Federal Housing Administration (FHA): Notice of FHA PowerSaver Home Energy Retrofit Loan Pilot Program: Request for Comments and Expressions of Interest, 69112-69120 [2010-28015]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 75, Number 217 (Wednesday, November 10, 2010)]
[Notices]
[Pages 69112-69120]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28015]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5450-N-01]


Federal Housing Administration (FHA): Notice of FHA PowerSaver 
Home Energy Retrofit Loan Pilot Program: Request for Comments and 
Expressions of Interest

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: This notice announces HUD's proposal to conduct an FHA Home 
Energy Retrofit Loan Pilot Program (Retrofit Pilot Program or Pilot 
Program) known as FHA PowerSaver. The Consolidated Appropriations Act, 
2010 directs HUD to conduct an Energy Efficient Mortgage Innovation 
pilot program targeted to the single family housing market. The 
Retrofit Pilot Program is designed by HUD to meet this statutory 
directive and provides funding to support that effort.
    Under the Retrofit Pilot Program, HUD, through FHA-approved 
lenders, will insure loans for homeowners who are seeking to make 
energy improvements to their homes. HUD intends to select a limited 
number of lenders to participate in the Retrofit Pilot Program. The 
Pilot Program will be for loans originated during a 2-year period, will 
be restricted to lenders approved by HUD to participate in the Pilot 
Program, and will be conducted in geographic areas identified by HUD as 
optimum locations to conduct the Pilot Program. In making these 
determinations, HUD will consider the factors and criteria that are 
proposed in this notice to establish the framework for the Pilot 
Program, and for which HUD specifically solicits public comment.\1\
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    \1\ Section 470 of the Housing and Urban-Rural Recovery Act of 
1983 (42 U.S.C. 3542) provides that: ``No demonstration program not 
expressly authorized in law may be commenced by the Secretary of 
Housing and Urban Development until (1) a description of such 
demonstration program is published in the Federal Register, which 
description may be included in a notice of funding availability; and 
(2) there expires a period of sixty calendar days following the date 
of such publication, during which period the Secretary shall fully 
consider any public comments submitted with respect to such 
demonstration program.'' The Retrofit Pilot Program is specifically 
authorized by the Consolidated Appropriations Act, 2010. 
Accordingly, HUD is not required to solicit comment on this 
demonstration. Nevertheless, HUD welcomes public comment on the 
proposed pilot program.
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    For this Pilot Program, HUD will deploy up to $25 million 
appropriated by the Act for an Energy Efficient Mortgage Innovation 
Fund pilot program directed at the single family housing market. HUD 
will utilize those funds primarily to provide incentive payments with 
grant funds to participating lenders to support approved activities 
that deliver bona fide benefits to borrowers, with remaining funds 
available to support the evaluation of the Pilot Program.
    Following the public comment period, HUD will announce the lenders 
that have been selected to participate in the Pilot Program, the 
geographic areas in which the Pilot Program will be conducted, and any 
modifications to the Retrofit Pilot Program made in response to public 
comment and/or in response to HUD's further consideration of how the 
pilot program should be structured. At the conclusion of the Pilot 
Program, HUD will assess the results of the Retrofit Pilot Program, and 
determine any additional action based on that assessment. HUD will 
assess the extent to which energy retrofits under the Pilot Program 
delivered expected benefits in terms of energy reductions, cost 
savings, and property value improvement, among other results.
    In addition to seeking comments on the proposed Pilot Program, HUD 
invites lenders interested in participating in this Pilot Program to 
notify HUD of such interest as provided in Appendix A to this notice.

DATES: Comment Due Date: December 27, 2010.

ADDRESSES: Note: The following procedures pertain to the submission of 
general comments on this notice. Lenders interested in participating in 
this Pilot Program must e-mail their Expressions of Interest to 
FHAPowerSaver@hud.gov in accordance with Appendix A of this notice.
    Interested persons are invited to submit comments regarding this 
notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street, SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
https://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
https://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
notice. No Facsimile Comments. Facsimile (FAX) comments are not 
acceptable.

    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-708-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal

[[Page 69113]]

Information Relay Service at 800-877-8339. Copies of all comments 
submitted are available for inspection and downloading at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Patricia McBarron, Office of Single 
Family Housing Development, Office of Housing, Department of Housing 
and Urban Development, 451 7th Street, SW., Washington, DC 20410-8000; 
telephone number 202-708-2121 (this is not a toll-free number). Persons 
with hearing or speech impairments may access this number through TTY 
by calling the toll-free Federal Information Relay Service at 800-877-
8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. Energy Efficient Mortgage Innovation Pilot Program

    The Consolidated Appropriations Act, 2010 (Pub. L. 111-117, 
approved December 16, 2009, 123 Stat. 3034) (2010 Appropriations Act), 
which appropriated Fiscal Year (FY) 2010 funds for HUD, among other 
agencies, appropriated $50 million for an Energy Innovation Fund to 
enable HUD to catalyze innovations in the residential energy efficiency 
sector that have the promise of replicability and help create a 
standardized home energy efficient retrofit market. Of the $50 million 
appropriated for the Energy Innovation Fund, the 2010 Appropriations 
Act stated that ``$25,000,000 shall be for the Energy Efficient 
Mortgage Innovation pilot program directed at the single family housing 
market.'' (See Pub. L. 111-117, at 123 Stat. 3089.)
    In considering how to structure the pilot program directed by the 
2010 Appropriations Act, HUD looked to the findings of the 
Administration's Recovery through Retrofit Report, which specifically 
addressed retrofitting homes for energy efficiency, and the suitability 
of building the pilot program by supplementing FHA's Title I Property 
Improvement Loan Insurance program.

B. Recovery Through Retrofit

    On October 19, 2009, the Vice President and the White House Middle 
Class Task Force released the Recovery through Retrofit Report (RTR 
Report), which builds on the foundation laid out in the American 
Recovery and Reinvestment Act (Pub. L. 111-5, approved February 17, 
2009) to expand green job opportunities in the United States and boost 
energy savings for middle class Americans by retrofitting homes for 
energy efficiency.\2\ The White House Council on Environmental Quality 
developed the Report through an interagency process, involving eleven 
Departments and Agencies (including HUD) and 6 White House offices.
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    \2\ Middle Class Task Force and Council on Environmental 
Quality, Recovery through Retrofit (2009). https://www.whitehouse.gov/assets/documents/Recovery_Through_Retrofit_Final_Report.pdf.
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    The RTR Report recognizes that making American homes and buildings 
more energy efficient presents an unprecedented opportunity for 
communities throughout the country. The funding of home retrofit 
projects can potentially help people earn money as home retrofit 
workers, while also helping them save money by lowering their utility 
bills. By encouraging nationwide home energy efficiency improvements, 
workers of all skill levels can be trained, engaged, and have the 
opportunity to participate in expanding a national home retrofit 
market. According to the RTR Report, there are almost 130 million homes 
in this country,\3\ generating more than 20 percent of our Nation's 
carbon dioxide emissions.\4\ The RTR Report indicates that existing 
home energy retrofit techniques and technologies can reduce home energy 
use by up to 40 percent per home and lower associated greenhouse gas 
emissions by up to 160 million metric tons annually by the year 
2020.\5\ The RTR Report also stated that home energy efficiency 
retrofits have the potential to reduce home energy bills by $21 billion 
annually.\6\
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    \3\ U.S. Census Bureau, American Housing Survey National Tables: 
2007, All Housing. https://www.census.gov/hhes/www/housing/ahs/ahs07/ahs07.html.
    \4\ U.S. Energy Information Agency, ``U.S. Carbon Dioxide 
Emissions from Energy Sources: 2008 Flash Estimate.'' https://www.eia.doe.gov/oiaf/1605/flash/pdf/flash.pdf.
    \5\ Choi Granade, H; J Creyts; A Derkach; Ph Farese; and S. 
Nyquist, K. Ostrowski, ``Unlocking Energy Efficiency in the U.S. 
Economy,'' July 2009.
    \6\ Id.
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    The RTR Report identified several barriers that have prevented a 
self-sustaining retrofit market from forming. Among other barriers, the 
RTR Report found that homeowners face high upfront costs and many are 
concerned that they will be prevented from recouping the value of their 
investment if they choose to sell their home. The upfront costs of home 
retrofit projects are often beyond the average homeowner's budget.\7\
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    \7\ Middle Class Task Force and Council on Environmental 
Quality, Id.
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C. Title I Property Improvement Loan Insurance Program

    Through the Title I Property Improvement Loan Insurance program 
(Title I program), FHA offers consumers the opportunity to obtain 
affordable home improvement loans by insuring loans made by private 
lenders to improve properties that meet certain requirements. Lending 
institutions make loans from their own funds to eligible borrowers to 
finance these improvements. The program is authorized by section 2 of 
Title I of the National Housing Act (12 U.S.C. 1703). Specifically, 
under section 2(a) of the National Housing Act, HUD is authorized to 
help homeowners finance alterations, repairs, and improvements in 
connection with existing structures or manufactured homes. The Title I 
program regulations are codified in 24 CFR part 201.
    Eligible borrowers include owners of the properties to be improved, 
the person leasing the property (provided that the lease will extend at 
least 6 months beyond the date when the loan must be repaid), or 
someone purchasing the property under a land installment contract. Only 
lenders approved by HUD specifically for the Title I program can make 
loans covered by Title I loan insurance. Title I loans can be disbursed 
directly to the borrower or, if the loan is made through a dealer, the 
disbursement will be made jointly to the dealer and the borrower.
    Title I program loans may be used to finance permanent property 
improvements that protect or improve the basic livability or utility of 
the property--including manufactured homes, single family and 
multifamily homes, nonresidential structures, and the preservation of 
historic homes. The loans can also be used for fire safety equipment. 
The Title I program may be used to insure such loans for up to 20 years 
on either single family or multifamily properties. The maximum loan 
amount is $25,000 for improving a single family home or a 
nonresidential structure. Funds can also be used for the construction 
of a nonresidential structure. FHA insures private lenders against the 
risk of default for up to 90 percent of any single loan, although FHA 
liability is capped at the lender's reserve pool--10 percent of the 
amount of all insured Title I loans in the financial institution's 
portfolio.

D. Goals of the Home Energy Retrofit Loan Pilot Program

    FHA's goals for the Pilot Program are: (1) To facilitate the 
testing and scaling of a mainstream mortgage product for

[[Page 69114]]

home energy retrofit loans that includes liquidity options for lenders, 
resulting in more affordable and widely available loans than are 
currently available for home energy retrofits; and (2) to establish a 
robust set of data on home energy improvements and their impact--on 
energy savings, borrower income, property value, and other metrics--for 
the purpose of driving development and expansion of mainstream mortgage 
products to support home energy retrofits. More broadly, FHA recognizes 
that affordable and available financing in and of itself may not drive 
widespread adoption of home energy retrofits in every market; however, 
research suggests that lack of financing is a primary barrier.\8\ Thus, 
FHA intends for the Pilot Program to help determine the extent to which 
affordable and available financing, along with other strategies and 
tactics, can increase retrofit activity among homeowners.
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    \8\ Choi Granade, H; J Creyts; A. Derkach; Ph. Farese; and 
S.Nyquist, K. Ostrowski, Unlocking Energy Efficiency in the U.S. 
Economy, July 2009.
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    As a result of discussions with national experts in housing finance 
and home energy efficiency, HUD determined that utilizing the existing 
FHA Title I program, with additional incentives and requirements, is 
the most efficient and effective opportunity it could deploy to deliver 
federally insured financing to homeowners in markets that are ready and 
able to utilize it. After analyzing the viability of the Title I 
program to achieve these goals, FHA determined that several changes to 
the program are necessary for the purposes of the Pilot Program. These 
changes are described in detail in Section II.D. of this notice. 
Broadly, the changes are intended to protect consumers, provide low-
cost financing, and generate lender and secondary market participation 
in home energy retrofit loans.
    Section II of this notice, which immediately follows, presents the 
structure, requirements, and criteria that will govern HUD's proposed 
Retrofit Pilot Program, and HUD welcomes comment on all aspects of the 
proposed pilot program. HUD invites interested lenders to advise HUD of 
their interest, as described in Appendix A of this notice, so that HUD 
may contact them and explore their interest and the possibility of 
their participation in the pilot program. No proprietary information 
should be submitted by any interested lender, only expressions of 
interest in participating.
    After reviewing public comments submitted in response to HUD's 
solicitation of comment, HUD will issue a second Federal Register 
notice that will formally announce the establishment of the Retrofit 
Pilot Program, and the commencement date.

II. The Home Energy Retrofit Loan Pilot Program

A. Authority

    The Retrofit Pilot Program is authorized by the provisions of the 
Energy Innovation Fund of the 2010 Appropriations Act, which directs 
HUD to conduct an Energy Efficient Mortgage Innovation pilot program 
targeted to the single family housing market (Pub. L. 111-117, at 123 
Stat. 3089). The Pilot Program is based on the requirements of Title I, 
section 2 of the National Housing Act (12 U.S.C. 1703). Under section 
2(a) of the National Housing Act, HUD is authorized to provide loan 
insurance in order to help homeowners finance alterations, repairs, and 
improvements in connection with existing structures or manufactured 
homes. HUD's implementing regulations are codified at 24 CFR part 201.

B. Duration and Geographic Scope

    1. Duration. The Retrofit Pilot Program will be conducted for loans 
originated during a period of 2 years commencing on the effective date 
specified by the final notice that announces and establishes the Pilot 
Program. HUD, however, may extend the duration of the Pilot Program, 
after its commencement, beyond the 2-year period to accurately assess 
the Pilot's effectiveness. HUD will announce any such extension through 
Federal Register notice.
    2. Geographic scope. The success of the Retrofit Pilot Program and 
its potential to inform further efforts to expand financing for energy-
efficient home retrofits will be advanced by focusing on properties 
located in communities that have already taken affirmative steps to 
address energy efficiency retrofits. HUD is aware that a number of 
communities have already developed the programmatic infrastructure to 
help ensure that the critical non-financial components of a holistic 
retrofit initiative are in place. In selecting communities in which to 
conduct the Pilot Program, HUD will target communities that have 
already developed a robust home energy efficiency retrofit 
infrastructure.
    The Department of Energy's (DOE's) Energy Efficiency and 
Conservation Block Grants (EECBG) program is authorized under Title V, 
Subtitle E of the Energy Independence and Security Act (EISA), signed 
into law on December 19, 2007. Through formula and competitive grants 
administered by DOE, this program empowers local communities to make 
strategic investments to meet the nation's long-term goals for energy 
independence and leadership on climate change.
    With funding for the EECBG program provided by the American 
Recovery and Reinvestment Act, DOE initiated the Retrofit Ramp-up 
Program, now known as the Better Buildings program, a demonstration 
program directed to stimulating activities and investments that can: 
(1) Deliver verified energy savings from a variety of projects in the 
local jurisdiction of the applicant, with a particular emphasis on 
efficiency improvements in residential, commercial, industrial, and 
public buildings; (2) achieve broader market participation and greater 
efficiency savings from building retrofits; (3) highly leverage grant 
funding in order to significantly enhance the resources available for 
supporting the program; (4) sustain themselves beyond the grant monies 
and the grant period by designing a viable strategy for program 
sustainability; (5) serve as pilot building retrofit programs that 
demonstrate the benefits of gaining economy of scale; and (6) serve as 
examples of comprehensive community-scale energy-efficiency approaches 
that could be replicated in other communities across the country.
    Under the Better Buildings Program, approximately $485 million was 
allocated by DOE through competitive grants to initiatives in the 
following locations: Austin, TX; 16 towns in Maryland: Berlin, 
Cambridge, Chestertown, Cumberland, Denton, Easton, Elkton, Frostburg, 
Oakland, Princess Anne, Dundalk, Westminster, Havre de Grace, 
Salisbury, Takoma Park, and University Park, MD; Fayette County, PA; 
Bedford, NY; Berlin, Nashua, and Plymouth, NH; Boulder County, City and 
County of Denver, Garfield County, and Eagle County, CO; Camden, NJ; 
Chicago region, IL; Cincinnati, Ohio and northeast Kentucky; Consortium 
of 14 Connecticut Towns: Bethany, Cheshire, East Haddam, East Hampton, 
Glastonbury, Lebanon, Mansfield, Portland, Ridgefield, Weston, 
Westport, Wethersfield, Wilton and Windom; Detroit, Grand Rapids, and 
southeast MI; Greensboro, NC; Indianapolis and Lafayette, IN; Kansas 
City, MO; Los Angeles, San Francisco Bay Area, Sacramento, San Diego, 
and Santa Barbara County, CA; Lowell, MA; Madison, Milwaukee, and 
Racine, WI; Maine statewide; Missouri statewide; New York statewide; 
Omaha and

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Lincoln, NE; Oregon statewide; Philadelphia, PA; Phoenix, AZ; Riley 
County, KS; San Antonio, TX; Seattle, and Bainbridge Island, WA; Select 
Southeastern cities: Atlanta GA, Carrboro NC, Chapel Hill, NC, 
Charlotte, NC, Charleston, SC, Charlottesville, VA, Decatur GA, Hampton 
Roads/Virginia Beach, VA, Huntsville, AL, Jacksonville FL and New 
Orleans, LA; Toledo, OH; and U.S. Virgin Islands.
    The locations listed above are all eligible markets for lenders to 
serve in the Pilot. In addition, FHA will consider lenders' interest in 
other communities, subject to an assessment of such communities' 
infrastructure for implementing residential retrofit programs. HUD 
expects to consult with DOE in such cases. In providing HUD with 
Expressions of Interest to Participate, lenders must specify the 
market(s) they intend to target.
    FHA considered targeting the pilot to a smaller number of markets, 
which may have increased the likelihood of lender competition within 
some markets, potentially benefitting consumers. FHA determined that 
such an approach could limit the number and diversity of lenders that 
could participate in the program overall, however. FHA determined it 
was important for the Pilot to be open to a reasonably wide range of 
lenders--by size and type, as well as service area--especially given 
the challenging conditions facing lenders in the current environment, 
which may create barriers to participation for some, even if 
interested. In selecting lenders to participate, HUD will evaluate the 
extent to which lenders intend to provide loans at the most favorable 
rate to consumers, thus directly addressing a major benefit that lender 
competition would potentially foster.

C. Lender Eligibility

    Lender participation in the Retrofit Pilot Program is voluntary. Of 
the pool of interested lenders that meet the criteria described in 
Section II of this notice, HUD intends to select a limited number of 
lenders to participate in the Retrofit Pilot Program. HUD is currently 
undertaking efforts to identify FHA-approved lenders that may be 
suitable candidates for participation in the Retrofit Pilot Program. To 
be eligible, lenders must satisfy the criteria set forth in this 
Section II.C. HUD reserves the right to terminate a lender's 
participation in the Retrofit Pilot Program for unacceptable 
performance.
    1. Approval as an FHA Title I or Title II program lender. Lenders 
must hold valid Title I contracts of insurance and be approved pursuant 
to the requirements of 24 CFR part 202 to originate, purchase, hold, 
service, or sell loans insured under the Title I program regulations at 
24 CFR part 201. However, approved Title II lenders may obtain Title I 
eligibility under an expedited process.
    2. Experience with similar lending initiatives. Lenders must be 
able to demonstrate experience with the type of lending initiative 
being undertaken in the Retrofit Pilot Program. In particular, HUD will 
consider the extent to which lenders have experience in successfully 
originating and/or servicing small loans, home equity loans, second 
liens, FHA section 203(k) rehabilitation loans, and Title I Property 
Improvement Loans. Lenders that do not have experience in such lending 
may still be able to participate in the Pilot Program to the extent 
they can demonstrate how their other experience is relevant to 
determining their ability to participate in the pilot, and they agree 
to meet the Title I requirements before participation in the pilot 
program.
    3. Computer system capabilities. Lenders must have the technical 
capability to interface with FHA through FHA Connection. In addition, 
lenders must have the technical capability to interface with any other 
computer systems utilized by FHA or its contractors pertaining to the 
Retrofit Pilot Program.
    4. Audit capabilities. Lenders must have a demonstrated capacity to 
provide timely reports to FHA on origination and performance of 
retrofit loans. FHA envisions requiring monthly reports on loan and 
portfolio performance. In addition, a lender must be able to provide an 
electronic loan package to HUD for a random sample of loans chosen for 
quality reviews.
    5. Collaborative capacity. Lenders must have demonstrated capacity 
to work with public sector agencies, nonprofit organizations, 
utilities, and/or home improvement contractors.

D. Lender Incentives

    HUD recognizes that even with Federal mortgage insurance such as 
would be available under the Pilot Program, small loans for home energy 
retrofits may have relatively high transaction costs for lenders, 
discouraging some from offering such loans and forcing others that do 
offer them to increase costs to borrowers. HUD will utilize the 
appropriated funds provided under the Act to provide lender incentive 
payments to support activities that lower costs to borrowers. Eligible 
uses of such payments will include lowering loan interest rates and, 
for lenders that will also service their own loans, reducing servicing 
costs. HUD will also consider other proposed uses of such funds. Any 
use of funds must show, to HUD's satisfaction, bona fide benefit to 
borrowers. The amount of payment to each lender and the eligible uses 
of funds by each lender will be determined by HUD based on the lender's 
Expression of Interest. A significant factor in determining payment 
amounts to each lender will be the number of loans the lender 
anticipates making during the 2-year period of the Pilot Program. 
Lenders will be required to report to HUD on their use of incentive 
payments funds.
    HUD anticipates that the amount of grant funds will not exceed $5 
million per lender.
    Funds may be available to lenders who request them, but are not 
required for participation. Lenders who do not seek funds may still 
participate in the Pilot Program. HUD is specifically seeking comment 
on the incentive payments available under the program.

E. Selection of Lenders

    As noted above, lenders interested in potentially participating in 
the Retrofit Pilot Program must submit an Expression of Interest using 
the template in Appendix A and following the instructions in this 
notice. Lenders that fail to do so will not be considered for 
participation.
    In evaluating Expressions of Interest and selecting lenders to 
participate, HUD will first review each Expression of Interest to 
verify that the lender is eligible to participate in the program. HUD 
will then evaluate the Expressions of Interest from all eligible 
lenders primarily by weighing the following factors in the Expression 
of Interest: (1) The lender's anticipated loan volume and target 
markets; (2) the lender's business model for participating in the 
pilot; (3) the lender's capacity (experience and/or potential) to work 
in public-private partnerships; and (4) the extent to which the lender 
intends to deliver the most favorable loan product to consumers. HUD 
anticipates that these primary weighing factors will have generally 
equal weighing significance. In addition, HUD may consider the 
following factors in selecting lenders to participate: (1) Diversity of 
lender type and target market; and (2) impact on low-income households 
and communities.

F. Differences Between Retrofit Pilot Program and Existing Title I 
Program

    With the exceptions discussed below, the Retrofit Pilot Program 
will be governed by the Title I program regulations at 24 CFR part 201. 
This

[[Page 69116]]

notice does not make any changes to the current Title I Property 
Improvement Program. The differences specified in this notice are only 
applicable to lenders selected to participate in the Pilot Program.
    Lenders selected to participate in the Retrofit Pilot Program must 
enter into a Retrofit Pilot Program Agreement by which they commit to 
adhere to the Title I program regulations, except as modified in this 
notice and in subsequent refinements, such modifications being 
applicable only to loans insured under the Retrofit Pilot Program. 
There will also be other requirements applicable to the Retrofit Pilot 
Program; for example, insuring Retrofit Pilot Program loans only in 
communities selected for the Pilot Program.
    In summary, the proposed changes described below, in combination 
with the appropriated funds, have the effect of creating an innovative 
pilot program that accords with Congress' direction in the Act. These 
changes fall into the following categories: (1) Changes designed to 
enhance FHA underwriting of program loans; (2) changes related to FHA 
administration of the program, specifically in the areas of loan 
servicing, claim procedures, and reporting; (3) changes to target the 
pilot program specifically on its purpose of improving home energy 
performance; and (4) changes to provide additional benefits to 
borrowers. Finally, as noted, FHA proposes to augment these changes 
with incentives for lenders to participate, using funding appropriated 
under the Act. In summary, these changes adjust the current flexible 
framework for the Title I program to enable it to encourage and 
directly support home improvements that improve energy performance, 
while reducing barriers to making financing under the program more 
widely available and more affordable.
    1. Definition 24 CFR 201.2. For purposes of the Retrofit Pilot 
Program, the following terms have the following meanings.
    a. Single family property improvement loans. Only ``single family 
property improvement loans'' as that term is defined in 24 CFR 201.2 
are eligible for FHA insurance and the Retrofit Pilot Program. 
Properties must also be principal residences as defined in 24 CFR 
201.2. HUD intends to further limit the Pilot Program to single unit 
detached properties in order to control the number of variables in the 
Pilot Program. Loans used to finance the property improvements for 
manufactured homes and multifamily properties \9\ are not eligible for 
the Retrofit Pilot Program, but remain eligible for Title I program 
insurance under 24 CFR part 201.
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    \9\ Manufactured home improvement loan and multifamily property 
improvement loan are terms defined in Sec.  201.2.
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    2. Loan maturities (24 CFR 201.11). Under the Title I program 
regulations at 24 CFR 201.11 an insured loan may have a term as long as 
20 years. Under the Retrofit Pilot Program, loan terms generally will 
be limited to 15 years to better align the term of financing with the 
useful life of, and benefits from, most energy retrofit improvements. 
Under the Pilot Program, loan terms that are for 20 years can only be 
for certain specified improvements: Renewable energy measures, 
geothermal systems, and other improvements as approved by HUD. See 
``Eligible use of loan proceeds'' in Section II.D.4(b) below.
    3. Interest and discount points (24 CFR 201.13). Under the Title I 
program regulations at 24 CFR 201.13, the lender may not require or 
allow any party, other than the borrower, to pay discount points or 
other financing charges in connection with the loan transaction. This 
restriction, while helping to assure that borrowers have a personal 
stake in the repayment of the loan, also has the effect of hindering 
state and local efforts to support home energy retrofits by lowering 
the cost of capital to consumers, such as through interest-rate write 
downs. The Retrofit Pilot Program expressly contemplates that third 
parties (including state and local governments, private organizations, 
and nonprofit organizations) may pay discount points or other financing 
charges in connection with the Title I loan transaction and encourages 
third parties to work with participating lenders on this basis. In 
addition, as noted, lenders may utilize HUD incentive payments under 
the Pilot Program for this purpose.
    The interest shall be calculated on a traditional mortgage interest 
basis.
    4. Property improvement loan eligibility (24 CFR 201.20).
    a. Borrower eligibility (24 CFR 201.20(a)). As under Title I loans, 
Retrofit Pilot Program borrowers shall have at least a one-half 
interest in one of the following:
    (i) Fee simple title of the property; or
    (ii) A properly recorded land installment contract.
    Unlike the Title I program, lessees of the property will not be 
eligible to participate in the Pilot Program. The limitation of 
eligibility to owner-occupied properties is designed to reduce the 
variables in the Pilot Program for purposes of evaluation, as well as 
to help ensure compliance with the minimum property loan to value 
ratios described in section II.F.5., below.
    b. Eligible use of the loan proceeds (24 CFR 201.20(b)). Similar to 
the Title I program, loan proceeds shall be used only for the purposes 
disclosed in the loan application. Under the standard Title I loan, 
proceeds shall be used only to finance property improvements that 
substantially protect or improve the basic livability or utility of the 
property. Further, HUD has the authority to establish a list of items 
and activities that may not be financed with the proceeds of any 
property improvement loan.
    Under the Retrofit Pilot Program, loan proceeds may be used only 
for measures that improve home energy performance or directly make such 
measures possible. If a lender has any doubt as to the eligibility of 
any item or activity, the lender must request a determination from FHA 
before making a loan. The proposed list of eligible measures, to be 
finalized after the period for public comment on this notice, is 
attached as Appendix B. HUD is specifically seeking comments on this 
aspect of the Pilot Program.
    The reason for this limitation is that the purpose of the Retrofit 
Pilot Program is to provide financing specifically for home energy 
retrofits. In addition, HUD believes that limiting the eligible uses of 
loan proceeds, as described, will allow better evaluation of the 
Retrofit Pilot Program for its intended purpose and facilitate broader 
analysis of Pilot Program data to improve the structure of other future 
financing efforts to support home energy retrofits. HUD encourages the 
use of home energy audits and other tools to enable consumers to 
determine the most beneficial improvements they should seek to 
undertake.
    5. Property valuation (24 CFR 201.20). The combined loan-to-value 
ratio of the mortgage and energy retrofit loan cannot exceed 100 
percent and will require a method to determine current valuation of the 
property, such as an Exterior-Only Inspection Residential Appraisal 
Report (Form HUD-2055) or other approved valuation method. HUD is 
specifically seeking comments on this aspect of the Pilot Program.
    6. Credit requirements for borrowers (24 CFR 201.22). In addition 
to the requirements under the Title I program, all borrowers 
participating in the Retrofit Pilot Program must have a decision credit 
score of 660 or higher. The decision credit score used by FHA is based 
on methodologies developed by the FICO Corporation. FICO scores, which 
range from a low of 300 to a high

[[Page 69117]]

of 850, are calculated by each of the three National Credit Bureaus and 
are based upon credit-related information reported by creditors, 
specific to each applicant. Lower credit scores indicate greater risk 
of default on any new credit extended to the applicant. The decision 
credit score is based on the middle of three National Credit Bureau 
scores or the lower of two scores when all three are not available, for 
the lowest scoring applicant. While FHA's guidance is based on the 
``FICO-based'' decision credit score, it is not FHA's intent to 
prohibit the use of other credit scoring models to assess a borrower's 
credit profile.
    The borrower's total debt-to-income ratio cannot exceed 45 percent, 
as under the Title I program. HUD recognizes that requiring a minimum 
credit score for participation in the pilot program will mean that some 
homeowners cannot participate. However, given that this is a pilot 
program, HUD has determined to limit the Retrofit Pilot Program to 
borrowers with these credit scores in order to make an initial 
assessment of the interaction of credit ratings and repayment in 
connection with home energy retrofit loans.
    7. Charges to borrower to obtain loan (24 CFR 201.25). The 
regulations for the Title I program provide that HUD will establish a 
list of fees and charges that may be included in a property improvement 
loan. The Retrofit Pilot Program will also establish a similar list of 
fees and charges.
    8. Conditions for loan disbursement (24 CFR 201.26). In addition to 
current Title I requirements pertaining to disbursement of loan 
proceeds, the Retrofit Pilot Program funds shall be disbursed to the 
borrower(s) in two increments: (1) 50 percent of the proceeds shall be 
disbursed at loan funding/closing; and (2) the remaining 50 percent of 
the proceeds shall be disbursed after the energy retrofit improvements 
have been completed as evidenced by an executed Completion Certificate 
for Property Improvements (Form HUD-56002) by the borrower(s), and a 
lender-required inspection.
    9. Requirements for dealer loans (24 CFR 201.27). Under the Title I 
program a dealer loan (defined at 24 CFR 201.2) ``means a loan where a 
dealer, having a direct or indirect financial interest in the 
transaction between the borrower and the lender, assists the borrower 
in preparing the credit application or otherwise assists the borrower 
in obtaining the loan from the lender.'' Dealer loans will not be 
permitted in the Retrofit Pilot Program.
    The reason for this limitation is that dealer loans have been 
disproportionately correlated with poor loan performance under Title I 
and other home improvement loan programs in the past. While HUD 
recognizes that there are many responsible dealers who can and would 
provide financing through dealer loans in a responsible manner, it is 
limiting the Retrofit Pilot Program to ``direct loans.'' ``Direct 
loans'' is defined under the Title I program (at 24 CFR 201.2) as ``a 
loan for which a borrower makes application directly to a lender 
without any assistance from a dealer.'' HUD believes that home 
improvement contractors and others whose activity may be described 
under the definition of ``dealer'' for the Title I program will play an 
important role in ensuring the pilot's success by performing the actual 
work related to the retrofits.
    10. Loan servicing (24 CFR 201.41). Under the Title I program, 
lenders remain responsible for proper collection efforts, even though 
actual loan servicing and collection may be performed by an agent of 
the lender. In addition to these requirements, the servicer of a 
Retrofit Pilot Program loan, whether the servicer is the original 
lender or a subsequent servicer, as under FHA's major single family 
program (commonly referred to as the Title II program), is fully 
responsible for the required servicing responsibilities. As under the 
Title II program, ``the mortgagee shall remain fully responsible for 
proper servicing, and the actions of its servicer shall be considered 
to be the actions of the mortgagee.'' HUD emphasizes that the servicer 
shall also be fully responsible for its actions as a servicer. HUD 
intends to seek recovery from servicers if FHA losses are attributable 
to servicing errors.
    In addition, as noted, lenders that also service loans they 
originate under the pilot program may utilize HUD incentive payments 
under the program to reduce servicing costs that deliver bona fide 
benefits to borrowers.
    11. Insurance claim procedure (24 CFR 201.54). Under the Title I 
program, HUD requires that insurance claims be fully documented.
    Under the Pilot Program, the holder of the note will be accountable 
to HUD for origination/underwriting errors, and the servicer will be 
accountable to HUD for servicing errors. If a claim would be denied due 
to servicing errors, FHA will pay the claim to the holder of the note 
and seek recovery of its losses from the servicer. To effectuate this, 
the insured lender must obtain an indemnification agreement from the 
subservicer at loan origination that will be assigned to HUD when an 
insurance claim is filed. As an alternative to an indemnification 
agreement from the subservicer, the insured lender shall execute and 
submit with the claim a subrogation agreement that allows HUD to obtain 
indemnification directly from the subservicer. Losses to HUD will be 
mitigated by recoveries from defaulted borrowers.

III. Evaluating the Success of the Retrofit Pilot Program

    As a pilot program, one of the principal purposes of the Pilot is 
to generate data on key questions that can help make the case for 
additional mainstream mortgage products to support home energy 
retrofits, including first mortgage options. FHA is therefore committed 
to a robust evaluation program in connection with the Pilot. (The 
evaluation will also enable HUD to assess the success of possible 
modifications to the existing Title I program before initiating, 
through rulemaking, any changes to the Title I regulations.)
    FHA has identified three core questions on which the evaluation 
program will focus: (1) Did homes reduce energy consumption after 
retrofits? (2) did homeowners realize lower energy bills as a result of 
the retrofit? and (3) was home value affected as a result of the 
retrofit? Data from the PowerSaver Pilot Program suggesting answers to 
these questions will help fill a major void and start to establish a 
basis for analyzing other financing options.
    FHA acknowledges that these can be challenging impacts to evaluate, 
for reasons ranging from ``rebound effects'' to consumer concerns about 
accessing utility billing data. FHA believes that it must attempt to do 
so, however; otherwise, FHA is concerned that continued progress on 
mainstream mortgage financing options for home energy retrofits will be 
frustrated.
    FHA notes that HUD will also be tracking information on loan 
performance, through regular lender reporting, as under other FHA 
programs. The evaluation effort will therefore include loan performance 
as a component as well. In addition, FHA will explore the feasibility 
of adding to the core evaluation scope, potentially including: (1) 
Lender costs for originating and servicing; (3) impact of interest 
rates on consumer participation; (2) relative effectiveness of non-
financial programmatic elements (consumer education, product marketing, 
auditing tools, and workforce quality assurance); and (4) the extent to 
which specific home energy improvements are chosen and the results from 
specific measures.

[[Page 69118]]

    FHA recognizes the limitations in drawing conclusions from 
evaluating the Pilot Program. FHA anticipates utilizing a third party 
to conduct the evaluation and anticipates sharing the results with the 
public. FHA expressly encourages comment on the goals and scope of the 
evaluation.

IV. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements in this rule have been 
submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) and 
paperwork approval is pending. In accordance with the PRA, an agency 
may not conduct or sponsor, and a person is not required to respond to, 
a collection of information, unless it displays a currently valid OMB 
control number.

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this notice rule 
under Executive Order 12866 (entitled ``Regulatory Planning and 
Review''). A determination was made that this notice is an 
``economically significant regulatory action,'' as defined in section 
3(f)(1) of the Order, and the notice is accompanied by an impact 
analysis. The impact analysis is available at https://www.hud.gov/offices/adm/hudclips/ia/. The following provides a brief summary of the 
finding relating to the aggregate costs, benefits, and transfers of the 
pilot program contained in the analysis:
    Introduction. As discussed more fully in the accompanying impact 
analysis, FHA envisions that the pilot program will provide insurance 
for up to 24,000 loans over the 2-year period of the pilot program, 
with an expected average loan size of $12,500. The program is therefore 
expected to result in the extension of $300 million in FHA-insured 
energy efficiency property improvement loans over the 2-year period.
    Benefits. The aggregate net benefits are obtained by multiplying 
the individual net benefits by the expected number of loans and adding 
the expected social benefits of reduced energy consumption. As a base 
case, HUD assumes a consumer household with annual savings of $1,000, a 
0 percent price growth, and a 7 percent discount rate. The present 
value of a technical retrofit for this base case scenario is $11,400. 
Assuming a rebound effect of 30 percent yields a comfort benefit of 
$3,400 and energy savings of $8,000 per participant.\10\ As noted, 
approximately 24,000 loans are expected over 2 years. For the base case 
scenario, this would equal $41 million in comfort benefits and $96 
million in energy savings for each year of the program. The benefits of 
the FHA program may not equal the sum of the benefits of all retrofits 
financed through the program, but only reflect the benefits of the 
retrofits that would not have occurred without the program; however, 
the existence of significant market imperfections and the lack of 
affordable financing make it reasonable to assume that a large 
proportion, if not all of the loans, will generate benefits.
---------------------------------------------------------------------------

    \10\ The ``rebound effect'' refers to the fact that the reaction 
of the consumer to the energy-saving technology will not necessarily 
reduce energy consumption by what is technically possible. By 
increasing energy efficiency, the retrofit reduces the expense of 
physical comfort and will thus increase the demand for comfort. In 
fact, the retrofit may have been driven for a demand for more 
heating in the winter or cooling in the summer. The size of the 
rebound effect will depend on the income of the household and the 
path of energy prices.
---------------------------------------------------------------------------

    Costs. The cost of receiving the energy-savings is the upfront 
investment plus the costs of financing the investment. The cost per 
investment is thus equal to the size of the loan.
    Transfers to Consumers. The transfer to consumers is equal to the 
difference between the FHA interest rate and the interest rates on 
other loans available for the same purpose. As discussed, alternative 
means of financing are limited and come with higher interest costs. The 
gain to consumers is not limited to reduced loan costs but will consist 
also of the benefits of energy-efficient investment. The extent of 
these benefits depends upon the subsidy from an FHA loan guarantee.
    The docket file is available for public inspection in the 
Regulations Division, Office of General Counsel, Department of Housing 
and Urban Development, 451 7th Street, SW., Room 10276, Washington, DC 
20410-0500. Due to security measures at the HUD Headquarters building, 
please schedule an appointment to review the docket file by calling the 
Regulations Division at 202-402-3055 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access this number 
via TTY by calling the Federal Information Relay Service at 800-877-
8339.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment was prepared in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C). That FONSI is 
available for public inspection between the hours of 8 a.m. and 5 p.m., 
weekdays in the Regulations Division, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 7th Street, 
SW., Washington, DC 20410. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
FONSI by calling the Regulations Division at 202-708-3055 (this is not 
a toll-free number). Individuals with speech or hearing impairments may 
access this number via TTY by calling the toll-free Federal Information 
Relay Service at (800) 877-8339.

    Dated: October 28, 2010.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.

Appendix A

Home Energy Retrofit Loan Pilot Program Criteria for Expressions of 
Interest From Lenders

Introduction

    Lender participation in the Retrofit Pilot Program is voluntary. 
HUD intends to select a limited number of lenders to participate.
    Lenders interested in potentially participating in the Retrofit 
Pilot Program must submit an Expression of Interest using the format 
below and following the instructions in this notice. Lenders that 
fail to do so will not be considered for participation.
    Lenders interested in potentially participating may also provide 
general comments on the Pilot Program. Any such comments should be 
submitted separately from the Expression of Interest, following the 
instructions in the notice, but may be referenced in the Expression 
of Interest.
    As noted in the notice, all properly submitted comments and 
communications submitted to HUD in connection with this pilot 
program will be available for public inspection and copying. 
Expressions of Interest should not therefore contain any proprietary 
information. HUD may seek additional information from lenders that 
submit Expressions of Interest. Such information would be available 
for public inspection and copying as well, unless it is proprietary.
    Expressions of Interest are non-binding. HUD will execute 
contracts with participating lenders after reviewing all Expressions 
of Interest and the issuance of the final notice for the Retrofit 
Pilot Program in the Federal Register.

Submission Instructions

    To be considered for participation in the Pilot Program, a 
lender must e-mail its Expression of Interest to 
FHAPowerSaver@hud.gov by the public comment deadline set forth in 
the DATES section of this notice. Late submissions and Expressions 
of Interest not submitted to

[[Page 69119]]

FHAPowerSaver@hud.gov will not be considered for participation in 
the Pilot Program.
    Expressions of Interest must address each of the 10 factors 
identified below (labeled I through X). There is no minimum or 
maximum page number or required format for Expressions of Interest. 
Lenders should provide whatever manner of information they believe 
would be most relevant to HUD in evaluating their Expression of 
Interest in participating in the Retrofit Pilot Program. Each 
Expression of Interest must also contain a one page executive 
summary that sequentially summarizes the factors addressed below.

Factors to be Addressed in Expressions of Interest

I. Contact Information

    Institution Name:
    Address:
    Contact Name, Title, Phone Number and Email Address:

II. Statement of Interest

    Please describe your institution's interest in potentially 
participating in the program. HUD is interested in understanding the 
reasons for your interest, how it fits with your business strategy 
and goals, and how, specifically, your institution would be able to 
meet the goals of the Pilot Program as described in the notice.

III. Status as an FHA Title I or Title II Program Lender

    Please provide evidence that your institution has a valid Title 
I contract of insurance and is approved under the requirements of 24 
CFR part 202 to originate, purchase, hold, service, or sell loans 
insured under the Title I program regulations at 24 CFR part 201.
    If you do not meet the criteria above but are an approved Title 
II lender, please provide evidence to that effect.

IV. Experience With Similar Lending Initiatives

    Please describe your experience successfully originating and/or 
servicing small loans, home equity loans, second liens, FHA section 
203(k) rehabilitation loans, and/or Title I Property Improvement 
Loans.
    If your institution does not have such experience and capacity, 
please describe how any other experience is relevant to determining 
your institution's ability to participate in the Pilot Program.

V. Computer System Capabilities

    Please provide evidence of your institution's technical 
capability to interface with FHA through FHA Connection and the 
Single Family Default Monitoring system.

    Note: Participating lenders will be required to have the 
technical capability to interface with any other computer systems 
utilized by FHA or its contractors pertaining to the Retrofit Pilot 
Program.

VI. Audit and Reporting Capabilities

    Please provide evidence of your institution's capacity to 
provide timely reports to FHA on origination and performance of 
loans under the Pilot Program, specifically including an electronic 
loan package to HUD for a random sample of loans chosen for quality 
reviews.

    Note: FHA envisions requiring monthly reports on loan and 
portfolio performance.

VII. Collaborative Capacity

    Please provide evidence of your institution's capacity to work 
with public sector agencies, nonprofit organizations, utilities, 
and/or home improvement contractors.

VIII. Projected Activity and Markets

    Please describe the volume of lending your institution 
anticipates doing under the two-year Pilot Program and the markets 
you intend to serve.

    Note: FHA may allow less volume than described.

IX. Product Plan and Business Model

    Please describe your institution's product plan and business 
model as you envision it for lending under the Pilot Program. 
Specifically, please inform HUD of the following: (1) Will you 
originate and service loans, or originate only? (2) What do you 
expect in terms of loan performance? (3) What fees will you charge? 
(4) What steps will you take to ensure the lowest cost of financing 
for consumers? (5) How will you market the product? (6) To what 
extent will you work with public agencies, contractors, utilities, 
and other organizations? (7) How will you ensure quality control of 
contractors? (8) Will you hold loans, sell whole loans and/or issue 
securities backed by pools of loans, or some combination?

X. Use of HUD Incentive Payments

    To the extent that you request to utilize funds from HUD for 
incentive payments to lower costs for borrowers, either through 
lower interest rates, lower servicing costs, and potentially other 
purposes, please describe how much funding you request, the number 
of loans you anticipate making (a range is appropriate if 
necessary), and the bona fide benefit that would accrue to borrowers 
through the uses of the funds.

    Note: As noted, Expressions of Interest are non-binding. The 
purpose of this question is to get a sense of your institution's 
intent at this stage, understanding that specifics may change.


    Note: To the extent these answers would contain proprietary 
information, please contact HUD based on information provided in the 
notice.

XI. Final comments

    Please provide any additional information that would be relevant 
to HUD in evaluating your Expression of Interest to participate in 
the Retrofit Pilot Program, either as a narrative response or 
attachment(s), or both.

Appendix B

Eligible Improvements Under Retrofit Pilot Program

------------------------------------------------------------------------
         Improvement                           Standards
------------------------------------------------------------------------
Whole House..................  Whole house air sealing measures,
                                including interior and exterior
                                measures, utilizing sealants, caulks,
                                insulating foams, gaskets, weather-
                                stripping, mastics, and other building
                                materials in accordance with BPI
                                standards or other procedures approved
                                by the Secretary. (Reference: https://www.bpi.org/standards.aspx)
Insulation: Attic............  Attic insulation measures that--
                               (A) Include sealing of air leakage
                                between the attic and the conditioned
                                space, in accordance with BPI standards
                                or the attic portions of the DOE or EPA
                                thermal bypass checklist or other
                                procedures approved by the Secretary;
                               (B) add at least R-19 insulation to
                                existing insulation;
                               (C) result in at least R-38 insulation in
                                DOE climate zones 1 through 4 and at
                                least R-49 insulation in DOE climate
                                zones 5 through 8, including existing
                                insulation, within the limits of
                                structural capacity, except that a
                                State, with the approval of the
                                Secretary, may designate climate zone
                                sub regions as a function of varying
                                elevation; and (Map Page: https://www.energystar.gov/index.cfm?c=home_sealing.hm_improvement_insulation_table le)
                               (D) cover at least--
                               (i) 100 percent of an accessible attic;
                                or
                               (ii) 75 percent of the total conditioned
                                footprint of the house.
                               (BPI Standards reference: https://www.bpi.org/standards.aspx)
Insulation: Wall.............  Wall insulation that--
                               (A) is installed in accordance with BPI
                                standards or other procedures approved
                                by the Secretary;
                               (B) is to full-stud thickness or adds at
                                least R-10 of continuous insulation; and
                               (C) covers at least 75 percent of the
                                total external wall area of the home.

[[Page 69120]]

 
                               (BPI Reference: https://www.bpi.org/standards.aspx)
Insulation: Crawl Space......  Crawl space insulation or basement wall
                                and rim joist insulation that is
                                installed in accordance with BPI
                                standards or other procedures approved
                                by the Secretary and--
                               (A) covers at least 500 square feet of
                                crawl space or basement wall and adds at
                                least--
                               (i) R-19 of cavity insulation or R-15 of
                                continuous insulation to existing crawl
                                space insulation; or
                               (ii) R-13 of cavity insulation or R-10 of
                                continuous insulation to basement walls;
                                and
                               (B) fully covers the rim joist with at
                                least R-10 of new continuous or R-13 of
                                cavity insulation.
                               (BPI Reference: https://www.bpi.org/standards.aspx)
Duct Sealing.................  Duct sealing or replacement and sealing
                                that--
                               (A) is installed in accordance with BPI
                                standards or other procedures approved
                                by the Secretary; and
                               (B) in the case of duct replacement and
                                sealing, replaces and seals at least 50
                                percent of a distribution system of the
                                home.
                               (BPI Reference: https://www.bpi.org/standards.aspx)
                               Reference: https://www1.eere.energy.gov/buildings/windowsvolumepurchase/ buildings/windowsvolumepurchase/
Skylight Replacement.........  Skylight replacement that meets most
                                recent Energy Star specifications.
Door Replacement.............  Door replacement that meets most recent
                                Energy Star specifications.
Storm Doors..................  Storm doors that--
                                meet the most recent Energy Star
                                specifications
Storm Windows................  Storm windows that--
                                meet the requirements for low-e
                                storm windows under the Department of
                                Energy Windows Volume Purchase Program
Heating System Gas/Propane/    Heating system replacement that meets
 Oil Boiler/Furnace.            most recent Energy Star specifications.
Air Conditioner..............  Air-source air conditioner or air-source
                                heat pump replacement with a new unit
                                that meets most recent Energy Star
                                specifications.
Geothermal...................  Heating or cooling system replacement
                                with an