PACE loans, otherwise known as Property Assessed Clean Energy Bonds, are quick personel loans provided by cities to homeowners. Intended to finance energy-efficiency upgrades and retrofits, these PACE loans are paid off as a part of the property taxes on a house. The Federal Housing Finance Agency, along with Fannie Mae and Freddie Mac, is working to push these loans out of their market.
Article source: Federal agencies question clean energy bonds for homeowners by Personal Money Store
The administration of PACE loans
Considered “bond backed loans,” PACE loans are administered by city governments. The homeowners apply for PACE for finance loans they can use to improve the energy use of their home. The city then turns around and sells these loans as bonds. The loan is paid off by adding the payments to the property taxes. Since the energy-use improvements stay with the house, the payments stay with the house also. These loans are a way for cities to help their residents finance personal payday installment loans that move each city towards energy independence. The federal stimulus program provided cash to cities to help get the programs started.
The conflict with PACE loans
If PACE loans are a way for cities and housing to improve and for the country to move toward energy independence, why are federal agencies such as the Housing Finance Agency against them? If a homeowner has these PACE loans, the other agencies might not get as much money. When a home is foreclosed on, the mortgage holder has to sell the house to make their money. However, liens such as property taxes have to be paid before the mortgage lender gets any money. If the homeowner stops paying their mortgage, then the PACE loan gets paid off before the mortgage.
Are PACE loans really at risk?
No federal agency has yet taken action to shut down PACE loans, officially. The standards for mortgage installment loans for bad credit programs where PACE is accessible, though, are being tightened. The PACE program has gotten a letter written by Henry Waxman and Barney Frank “urging officials to work together easily to resolve the uncertainty”.
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