In August 2015 President Barack Obama and the Federal Housing Administration (FHA) expressed support for the use of Property Assessed Clean Energy (PACE) to finance energy efficiency upgrades in homes. More importantly, the FHA will allow borrowers to use its insured mortgage loans for financing properties with existing PACE loans. This is considered a welcome development for residential PACE that has met some opposition in the past from industry stakeholders like the Federal Housing Finance Agency (FHFA).

1. FHA PACE
loans

2. What are PACE Loans
PACE is an innovative product that helps residential
and commercial property owners afford the costs of
renewable energy (RE), energy efficiency (EE) , or
water efficiency projects.

3. Background
California passed the very first legislation to enable
PACE financing and launched the BerkeleyFIRST
program, which paved the way for the PACE financing
model and now concluded, in 2008

4. Kinds of PACE Loans
Residential
Commercial PACE

5. Residential PACE Loans and FHA
Obama Admin’s Action Plan Towards Clean Energy
President Obama’s announcement on August 24, 2015,
showing support for PACE as part of his overall plan to address
climate change and transition into a cleaner and more energy
efficient America.
In the statement, the FHA is tasked to “unlock” residential PACE
financing for single­family homes. This action is deemed to
“remove existing barriers and accelerate” the use of residential
PACE financing.

6. FHA’s Guidance on
PACE Assessments
Based on its preliminary statement, the FHA will allow
for the purchase and refinance of properties with
subordinated PACE loans using FHA­insured
mortgages. The FHA will set out the eligible methods of
subordinating existing PACE liens in its guidance.

7. DOE PACE – FHA Partnership
Accordingly, the DOE or the U.S. Department of
Energy PACE has Guidelines that offer
recommendations regarding acceptable PACE
programs that should:
Require mortgage holders to be notified when a
PACE assessment is made on the property; and
Finance PACE projects that are cost­effective and
reduce energy requirements as can be measured
using DOE­approved methods.

8. What Are the Benefits of
FHA PACE Loans
FHA’s integration of PACE financing into its
insurance will help more homeowners take
advantage of energy saving options and will
preserve the marketability of homes with
existing PACE loans.

9. On PACE’s side, how does it
help homeowners?
Investment
Value
Sustainability

10. Why buy homes with PACE
loans using FHA loans?
They are available for purchase or refinance of properties;
Known for their down payments that could go as low as 3 &1/2
Down payments could be funded by friends, relatives or
institutions approved by the FHA;
Requires a credit score that is deemed lower than asked for
conventional loans;
Have a number of loan programs for borrowers that suffered
financial hardship, who are public personnel.
Have no income limit but maximum lending limits will apply.

11. Buying an energy­efficient home is a good
investment and you may do so using FHA loans.
We can connect you with a local lender to find
out the status of properties with PACE loans and
their eligibility for FHA insurance, availability of
PACE financing, or qualification for an FHA loan.

12. Finding the
BestFHALender is a one­stop shop offering useful
information about FHA loans and enabling customers to
shop for multiple lenders.
Best FHA Lender
Click here to learn more

13. Information Provided by
He is Americas Mortgage Commentator
and has been providing Mortgage
commentary for over 10 years.
Justin Mchood

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