GARDINER, Maine -- Leona and Wilbur Eshelman’s modest blue-and-white mobile home in this snowy town is the poster child for energy-guzzling, pre-1976 manufactured housing: the windows are drafty, the insulation is thin, and the structure’s aluminum frame conducts cold air into the house during the long Maine winters. Inside, a wood stove provides most of the warmth during the day because the Eshelmans, who are retired, can’t cover the cost of heating oil on their limited fixed income.

But in a few weeks, housing officials say, those headaches should be gone – along with the house itself.

In its place, the couple will receive an ENERGY STAR®-qualified manufactured home, under a new state program that is helping families obtain affordable financing for home improvements that cut their energy use by at least 20 percent – or in the case of mobile homes, replace them outright with ones that are up to five times more energy efficient. Officials say the program will enable homeowners to pay less on their energy bills each month, obtain reduced mortgage rates or other financial benefits, and help the environment.

Last month, Maine became the first state to offer ENERGY STAR mortgages under the new program , which is a collaborative effort between the Washington, D.C.-based Energy Programs Consortium, the U.S. Department of Energy, the U.S. Environmental Protection Agency and state energy and housing agencies, with support from the Ford and Surdna Foundations.

“There is an incredible link between energy savings and housing and energy savings and buildings,” said Dale McCormick, director of the Maine State Housing Authority. “Forty percent of our energy use and the carbon that we emit is in buildings. So if you weatherize homes, you’ll conserve fuel, lower the carbon footprint, save families money, and keep money in the state economy.”

An ENERGY STAR mortgage incorporates the cost of energy-efficiency investments into the total lending package, and the improvements it finances must lead to a minimum 20% energy savings. Lenders must also provide borrowers with an additional financial benefit above and beyond the home energy savings, such as a reduction in interest rates, assistance with closing costs, or other benefits.

A wide range of mortgage products qualify as an ENERGY STAR Mortgage, including refinance mortgages and mortgages to purchase new homes. The home improvements can be in the mortgage or outside it. For example, they can be financed through a weatherization grant or a state-subsidized unsecured loan, among other options.

Energy Cost Savings

Maine Housing’s calculations show that with the cost of heating oil at $3.50 a gallon, weatherization improvements lead to $600 in annual savings for the average home. Burning less energy also means that fewer planet-warming greenhouse-gas emissions are spewed by the furnaces, boilers and fossil fuel-burning plants that power home energy use.

Maine officials say that the ENERGY STAR Mortgage Program is one of several options they are embracing to make homes more secure, comfortable and affordable. While energy prices have slid from their record peaks last summer, they still remain high by historical standards, placing pressure on cash-strapped homeowners struggling to make ends meet during today’s tough economic climate.

Last July, when the cost of heating oil spiked to almost $5.00 a gallon in the state, it was clear to officials that failing to protect homeowners from runaway energy costs could have devastating consequences.

“Can you imagine oil to heat your home costing $3,600 or $4,000? That is what Maine families were facing at $5.00-a-gallon oil,” said McCormick. “Luckily prices fell, but we are thinking of that as a temporary, buying-us-time situation. Maine at $5 a gallon is a scary place.”

A Broad Reach

Maine’s launch of the program is the start of what is aimed to be a broad-based effort to help lower residential energy use and stabilize housing on a national scale, said EPC Director Mark Wolfe. “What we’re seeing is that it can be done in Maine, and hopefully it can be done elsewhere,” he said.

Additional states, including Colorado, Massachusetts, New Jersey, New York and Pennsylvania – plus the District of Columbia -- are expected to launch the program later this year, said Wolfe.

Experience suggests that energy-efficient mortgages perform better than other conventional loans, said EPC Managing Director Howard Banker. Once the weatherization improvements are completed, borrowers have more money left over each month after paying their heating and utility bills, making it easier to afford their monthly payments.

“It’s beneficial to lenders because their loans will perform better, because people will save money and it will be less likely that we will see problems in mortgages as we’ve all seen recently,” said Banker.

But Maine officials acknowledge that they have their work cut out for them. There are around 9,000 older mobile homes like the Eshelman’s in the state, and “they’re all sieves,” said McCormick. That’s on top of the hundreds of thousands of other energy-guzzling homes in Maine, which has the ninth oldest housing stock in the nation. Nearly all of the more than 600,000 homes in the state would benefit from weatherization improvements, said McCormick.

Standing on the Eshelman’s driveway on a snowy day late last month, McCormick ticked off some of the advantages the elderly couple will find in their new ENERGY STAR mobile home: double-pane windows, walls that are three times thicker than the ones they have now, a concrete-slab foundation covered in styrofoam insulation that will keep the heat in. The current home, built in 1972, sits on concrete blocks that tilted over time, causing the floor to buckle and door and window frames to tilt -- and making a tight seal against the elements impossible.

The Eshelman’s home financing is subsidized through Maine Housing’s Mobile Home Replacement Program. The nine lenders who have so far been approved to offer ENERGY STAR mortgages will also offer market-rate loans to higher-income families. As approved lenders, they must also provide the borrower additional loan reductions over and above the lower energy bills, like lower closing costs or a lower interest rate. Housing officials are optimistic that the innovative program will reach a broad swath of Mainers.

“We’ve got big hopes,” said McCormick. “Huge.”

-- By Rona Cohen

CSG/ERC Senior Policy Analyst Rona Cohen is managing the communications and outreach effort for the ENERGY STAR Mortgage Program

More information on the ENERGY STAR Mortgage Program is available on the Web site of the Energy Program Consortiums: http://energyprograms.org/energystar/index.html