What is PACE?

PACE refers to Property Assessed Clean Energy programs which may provide an alternative means of financing energy and other PACE-allowed improvements to residential properties using financing provided by private enterprises in conjunction with state and local governments. 

The terms and conditions of PACE programs vary by state, locality and PACE program, but generally repayment of the PACE obligation is collected by the local government in the same manner as special assessments rather than paid directly by the Borrower to the party providing the PACE obligation.

In the event of a sale of the property, including a foreclosure sale, the PACE obligation may remain with the property. If the obligation will remain, the new owner will assume responsibility for making the payments on the outstanding PACE amount. 

Properties where the Property Assessed Clean Energy (PACE) obligation will remain in place after the sale of the property are not eligible for FHA mortgage insurance.

For additional information see Handbook 4000.1, Section II.A.1.b.iv.(A)(6) available at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-03429