August 28, 2015 12:27 am
PACE can vary from state-to-state, but generally allows homeowners to finance energy efficiency improvements for up to 20 years through assessments attached to the property. PACE allows homeowners to benefit from the improvements immediately and spread the cost over time. When the property is sold, the PACE loan remains with the property and the next owner is responsible for repaying the loan.
The Single Family FHA guidance will allow lenders to evaluate the conditions under which borrowers purchasing, refinancing properties, or modifying their loans with existing PACE assessments will be eligible to use FHA-insured financing. Through this guidance FHA is committing to develop more specific guidance in the near future that will include these 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.
The FHA will also be partnering with the Department of Energy (DOE) to incorporate its use of the DOE’s Home Energy Score into Single Family existing FHA’s Energy Efficient Home (EEH) program. The FHA will provide flexible underwriting to recognize the reduced costs of utilities.
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.
The DOE developed the Home Energy Score as a low-cost, reliable method to estimate a home’s energy use. It is the equivalent of a vehicle miles-per-gallon rating for homes. The calculation methodology relies on a 10-point scale in which a “1” corresponds to the least energy-efficient homes and a “10” corresponds to the most energy-efficient homes. According to the DOE, the average U.S. home will score a “5.” The official DOE-recognized Home Energy Score can only be assessed by a qualified energy assessor.
Published with permission from RISMedia.