Newsroom

December 07, 2017

FHA to stop insuring mortgages with PACE assessments

The Federal Housing Administration (FHA) announced Thursday that it will no longer insure new mortgages that include Property Assessed Clean Energy (PACE) assessments. NAFCU had long advocated for reining in PACE loans over consumer protection concerns.

PACE loans enable mortgage borrowers to finance environmentally friendly home upgrades. Under its previous policy, FHA made PACE loans subordinate to first-lien mortgages, allowing borrowers with FHA loans to refinance or sell their properties instead of being forced to pay off the PACE loan before getting a new mortgage.

Department of Housing and Urban Development Secretary Ben Carson, in the announcement of the FHA's policy reversal, said "FHA can no longer tolerate putting taxpayers at risk by allowing obligations like these to be placed ahead of the mortgage itself in the event of a default."

NAFCU had previously supported legislation that would have increased PACE loans consumer protections, such as requiring federal TILA-rooted requirements and considerations for PACE loans – including the CFPB's ability-to-repay and qualified mortgage rules, among other standards.