FHA Stops Insuring Mortgages With PACE Assessments
December 7, 2017
The Federal Housing Administration (FHA) has announced that it will cease insuring new mortgages on properties that include Property Assessed Clean Energy (PACE) assessments.
The PACE policy was announced in July of 2016 and was terminated effective immediate. The FHA announcement stated that this decision was “part of a larger effort to protect the health of its Single Family Mutual Mortgage Insurance Fund (MMIF) and the borrowers who rely upon it.” The FHA also expressed concern about PACE obligations that were placed on FHA-insured mortgages that are already outstanding, and also argued this created undue risk and potential term violations of FHA-insured mortgages.
"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," said U.S. Department of Housing & Urban Development (HUD) Secretary Dr. Ben Carson. "Assessments such as these are potentially dangerous for our Mutual Mortgage Insurance Fund and may have serious consequences on a consumer's ability to repay, or when they attempt to refinance their mortgage or sell their home."
David H. Stevens, President and Chief Executive Officer of the Mortgage Bankers Association (MBA) and FHA Commissioner during the first part of the Obama Administration, welcomed the announcement on his Twitter feed.
Stevens tweeted: “Yes! Good news! This is a rip off program that can screw consumers promoted by the last Administration. Great move @SecretaryCarson and HUD. The Obama team got this one way wrong.”
Elizabeth Mendenhall, President of the National Association of Realtors (NAR), commented, “FHA’s PACE announcement is a smart step that will protect taxpayers and strengthen the overall program for homebuyers. NAR supports voluntary, incentive-based programs that encourage homeowners to make their property more energy efficient, but not at the expense of FHA or the strength of its portfolio. NAR pushed hard for this change and we applaud FHA’s attention to the issue.”
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