A federal program that lets homeowners finance energy improvements and pay back the money via the tax assessment system leaves homeowners vulnerable to fraud and lending abuse, the trade group for title insurers says.
The American Land Title Association says federal authorities need to resolve issues with the Property Assessed Clean Energy program to prevent the program’s potential risks from delaying or cancelling real estate transactions.
“We recognize the value in lowering energy costs for consumers, creating jobs for the economy and reducing buildings’ carbon footprint for the environment,” said Kurt Pfotenhauer, chief executive officer of the American Land Title Association. “However, guidance is needed in resolving uncertainty surrounding these programs.”
ALTA sent a letter to the Federal Housing Finance Agency questioning how a PACE lien is created, how it’s administered, and how local jurisdictions will record the payoff of PACE loans. ALTA is concerned consumers in the PACE program are not getting Good Faith Estimates and HUD-1 Settlement Statements. Lenders, meanwhile, have questions about which liens get paid if the homeowner goes into default on the mortgage, the PACE loan, or both.
“This information allows consumers and lenders to make an informed decision about purchasing a property or providing mortgage financing,” Pfotenhauer said. “This uncertainty increases the potential of impeding or preventing real estate transactions.”
ALTA also questioned whether PACE liens must be recorded in the local public records and how ownership of the property is determined. “Without establishing standards for determining title to property, PACE loans run the risk of significant losses due to fraud,” Pfotenhauer said. “In addition to harming PACE participants, it also damages local property records, and results in increased costs of underwriting, claims, escrow services and compliance for the land title industry.”