PACE Financing Loans

SB 162—Local Government by Sen. Matt Brass (R), Newnan, was introduced in the Senate.  This bill relates to local government, so as to provide for disaster mitigation improvements and broadband services infrastructure in projects of downtown development authorities and development authorities; to provide for definitions; to provide for related matters; to repeal conflicting laws; and for other purposes.  The bill was passed as a substitute by the Senate Regulated Industries and Utilities Committee.  The bill provides for PACE (property assessed clean energy) Financing of disaster mitigation improvements and broadband services. 
 
In reviewing the language of the bill, CBA has concerns with the bill as written.  PACE loans have issues at the federal level as well.  In December 2017, the Federal Housing Administration announced that it would stop insuring mortgages on loans that also carry PACE loans.  Fannie Mae’s guidelines indicated that they will not purchase mortgage loans secured by properties with an outstanding PACE loan unless the terms of the PACE loan program do not provide for lien priority over first mortgage liens.  On Monday, the CFPB issued an “Advance Notice of Proposed Rulemaking” on PACE financing that could see an ability-to-repay provision added to PACE regulations.  Read more on each of these items by clicking below.
 
https://www.housingwire.com/articles/42036-fha-to-stop-insuring-mortgages-with-pace-loans
 
https://www.fanniemae.com/content/guide/selling/b5/3.4/01.html
 
https://www.housingwire.com/articles/48337-cfpb-plans-to-issue-rules-on-pace-loans 
 
PACE loans in Georgia have a lien priority superior to the mortgage, which creates issues for banks with foreclosures.  By FHA stating that they will no longer insure loans with PACE loans, this takes away an option for consumers to get financing on mortgages.  Also, PACE would create challenges for the consumers who are looking to purchase a home (as well as a challenge for those selling) with a PACE loan as the loan stays with the property and not the person that originally took out the loan. 
 
CBA, GBA, and GCUA all expressed concerns to the author of this bill.  The author indicated that he would be willing to work with us on language that may mitigate our concerns when the bill moves to the House.  On the Senate floor, the bill was amended by the author to delete language that would prevent a mortgagee from accelerating the mortgage in the event a PACE loan was added to the property.  The deletion of this language did alleviate one of the concerns with the bill as passed by the Senate Committee.  Senator William T. Ligon, Jr. (R), Brunswick, did stand and oppose the bill on the Senate Floor and asked for a “No” vote.  The bill was passed by the Senate with a vote of 39-14 on Thursday.  The bill was read in the House and assigned to the House Regulated Industries Committee.  CBA will continue to work with the author of the bill.

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