On December 7, 2017 FHA announced that properties encumbered with a PACE obligation will no longer be eligible for FHA-insured forward mortgages and the prohibition of PACE obligations remains in effect for Home Equity Conversion Mortgages (HECM), as referenced in Mortgagee Letter 2017-18. This guidance is effective for case numbers issued thirty days after the date of the Mortgagee Letter.
FHA to stop insuring mortgages encumbered with PACE obligations on January 6, 2018
What is PACE?
Property assessed clean energy (PACE) is a secure form of financing that can be used to fund clean energy and other improvements on private property, such as upgrades to heating and air conditioning units, purchase and installation of solar panels, windows, and other environment friendly products. PACE assessments are repaid through property tax bills, attach to the property and not to the original borrower and generally, take senior position to first mortgages.
Why Should You be Concerned?
Any debt that takes senior position over a first mortgage is always a concern for the mortgage industry and investors. Moreover, PACE assessments could reduce the funds available to repay a mortgage holder in the event of default or foreclosure, may impact homeowners’ overall ability to pay, complicates loan closings for lenders and title companies and could have a long-term effect on mortgage performance.
How Can We Help?
Our goal at Avanta Risk Management is to provide meaningful information to the mortgage and real estate industries to eliminate any risk PACE loans may create.
In anticipation of the risk created by PACE, we started evaluating effective methods of gathering PACE loan information in early 2017, which led to the development of proprietary technologies and processes to review single and/or bulk orders in real-time to identify properties with PACE obligations, determine tax Impacts, and obtain loan pay-off information.
Our service includes:
- PACE Loan Report –determine properties with a PACE obligation and the impact the PACE loan had on the property’s tax assessment and tax amounts.
- Innovative technologies that identify PACE obligations in real-time
- Comparison Assessment and Tax data for each property found to be encumbered by a PACE obligation
- Available in electronic and manual reporting formats
- PACE Pay-Off Report – provides Clients with PACE loan details for each requested order or utilized as an added value service to our PACE Loan Report service.
- Provides a single order approach to identify properties with an existing PACE obligation
- Provides a total-pay-off or outstanding balance for each property encumbered by a PACE obligation and detailed payment instructions
- Available in both manual and electronic reporting formats
Use the link below to learn more about what areas of the country are affected and how our solutions will help you avoid the risks PACE loans may create in your portfolio.