In late April, HUD Secretary Shaun Donovan and U.S. Department of Energy Secretary Steven Chu unveiled a two-year pilot program designed to help consumers fund home energy improvements.

With the Federal Housing Authority’s PowerSaver program, eligible home­owners may borrow up to $25,000 at fixed rates between 5% and 7% for as long as 20 years to finance retrofits such as high-efficiency windows and doors, heating and ventilating systems, solar panels, geothermal systems, and insulation and duct sealing.

Loans are available from 18 regional and local banks for qualified borrowers: those who own and live in their single-family detached home, are a solid credit risk, and do not have negative equity in their home. FHA will back the loans but will only cover up to 90% of the loan amount in the event of default. “It’s important that people have skin in the game,” says Bill Armstrong, treasurer of the National Association of Realtors, who is glad to see this type of vehicle used as an incentive for homeowners to make energy efficiency upgrades. While energy audits won’t be mandatory, participating lenders will encourage homeowners to get them.

Don’t confuse the PowerSaver loan with Fannie Mae’s energy improvement mortgage, which folds the costs of improvements — capped at 10% of the home’s post-improvement estimated market value — into the mortgage amount itself.