Drawbacks and Challenges
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Lender Approval and Complexity:
- Lender Consent: C-PACE assessments can create a senior lien on the property, which requires lender consent if the property has an existing mortgage. This can add complexity and cost to the financing process.
- Complexity in Refinancing: The presence of a C-PACE assessment can complicate refinancing due to concerns about lien priority. However, addressing these concerns early can facilitate smoother refinancing.
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Limitations on Sale and Refinance Options:
- Difficulty in Selling: Properties with C-PACE assessments may be harder to sell since new owners must agree to assume the additional assessments.
- Refinancing Challenges: The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac not to purchase or refinance mortgages with C-PACE liens, limiting refinance options.
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Property-Specific and Limited Availability:
- Customized Financing: C-PACE financing is structured for individual properties, making it less suitable for portfolio strategies.
- Geographical Constraints: The availability of C-PACE is limited to areas with PACE-enabling legislation, which can vary by state or municipality.
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Market Acceptance and Education:
Despite growing awareness and acceptance, there may still be a need for education among lenders, borrowers, and brokers about the nuances of C-PACE financing.
In summary, while C-PACE offers unique benefits, it also presents challenges related to lender consent, property sale and refinancing, geographical availability, and market understanding.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/are-there-any-potential-drawbacks-or-challenges-associated-with-c-pace-financing/
