The Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) announced changes to the treatment of Property Assessed Clean Energy (PACE) loans. This new guidance, which goes into effect immediately, states that PACE loans will remain in a subordinated position on most FHA mortgages, in line with long-standing guidance from the Federal Housing Finance Agency. The VA, which is issuing guidance on PACE loans for the first time, is taking the same position regarding lien position. In response, NAR President Tom Salomone issued a statement asking the VA and FHA to reconsider their position.
In part, Salomone’s statement read, “REALTORS supports incentive-based financing programs that allow homeowners to improve the energy efficiency of their homes and reduce their energy costs. However, NAR is concerned that, by putting PACE loans in a primary lien position, fewer homeowners will be able to take advantage of the benefits of this program, and may also make it more difficult for distressed homeowners to refinance their mortgage outside of the FHA or VA. Should that happen, a foreclosed property with a PACE loan in the primary position will likely remain on the market longer than it should, further increasing uncertainty in mortgage markets and placing unnecessary pressure on homeowners.”