Removing Barriers Blog

CCUL Defeats Super-Lien Bill
Posted August 27,2015 by CUNA Advocacy

Recently, the California Credit Union League (CCUL) helped defeat an attempt in the California legislature to give super-lien rights to unregulated lenders through Property Tax Assessed financing. The legislation, S 602, would have given the California Earthquake Authority the ability to lend to property owners seeking to seismically retrofit their homes. Late amendments tucked into the bill by proponents sparked opposition by the League and a coalition of realtors, bankers, mortgage bankers, and representatives from the land title industry. 

The lending community opposed the measure because it was a stealth attempt to expand property tax-assessed financing statewide—a phenomenon commonly seen in Property Tax Assessed Clean Energy (PACE) financing of energy efficiency upgrades for homes (solar panels). This unregulated lending market has caused trouble for consumers refinancing or selling their home because they must pay off their PACE loan to reconcile the lien.

The bill’s proponents have decided not to push S 602 for the remainder of the year due to intense opposition. The League organized district meetings with key legislators around the state during the legislative summer recess to ensure the credit union message was heard. Shortly before the legislature reconvened, the League was informed the proponents had decided not to take up the bill this year.

CCUL also submitted comments to the U.S. Department of Housing and Urban Development (HUD) weighing in on the agency’s consideration of super priority liens for energy efficiency loans made by unregulated lenders. Joining three other associations in its comment letter, CCUL requested that HUD and the Federal Housing Administration (FHA) avoid using super priority liens in any policy consideration of PACE loans. Any policy should be consistent with the Federal Housing Finance Agency’s (FHFA) existing policy on PACE loans, CCUL said.

The FHA declared in its policy statement: “The Single Family FHA guidance will address the impact of PACE assessments on purchases, refinances and loan modification options available to borrowers experiencing distress and will require the subordination of PACE financing to the first lien FHA mortgage.” 

CCUL’s advocacy team will be engaged in the continued debate around PACE -type financing to ensure the lending industry’s first mortgage position is protected.