July 20, 2016
The FHA has announced it will insure mortgages on qualifying homes that have PACE assessments. According to a press release on the FHA/HUD official site, the move was initiated to help encourage the use of clean energy.
“In order to enable homeowners seeking clean energy technologies in their homes to leverage a range of financing options, the Federal Housing Administration (FHA) today announced guidance that makes clear the circumstances under which it will insure mortgages on properties that include Property Assessed Clean Energy (PACE) assessments. FHA will now approve purchase and refinance mortgage applications in states that treat PACE obligations as special assessments similar to property taxes.”
That’s according to the July 19, 2016 press release, which explains that the reason PACE assessments have been troublesome in the past is because of the way the liens are sometimes structured.
“FHA’s new guidance addresses PACE programs where the PACE obligation is treated like a property tax and does not allow the full obligation to have priority or ‘prime’ status over the FHA mortgage lien.”
By law, the press release explains, the FHA cannot “accept a first lien PACE structure (except for past due amounts as is the case for all tax assessments).” Under the FHA program, a lender would be responsible for dealing with PACE payments in escrow similar to how property taxes are paid.
“PACE is showing promise as an effective way to finance energy efficiency, renewable energy, water conservation, and other resilience upgrades to homes, including new heating and cooling systems, lighting improvements, solar panels, water pumps, and insulation,” the press release says, adding, “PACE pays the costs for such enhancements and is repaid through an assessment added to the property’s tax bill.” PACE financing is sponsored by state and local agencies in order to promote energy efficient technology in the home.
“Today, we’re seizing the opportunity to shape a cleaner and more sustainable nation,” said Ed Golding, HUD Principal Deputy Assistant Secretary for Housing, who was quoted in the press release.
He adds, “Using PACE, families will be able to make their homes more energy efficient and sustainable in the long run, while still keeping their costs affordable today. As PACE programs continue to develop across the nation, the positive impact on families, jobs, and the environment will only grow.”
You can learn more about the FHA’s new PACE policy in FHA Mortgagee Letter 2016-11.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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