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Administration Outlines FHA Financing for PACE Loans

writing-on-paper [1]The Federal Housing Administration [2] (FHA) and the Obama Administration said on Monday that it plans to issue a set of guidelines that will support borrowers that want to make energy-efficient improvements to their homes. The new guidelines are part of the White House’s National Clean Energy Summit.
In addition, the FHA also noted their intent to allow borrowers to use their single family financing for properties with existing Property Assessed Clean Energy [3](PACE) loans that meet certain conditions.

“These new tools will help homeowners make smart choices for their pocketbooks and for the environment,” said Julián Castro, HUD secretary. “HUD and the Obama Administration are proud to invest in American families and in the future of our planet.”
Through this guidance FHA is committing to develop more specific guidance in the near future that will include the following requirements:
  • PACE liens that preserve payment priority for first lien mortgages through subordination are eligible;
  • PACE assessments must be fixed-rate and fixed repayment schedule;
  • PACE assessments must be recorded and identifiable to the lender; and
  • PACE assessments must be attached to single family properties, as defined by FHA, which are 1- to 4 unit dwellings.

FHA also announced a new partnership with the Department of Energy (DOE) that will incorporate the use of DOE’s Home Energy Score into Single Family existing FHA’s Energy Efficient Home (EEH) program. Under the new partnership, FHA will provide flexible underwriting to recognize the reduced costs of utilities when those costs are established with the DOE's Home Energy Score.

Homebuyers or homeowners who want to obtain an FHA-insured purchase or refinance mortgage for a single family home that receives a Home Energy Score of 6 or higher will be eligible to increase their income qualifying ratio by 2 percent above the standard Single Family FHA limit.