a separate value determination;
  • $3,500 (not to exceed actual cost) if supported by a value determination made by an approved FHA Roster Appraiser or Direct Endorsement (DE) underwriter; or
  • no limit (not to exceed actual cost) if:
    • supported by a value determination made by an approved Appraiser or underwriter; and
    • a separate on-site inspection is made by an FHA Roster Inspector or DE staff Appraiser.

(E) Required DocumentationThe Mortgagee must document the cost of work including the weatherization materials and labor.

(F) Maximum Mortgage Amount CalculationWhen determining the Adjusted Value, the dollar limit of the energy-related weatherization items may be added to both the sales price and the Property Value.

(G) Weatherization Combined with Energy Efficient MortgageFor existing Properties, energy-related weatherization items may be combined with the EEM.

(H) Cash-OutThe Borrower may not receive cash back from the mortgage transaction. If an excess exists, funds must be applied to the principal Mortgage balance.

(I) EscrowsThe Mortgagee must establish an escrow account for the remaining costs of the energy improvements if the installation of weatherization items is not complete by the time of closing for all Mortgages on existing Properties, except 203(k). The Mortgagee must establish an escrow account for the remaining cost of the energy improvements in accordance with the Repair Completion Escrow Requirements.If the costs of the energy improvements and weatherization items are part of a 203(k) Rehabilitation Mortgage, then the escrowed amounts of the energy improvements and weatherization items must be included in the rehabilitation escrow account.Escrows may not include costs for labor or work performed by the Borrower (Sweat Equity).

(J) Form HUD-92300, Mortgagee’s Assurance of CompletionWhen funds to complete weatherization improvements are escrowed, the Mortgagee must execute form HUD-92300, Mortgagee’s Assurance of Completion, to indicate that the escrow for weatherization improvements has been established.

ii. Completion Requirements for Weatherization Measures

(A) Time of CompletionInstallation of weatherization improvements must be completed within:

  • 30 Days of the mortgage Disbursement; or
  • 90 Days of the mortgage Disbursement if the improvements are part of an energy package for an EEM.

The Mortgagee must apply the remaining weatherization escrow funds to a prepayment of the mortgage principal if the work is not completed within the required time frames.

Any funds remaining in the escrow account at the end of the improvement period must be applied to pay down the mortgage principal.

(B) Escrow Closeout CertificationAfter the repair or rehabilitation escrow account is closed, the Mortgagee must complete the Escrow Closeout Certification screen in FHAC within 30 Days after the escrow account is closed.

(C) InspectionThe Mortgagee or their agent must inspect the weatherization items or obtain evidence from a local authority that the system was installed in accordance with local requirements.