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HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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Here’s the controversy surrounding PACE loans

Is the program too risky?

To one company using the programs, PACE (Property Assessed Clean Energy) programs are safe, but to critics in the industry, there are too many negatives about the loans, according to an article in MarketWatch by Andrea Riquier.

The PACE programs are designed to give homeowners new ways to finance energy efficient home improvements. And while intended to shape a cleaner and more sustainable nation, the programs have caused a lot of controversy, and the market has been slow to develop it due to Federal Housing Finance Agency regulatory concerns over the issue of lien priority.

The article told the story of how a “California homeowner had paid about $990 every month. But in early 2015, after solar panels were installed on her roof, Chavez, a retiree, discovered a total of $1,500, a sum she couldn’t afford, had been paid from her bank account.”

From the article:

Fidelity Home Energy sold the panels to the homeowner through a program called Property Assessed Clean Energy, which takes the local name Home Energy Renovation Opportunity, or HERO, in California. PACE loans date back to 2009, and 32 states and the District of Columbia have passed laws enabling programs to be set up. And as of this summer, the programs have the overt backing of the White House — including from President Obama himself.

For its part, Fidelity Home Energy’s CEO, Brad Smith, told MarketWatch that the program had been explained several times, at multiple steps throughout the process.

“We have installed over 5,500 solar systems and I believe this is the first time a customer has complained about an issue like this,” Smith wrote in an email.

The article explained that one of the most important concerns is the fact that PACE loans take priority over the mortgage in situations like foreclosures.

Back in July, the Federal Housing Administration announced it would soon begin insuring mortgages that also carry liens created by energy retrofit programs, as long as the energy lien remains subordinate to the mortgage.

HUD laid the groundwork for this move last year, when it announced its intentions to issue guidance that would preserve the priority status of FHA loans over loans created by PACE.

The housing industry’s biggest trade groups, however, are concerned with the details of the FHA’s new rules surrounding loans created by PACE loans.

Riquier concluded that California is currently working to address issues with PACE. 

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