Many U.S. homeowners are now eligible for up to $25,000 in federally-insured loans to make energy-efficient upgrades such as adding insulation, sealing ducts or replacing windows, the Obama administration announced Thursday.
Consumers with good credit scores, manageable debt and some equity in their homes can get "PowerSaver" loans at or below market rates to finance efficiency measures that also include new HVAC systems, water heaters, solar panels and geothermal heating/cooling.
"We're making it easier for American homeowners to save money by saving energy," said Energy Secretary Steven Chu, noting they spend an average of $2,000 each year on utility bills.
Eighteen regional and national lenders, including Quicken, have signed on to the two-year pilot program, said Secretary of Housing and Urban Development Shaun Donovan, who joined Chu in making the announcement. Donovan said he expects the loans will serve about 30,000 homeowners and will not only save them money on energy bills but also reduce pollution and create at least 3,000 construction jobs.
The loans are part of the Obama administration's broader efforts to improve home energy efficiency. In November, Vice President Joe Biden announced a pilot program in which nine communities will test a new Home Energy Score, which ranks a home's efficiency on a scale of one to 10.
Similar to the miles-per-gallon label for cars, the score will also tell consumers how their homes compare with others and how much money they could save with efficiency upgrades based on an energy audit.
"The government should not be in the business of selecting which home improvement projects homeowners can finance," says David Kreutzer, an energy expert at the Heritage Foundation, a Washington-based research group often critical of President Obama's environmental policies.
Kreutzer says only homeowners who could qualify for normal home-equity loans will likely meet the lending criteria, which include a credit score of at least 660 and a 45% debt-to-income ratio (on monthly basis, debt payments cannot exceed 45% of income.)
"This looks like a program to subsidize home improvements for those who don't need subsidies," he says.
Steven Nadel, executive director of the private American Council for an Energy-Efficient Economy, disagrees. "It's a useful step," he says of the loans, adding that the energy-retrofit market has been growing on its own but slowly. "This will help."
Donovan said the Home Energy Score could help prove the payback for various upgrades and the PowerSaver loans could expand demand for them that will prompt greater private investment.
The Federal Housing Administration will cover up to 90% of the loans' amount in the case of default, leaving the remaining risk to the lenders. The participating lenders include:
1. Admirals Bank
2. AFC First Financial Corporation
3. Bank of Colorado
4. City of Boise, Idaho
5. Energy Finance Solutions
6. Enterprise Cascadia
7. HomeStreet Bank
8. Neighbor's Financial Corporation
9. Paramount Equity Mortgage, Inc.
10. Quicken Loans
11. SOFCU Community Credit Union
12. Stonegate Mortgage Corporation
13. Sun West Mortgage Company, Inc.
14. The Bank at Broadmoor
15. University of Virginia Community Credit Union, Inc.
16. Viewtech Financial Services, Inc.
17. WinTrust Mortgage
18. W. J. Bradley Mortgage Capital Corporation