Because of the risks to safety and soundness caused by some energy efficiency loans, credit unions should make "appropriate adjustments, to their underwriting criteria and collateral monitoring practices."
That's the recommendation of NCUA Chairman Debbie Matz, in response to concerns raised about the Property Assessed Clean Energy loans by the Federal Housing Finance Agency.
Under the terms of many PACE loans, they acquire a priority lien over existing mortgages.
This raises concerns for the FHFA because PACE loans are "unlike routine tax assessments and pose unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors."
Matz urged credit unions to make changes because certain PACE loans "could usurp a lender's senior lien position on a mortgage, undermine the underwriting decisions made by the lender at the time of the mortgage origination, and bypass consumer protections required prior to the extension of credit."
To view the FHFA statement, go to: http://www.fhfa.gov/webfiles/15884/PACESTMT7610.pdf
