The
California League was successful in amending a Property Assessed Clean Energy
(PACE) bill, A 2693. PACE programs allow
lenders authorized by the state to finance loans for energy improvements on
residential properties. These loans take first priority and must be paid before
borrowers can refinance or sell their property, which is troublesome for
California credit unions. Last week an amendment was made last week to the bill
to address the lien issues surrounding these programs.
Because
of the lack of regulation surrounding PACE programs and the super-priority
lien, these programs have received considerable attention from homeowners,
traditional lenders, and the Federal Housing Finance Agency (FHFA). In a
December 2014 statement, the FHFA wanted to “make it clear to homeowners,
lenders, other financial institutions, state officials, and the public that
Fannie Mae and Freddie Mac’s policies prohibit the purchase of a mortgage where
the property has a first-lien PACE loan attached to it.” For credit unions and
their members in California, the unwillingness of Fannie Mae and Freddie Mac to
buy mortgages with attached PACE liens means a chilling effect on the liquidity
of the lending market.
The
League is working with a coalition to reform of the current PACE program. The
amended legislation will reduce the super-priority lien to a judgment lien
while allowing PACE lenders to collect on the loans through property tax
assessments, and will also require PACE lenders to provide TILA-RESPA
Integrated Disclosures to potential borrowers.