WASHINGTON—NAFCU, CUNA and nine other trade associations have sent a letter jointly urging the Department of Housing and Urban Development and Department of Veterans Affairs to suspend their recently revised guidance on Property Assessed Clean Energy loans, citing lending and consumer protection concerns.
PACE loans help mortgage borrowers finance environmentally friendly home upgrades.
The new HUD-VA guidance, issued last month, allows for the approval of mortgages for the purchase or refinance of properties with PACE obligations provided that certain requirements are met. One requirement is that delinquent PACE loan amounts retain a first-lien position, which the trades warn “undermines the lender’s (and the government’s) collateral position.”
The trades also said the proposal raises “a host of consumer protection concerns,” as PACE loans – classified as tax assessments rather than loans – are not subject to CFPB disclosures and protections associated with home mortgages.
Rep. Brad Sherman (D-CA) raised this same issue earlier this year in a letter to CFPB Director Richard Cordray, NAFCU noted.
Last August, the Federal Housing Administration made PACE loans subordinate to a first-lien mortgage, allowing borrowers with FHA loans to refinance or sell their properties instead of being forced to pay off the PACE loan before getting a new mortgage.
In the letter, the trades asked that HUD and VA suspend applicability of the proposal and issue the guidance for notice and comment.