What are FHA's requirements for escrow accounts for Energy Efficient Mortgages (EEMs)?

If the energy package is part of a Section 203(k) Rehabilitation Mortgage, then the escrowed amounts of the energy package must be included in the Rehabilitation Escrow Account. Escrows may not include costs for labor or work performed by the borrower (Sweat Equity). When funds to complete the energy package are escrowed, the mortgagee must execute form HUD-92300, Mortgagee’s Assurance of Completion, to indicate that the escrow for the energy package improvements has been established.

Except for 203(k) mortgages, the energy package is to be installed within 90 days of the mortgage disbursement. If the work is not completed within 90 days, the Mortgagee must apply the Energy Efficient Mortgage (EEM) funds to a prepayment of the mortgage principal. For 203(k) mortgages, the Mortgagee must follow the 203(k) Escrow Guidance found in Handbook 4000.1 II.A.8.a.xviii. ​​​​​​

The Mortgagee, the rater, or an International Code Council Residential Combination Inspector (ICC RCI) or Combination Inspector (CI) may inspect the installation of the improvements. The Borrower may be charged an inspection fee.

For additional information see:

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-04883