PACE Financing: Big Changes Taking Effect

By Don Knapp

Real estate professionals and contractors: Are you versed in the latest updates to Property Assessed Clean Energy (PACE) financing and what those changes will mean for your clients? Both the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Energy (DOE) issued new PACE guidelines last week that will likely increase the uptake of PACE programs like HERO and CaliforniaFIRST.

HUD Clears Way for PACE and FHA Mortgages
HUD updated its PACE guidelines for FHA loans last week. The summary of HUD’s decision is that repayment of the full amount of a PACE lien will not take precedence over the repayment of an FHA mortgage; only the repayment of individual delinquent PACE payments will take precedence over mortgage payments. This simple update recognizes PACE as a property tax assessment, not a loan product. This differentiation is likely to make PACE programs more widely available across the country.

Reaction from the PACE industry was enthusiastic and positive. “By allowing PACE assessments to coexist with FHA-backed mortgages, the government is removing an impediment in federal policy that will give greater access to more homeowners in new states,” said Greg Frost, national communications director of Renovate America, which administers the HERO program. Get more insight and reaction to HUD’s announcement via articles on Renewable Energy World, CleanTechnica, and Green Building Law Update.

DOE Recommends PACE Best Practices
The same week, the Department of Energy (DOE) released best practices for PACE programs. A key practice is directed at sponsoring local governments and PACE providers, who have been told to pay attention to energy performance. “Specifically, the recommendation is that they should require energy audits, require the life cycle energy savings benefit to exceed the investment cost, and collect utility bills to monitor job performance,” said Build It Green Chief Innovation Officer Bruce Mast. “It will be interesting to see if they adopt these recommendations.”

Energy Efficient Mortgages Can Pay off PACE Liens
While this announcement isn’t brand new, it’s worth repeating news from Fannie Mae from earlier this year: The mortgage giant rebranded its energy efficient mortgage (EEM) product as “HomeStyle Energy.” The new-and-improved EEM can now be used to pay off an existing PACE lien.

Center for Sustainable Energy Hosting PACE Webinar
On Aug. 18, the Center for Sustainable Energy will host the webinar, PACE From a Real Estate Perspective. A panel will explore the value of PACE and discuss some of the outstanding issues and barriers facing stakeholders who work with PACE financing. The goal is to help real estate professionals better understand why PACE is so valuable to the residential energy efficiency financing market.