Friday, May 19, 2017

HUD Secretary Signals Possible Policy Shift on PACE Loans

Housing and Urban Development (HUD) Secretary Ben Carson signaled this week that the administration may revisit an Obama-era policy on Property Assessed Clean Energy, or PACE, loans, a controversial financial product that allows homeowners to pay for energy-efficient retrofitting -- such as solar panels and high-efficiency air conditioners -- through their property tax assessments.

Guidance issued last year allowed the Federal Housing Administration to approve mortgage and refinance applications for properties with PACE loans outstanding. “We are very, very amenable to adjusting that policy,” Carson said at an industry conference. “I’m concerned about it. It really does create a burden and an extra complication.”

Financial and housing trade groups, the Federal Housing Finance Agency (FHFA), and the housing GSEs have long expressed concern about PACE loans -- currently available in about 30 states -- taking lien priority over the first mortgage lien.

FHFA has prohibited Fannie Mae and Freddie Mac from purchasing loans with PACE liens which take precedence over the first mortgage, citing concerns about taxpayer risk.

As PACE loans have come under fire in the media for their lack of consumer protections, legislation has been introduced in Congress that would ensure PACE lenders provide full consumer disclosures. (See earlier post)

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