PACE loans, otherwise known as Property Assessed Clean Energy Bonds, are quick personal loan provided by cities to homeowners. Property taxes provide the way to repay these loans that are used to retrofit homes for more energy efficiency. Fannie Mae and Freddie Mac, along with the Federal Housing Finance Agency, though, have muscled these loans out of the market.
Source of article: Federal agencies question clean energy bonds for homeowners by Personal Money Store
How PACE loans work
Considered “bond backed loans,” PACE loans are administered by city governments. The homeowner applies for finance loans in order to make energy improvements to the house. Cities take these loans and sell them as bonds. When time comes for the homeowner to pay back these loans, the money is simply added to the taxes for the house. By keeping the payments rolled in with the property taxes, the energy improvements are paid by the people using the house. This loan program helps homeowners find personal installment loan that will help them make improvements to their home. In order to jump-start the programs, the federal stimulus package provided money to the cities.
Why PACE loans present a problem
Why are some federal agencies against these PACE loans? If a homeowner has these PACE loans, the other agencies might not get as much money. To make their money, a mortgage holder has to sell a house that goes into foreclosure. Before the mortgage lender gets their money, any lien or tax has to be paid. Because PACE loans are paid as part of property taxes, this means they get paid back before the mortgage lender if the mortgage goes into default.
Are PACE loans really at risk?
No federal agency has yet taken action to shut down PACE loans, officially. In places where PACE loans are available, though, mortgage payday installment loans programs are tightening their standards. Two members of Congress have written a letter “urging officials to work together easily to resolve” the PACE program question.
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