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July 11, 2018

REMINDER: VA Circular 26-16-18 Property Assessed Clean Energy (PACE) Loan Processing is Rescinded July 1, 2018

Mortgage Action Alliance (MAA)--The Grassroots Newletter Volume XII | Issue 25 | July 11, 2018

VA Ends Policy Permitting PACE Liens on VA Loans

The Department of Veterans Affairs (VA) has ended its policy permitting VA-guaranteed financing on properties with a pre-existing Property Assessed Clean Energy Loan (PACE) obligation. The policy was originally announced in Circular 26-16-18 on July 19, 2016 and was similar to a HUD announcement for FHA loans at the same time. At that time, MBA advocated strongly against these decisions by both Departments because PACE loans are not subject to appropriate, standardized consumer protections, and they also upend traditional lien priority.  Last year, with the arrival of the new administration, MBA urged both VA and FHA to reconsider their PACE policy.  The original VA Circular included a sunset date of July 1, 2018, and VA has informed MBA it will not extend its PACE policy.  HUD previously announced on December 7, 2017 that it would reverse its prior PACE guidance.  MBA advocacy also resulted in the enactment of a provision (Section 307 of S. 2155) requiring the BCFP to issue regulations to apply ability to repay standards to PACE loans.  Taken together, these actions should better protect consumers, lenders and taxpayers from the deleterious effects of PACE lending. 

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