SAN DIEGO, August 24, 2015 – Today, the Federal Housing Administration announced it would develop guidance to insure mortgages for homes with Property Assessed Clean Energy (PACE) assessments, so long as the assessment is subordinated to an FHA mortgage. This policy statement is a major development in unifying national renewable energy and water and energy efficiency objectives with federal housing policy objectives. The FHA insures 7.6 million mortgages nationwide, and has recently been more important than ever for the housing market – comprising over 20% of new mortgage originations.
J.P. McNeill, CEO of Renovate America which runs the HERO Program and is the nation’s leading PACE provider with more than 40,000 funded projects in California in more than 35,000 homes, issued the following statement:
“This is a significant step forward for PACE, as it unites national renewable energy and water and energy efficiency objectives with federal housing policy objectives. We are pleased the White House and FHA recognize PACE as ‘an innovative mechanism’ and enshrine in federal policy today a core principle of the program: ‘When the property is sold, the remaining PACE loan stays with the more energy efficient property and the next owner is responsible for repaying the loan.’ As the policy guidance points out, PACE enables homeowners to benefit from the improvements immediately, spread the cost over time, and transfer the value of the retrofit from one owner to the next.
“Renovate America through its HERO Program have been successfully subordinating the assessment through contract since April of this year. Guidance from federal agencies that endorses these contracts – and the tool of subordination we launched — while preserving the key features of PACE, has the potential to unlock alternative sources of capital to accelerate renewable energy and efficiency retrofits for households, and reduce energy costs for consumers.
“It’s encouraging to see the FHA embrace an innovative new payment option designed specifically to address the shortcomings of other financing options for home renovations to encourage energy efficiency and water conservation. PACE lowers a key barrier for families of all means to access these home improvements. Energy efficient mortgages and home equity lines have been available for many years, but studies show they have not been widely effective payment options for homeowners.
“Since 2011, Renovate America’s HERO Program has helped more than 35,000 homeowners make more than $800 million in improvements to their homes which reduce energy and water consumption, saving them over $1.6 billion in estimated future energy costs and more than 1.3 billion gallons of water. Renovate America has helped create more than 6,500 local jobs.
“We encourage the FHA to work closely with state and local governments to ensure that today’s announcement helps to accelerate the availability and acceptance of PACE through contractual subordination.”