City Requires Energy 
Ratings for Loans

The Mortgage Assistance Payments (MAP) program provides secondary financing to first-time home buyers purchasing existing single-family, detached homes worth up to $150,000 (the average home price in Pomona is $110,000-$115,000). This secondary financing provides qualified home buyers with down payment and closing costs, up to 10% of the home's cost. MAP requires an energy rating of the home being purchased, and the buyer is advised about Energy Improvement Mortgages (EIMs-see "Making Energy Mortgages Work," HE May/June '95, p. 27). The buyer can then return to the primary lender and request an EIM that exceeds the original approved loan by the amount needed for the energy improvements recommended by the rating. Qualified buyers are those who make up to 120% of the state's median income. For instance, a family of one qualifies earning $43,100 per year, and a family of four can earn $61,550.

Edward Flores, housing program manager for the city of Pomona and architect of Neighborhoods in Progress, points out that low- and moderate-income first-time buyers are typically least able to pay utility costs and often buy houses that are most in need of energy efficiency improvements. Ray Hall of H & L Energy, which performs home energy ratings for the city of Pomona, estimates that the average cost of measures recommended for existing homes in the Pomona area is $4,500-$5,000.

The cost of the mandatory energy rating-about $125-is incorporated into the customer's MAP loan. Buyers are not obliged to act on the recommendations from the rating. However, the increase in monthly loan payments from the energy improvements should be less than the energy savings expected. In addition, the retrofits should increase the perceived value of the home to the next buyer, especially if the house qualifies for an Energy-Efficient Mortgage (EEM).

The MAP program budget of $500,000 for the first year will come from the city's low- and moderate-income housing redevelopment fund, a local fund mandated by California redevelopment law. With loans expected to average about $6,000 each, MAP will be able to provide about 83 loans this year. With additional financing through a California Housing Finance Agency program designed to leverage further loan money, the city expects to be able to do more.

A second component of Neighborhoods in Progress is the Acquisition, Rehabilitation and Resale program, through which the city buys foreclosed properties and uses Housing and Urban Development Department (HUD)-insured 203K funds to leverage financing to fix up the property, including energy efficiency improvements based on a home energy rating. The city then resells the property with an energy efficiency certification. Subsequent buyers can assume the city's 203K loan.

The city of Pomona also offers a Rehabilitation Loan program. This program uses local low- and moderate-income housing funds, HUD Community Development Block Grants (CDBG), and federal HUD Homefunds to provide home improvement loans for homeowners who receive energy rating inspections with their loan. The rating lets the homeowner know the most energy-efficient improvements to undertake and recommends additional energy efficiency measures that can be added to the original project. When they set out to replace a furnace, for example, homeowners might opt to include insulation and air leakage work in the loan.

The rehab program offers three financing options: deferred loans that become due when the property is sold or title is transferred, amortized loans at 3%-6% interest, depending on the homeowner's ability to pay, or grants up to $2,500 for those 65 or older who apply to correct an emergency health and safety problem. Loans are capped at $40,000, according to Flores.

Finally, there is a new-construction program known as Infill Housing. The city contracts with developers to construct new houses on vacant lots or in place of dilapidated houses that can't be fixed. First-time home buyers can purchase these new houses (built to Model Energy Code standards) through the MAP program, which otherwise applies only to resale homes. The Infill Housing program uses local low- and moderate-income redevelopment money to create a revolving loan fund. A contractor can borrow up to $20,000 to acquire a vacant lot on which to build. The contractor repays the $20,000 plus interest (prime rate plus 2%) to the fund when the house is sold.

Pomona advertises its Neighborhoods in Progress programs in both English and Spanish-over half of Pomona's 166,000 residents are Spanish speaking, according to a census analysis-at first-time home buyers' seminars and city events like the Cinco de Mayo fair. Thirty-second advertisements also appear on CNN, TNT, and AMC. Flores estimates that 70% of city residents are eligible for one or more of the programs, and the marketing is working. For the rehabilitation loan/ grant program's first year, Flores has enough money to do 50-100 loans; as of April, he had 550 applicants.

Flores believes the programs make effective use of local low- and moderate-income housing redevelopment funds, which last year's California Assembly Bill 1290 says localities must "use or lose" in three years. Funding for the Pomona's Neighborhoods in Progress has been approved for the next five years.

The spirit of Neighborhoods in Progress is in keeping with a national program introduced earlier this year in a partnership between HUD and the U.S. Department of Energy. Eye on Energy: Rehab for All Seasons encourages local building rehabilitation programs to incorporate energy improvements and provides a training video and resource guide. Guidelines about energy efficiency measures that can be installed during rehab projects are also being prepared. However, HUD is not requiring energy ratings or measures. Pomona's mandated energy ratings and rehabilitation/resale and infill new construction programs go beyond Eye on Energy's recommendations.

For more information about Neighborhoods in Progress, contact Edward Flores, Housing Program Manager, 505 S. Garey, Pomona CA 91769. Tel:(909) 620-3764.

-Nan Wishner

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