The Department of Energy today released new best practices guidelines for residential Property-Assessed Clean Energy mortgages, which provide homeowners a way to have their homes undergo energy-efficient retrofitting financed through property tax assessments. The new guidelines are intended to help state and local governments as they expand their PACE programs, and address the various problems and abuses that have emerged in the market since the PACE framework was first established in 2009.
Among other things, the guidelines suggest that PACE programs confirm property owners’ ability to repay their assessments, and that state and local governments work with program administrators to establish underwriting guidelines and criteria for PACE programs.
ABA and the Federal Housing Finance Agency have previously raised concerns about PACE programs — which are currently authorized in more than 30 states — where the PACE lien is allowed priority over the first mortgage lien. By taking first lien position, PACE loans could harm borrowers and lenders who rely on the certainty of the first lien position on mortgages for affordable financing. FHFA has prohibited Fannie Mae and Freddie Mac from purchasing loans with PACE liens citing concerns about taxpayer risk.
ABA remains concerned about the lack of required consumer protections surrounding PACE loans, which puts consumers — especially older Americans — at greater risk for deceptive or predatory lending tactics and foreclosure.