I have mentioned the solar and other energy retrofit programs our local cities are getting ready to roll out. One of the problems was the fact that Fannie & Freddie will not underwrite future loans on these properties since the improvement goes on the tax bill and that is a senior loan to the mortgage. FHFA has issued a statement concerning that and encouraging F&F to develop new guidelines to deal with this. After all, the PACE program is also a Federal program – you’d think one federal program would not be in conflict with another, wouldn’t you? (heh-heh).
FHFA ISSUES STATEMENT ON PACE LOAN PROGRAMS
The Federal Housing Finance Agency (FHFA) issued a statement today concerning energy retrofit lending programs that are finances through a county or city’s tax assessment regime. The so-called Property Assessed Clean Energy (PACE) programs allow homeowners to finance energy retrofit improvements to their homes through an assessment on their property tax bill. They have created concerns because the loans acquire priority lien over existing mortgages.
In the statement, FHFA directs Fannie Mae, Freddie Mac and the Federal Home Loan Banks to follow certain guidelines concerning the PACE loans. These allow the agencies to purchase mortgages on properties that previously acquired a PACE loan with a first-lien position. However, the agencies are directed to develop new underwriting guidelines going forward. For these new loans, the agencies will be required to adjust loan-to-value and debt-to-income ratios to reflect the “maximum permissible” PACE loan amount available to borrowers.