So long as the energy lien remains subordinate to the mortgage, the Federal Housing Administration will begin insuring mortgages that also carry liens created by energy retrofit programs, reports HousingWire staffer Ben Lane.

The groundwork was laid last year when the Department of Housing and Urban Development announced its intentions to issue guidance that would preserve the priority status of FHA loans over loans created by the Property Assessed Clean Energy program, also called PACE.

PACE allows homeowners to obtain financing to make improvements so that their homes become more energy efficient. According to HUD, PACE is an “effective way” to finance energy efficiency, renewable energy, water conservation, and other resilience upgrades to homes, including new heating and cooling systems, lighting improvements, solar panels, water pumps, and insulation.

PACE pays the costs for such enhancements and is repaid through an assessment added to the property’s tax bill. State and local governments sponsor PACE financing to encourage energy efficiency, solar energy deployment, advance resilience, create jobs, promote economic development, and protect the environment, HUD said.

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