August 18, 2015
California REALTORS® provide input on HUD/FHA discussions to give senior lien status to energy efficiency liens
Veering away from FHFA’s policy would cause confusion and friction in real estate markets
LOS ANGELES (Aug. 18) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) is providing input on discussions that the U.S. Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA) are having to give Property Assessed Clean Energy (PACE) liens "super lien" priority, which would make them senior to the FHA’s single-family first-mortgage financing.
"Housing policy makers are only looking at the general concept of PACE, which is to promote energy efficiency, but they haven’t taken the time to investigate how individual states are implementing the program and the hurdles and confusion it has created for real estate markets," said C.A.R. President Chris Kutzkey. "C.A.R. is supportive of the energy conservation goals of PACE, but we are concerned that the unregulated implementation of PACE lending in California has adversely affected the state’s real estate market and complicated real estate transactions."
The Federal Housing Finance Agency (FHFA) prohibits Fannie Mae and Freddie Mac from buying mortgages or notes with PACE-type liens. If FHA’s single-family policy on PACE liens veers away from Fannie Mae and Freddie Mac, confusion among consumers, lenders, servicers, and other real estate industry professionals will arise as they struggle to implement competing PACE procedures.
Allowing PACE liens to be senior to FHA single-family mortgages could threaten its Mutual Mortgage Insurance Fund as states have expanded the use of their PACE programs beyond energy efficiency, such as water conservation and earthquake retrofit. Even worse, the lack of underwriting and disclosure in such loans invites abuse by unscrupulous contractors.
PACE loans allow homeowners to build the costs for energy-efficiency upgrades, such as adding insulation and installing energy efficient windows or solar panels, into their property tax bills. PACE is available in 31 states, including California.
Leading the way…® in California real estate for 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
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