ARLINGTON, Va.—NAFCU Regulatory Affairs Counsel Kaley Schafer reiterated support for the Federal Housing Finance Agency's (FHFA) efforts to protect government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac from risks posed by residential property assessed clean energy (PACE) financing, but cautioned against disclosures that could burden financial institutions without adding consumer protections.
“NAFCU recommends that the FHFA maintain the current policy of allowing the GSEs to adjust loan-to-value ratios as necessary,” Schafer wrote in response to the FHFA's request for information on PACE financing. “In addition, NAFCU suggests that the FHFA charge targeted loan level pricing adjustments to account for the higher risks associated with PACE loans in those states and communities where available. A blanket increase would burden low- and -moderate-income borrowers and first time homebuyers.
“NAFCU appreciates the steps taken by the FHFA and other agencies to alleviate risks associated with PACE loans and is supportive of loan servicers providing annual disclosures for PACE loans to enhance consumer protections but only if the benefits outweigh the additional burdens,” Schafer added.
‘Negative Implications’
Though credit unions do not offer PACE financing, Schafer noted they still “face negative implications when PACE-financed improvements impose a superior lien on properties with preexisting mortgages.” She also called for a strong and sustainable secondary mortgage market that is accessible for participants of all sizes.
Schafer previously responded to an advanced notice of proposed rulemaking on PACE financing issued by the CFPB in 2019 and supported the agency’s efforts to bolster the sound underwriting practices by requiring ability-to-repay standards for PACE loans. The association noted it has also supported legislation to increase PACE loans' consumer protections.