ABA has previously raised concerns about PACE programs – which are currently operated in 30 states – where the PACE lien is allowed priority over the first mortgage lien. The recently issued guidance allows for the approval of mortgage and refinance options for properties with PACE obligations, provided they meet certain requirements. Among these requirements is the stipulation that the PACE assessment does not take first lien position ahead of the mortgage. However, the guidance does provide that for delinquent or foreclosed loans, PACE loans will retain a first-lien position. The groups wrote:
Allowing any PACE loan amount to hold a senior priority undermines the lender’s (and the government’s) collateral position and disrupts the very nature of secured lending.
The associations further pointed out that the guidance raises consumer protection concerns, since PACE financing is classified as a tax assessment rather than a loan, and as such, is not accompanied by various federal disclosures or subject to Ability to Repay standards.
View the letter.