FHA Announces ‘PACE’ Policy; CSG’s ‘PACE’ Resolution is Defeated

Logo for the U.S. Department of Housing and Urban Development

In a change of course, the U.S. Department of Housing and Urban Development (HUD) announced on Dec. 7 that within 30 days the Federal Housing Administration (FHA) will stop insuring mortgages on homes that also carry PACE liens (Property Assessed Clean Energy).

Last year HUD announced that FHA would begin insuring mortgages that also carry super-priority PACE liens. At the time this marked a switch in FHA policy that was criticized by the financial industry, as it created different policies between FHA and the Federal Housing Finance Agency (FHFA). FHFA has been consistent in its policy that it will not purchase mortgages with first-priority PACE liens.

But going forward, “FHA can no longer tolerate putting taxpayers at risk by allowing obligations like these to be placed ahead of the mortgage itself in the event of a default,” said Ben Carson, secretary of HUD. “Assessments such as these are potentially dangerous for our Mutual Mortgage Insurance Fund and may have serious consequences on a consumer’s ability to repay, or when they attempt to refinance their mortgage or sell their home.”

In a letter to mortgagees the FHA said: “FHA is concerned about the potential for increased losses to the Mutual Mortgage Insurance Fund due to the priority lien status given to such assessments in the case of default. FHA is also concerned with the lack of consumer protections associated with the origination of the PACE assessment, which are far less comprehensive than that of traditional mortgage financing products. FHA’s involvement with accepting properties with PACE assessments may indirectly help to overshadow potential consumer abuses.”

The California and Nevada Credit Union Leagues applaud FHA for recognizing the substantial problems PACE loans cause for consumers and credit unions. In California, the Leagues will continue to advocate for a reduction in the PACE lien-priority and more consumer protections. In Nevada, the Leagues will stay vigilant in stopping any attempt to introduce a residential super-priority lien PACE program.

CSG’s ‘PACE’ Resolution
In other PACE news, last week The Council of State Governments (CSG) was slated to hear a PACE resolution supporting the expansion of residential PACE across the country. The Credit Union National Association (CUNA), as well as the Nevada League, mobilized on the issue and submitted opposition letters to defeat the resolution.

The resolution supported residential PACE nationwide by using this year’s AB 1284 (Dababneh), the most recent PACE regulation bill, as justification to do so. Although the California League heavily supported AB 1284, much more is needed to protect consumers and credit unions from the risks associated with PACE liens.

The Nevada League mobilized by submitting a letter to Sen. Patricia Spearman (D-Las Vegas), who co-chairs the first committee (CSG Energy and Environment Public Policy Committee), which was scheduled to hear the resolution. The resolution never came up for consideration before that committee and was not approved by the shared legislation committee. Click here to see the Nevada League’s opposition letter.

The California League also worked with California and national consumer groups and the California Association of County Treasurer-Tax Collectors to secure additional opposition letters.

Pin It