On Dec. 7, 2017, the Department of Housing and Urban Development (HUD) announced that HUD will no longer insure mortgages encumbered with a Property Assessed Clean Energy (PACE) assessment. This reversal of HUD policy is a victory for the National Association of REALTORS® whose members sounded concern that PACE liens would take a first-lien position over FHA in instances of default or foreclosure, undermining the government's collateral position and disrupting the secured lending process.
The new prohibition on PACE liens goes into effect for FHA case numbers issued 30 days from the announcement. Mortgages with PACE liens previously insured by FHA will not be adversely affected.
2018 NAR President Elizabeth Mendenhall issued the following statement on behalf of NAR:
“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 owners to make their homes more energy efficient, but not at the expense of FHA or the strength of their portfolio. NAR pushed hard for this change and we applaud FHA’s attention to the issue.”
HUD Press Release
HUD Mortgagee Letter 2017-18