Potential Risks of C-PACE Financing
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Lender Approval and Pushback:
- C-PACE assessments create a senior lien on the property, which often requires consent from senior lenders. This can add time and cost to the financing process.
- The presence of a C-PACE lien may limit refinance options due to its senior status over other mortgages.
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Impact on Property Sales:
- The transfer of C-PACE obligations to new property owners can make properties less attractive to potential buyers, potentially limiting sale options.
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Long-term Financial Commitment:
- C-PACE financing typically spans 10 to 30 years, which is a long-term financial commitment that requires careful planning and consideration.
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Availability Limitations:
- C-PACE financing is only available in locations with PACE-enabling legislation, which can limit its accessibility for property owners in certain areas.
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Delinquency and Default Risks:
- Although C-PACE assessments do not accelerate upon default like traditional loans, they are treated similarly to property tax delinquencies. Only the past due portion is considered in default, but unresolved delinquencies can still impact property owners.
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Regulatory and Market Risks:
- Some entities, like the Federal Housing Finance Agency, have expressed concerns regarding C-PACE liens, directing organizations like Fannie Mae and Freddie Mac not to purchase or refinance affected mortgages.
By understanding these risks, property owners can better evaluate whether C-PACE financing aligns with their needs and strategies for energy-efficient upgrades.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-potential-risks-associated-with-c-pace-financing/
