American Land Title Association Asks For Clarifications Regarding Federal Clean Energy Program
July 27, 2010
While the American Land Title Association (ALTA) supports efforts to reduce energy consumption and limit greenhouse gas emissions, several questions need answered regarding the Property Assessed Clean Energy (PACE) program in order to prevent potential risks in delaying or canceling 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 ALTA. “However, guidance is needed in resolving uncertainty surrounding these programs.”
ALTA sent a letter to the Federal Housing Finance Agency asking for clarification about the process by which a PACE lien is created, and how it is administered and satisfied to repay the obligation. Without knowing additional information regarding PACE liens, consumers will not be able to be properly informed they have clear title to their property and creditors will be unaware of their lien priority.
“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.”
In addition, ALTA said concerns exist whether PACE financing is defined as a loan or a tax assessment. If it’s considered a loan, repayment is secured by a tax lien against the property. The Real Estate Settlement Procedures Act (RESPA) requires that all loans secured by a lien against real property must be conducted in accordance with RESPA, including the issuance of a GFE and HUD-1. ALTA also seeks clarification if PACE liens must be recorded in the local public records and how ownership of the property is determined. A property owner must have title in order to grant a lien against the property, but guidelines for the PACE programs are unclear in how to prove ownership.
“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.”