FHA issued Mortgagee Letter 2017-18, setting forth revised policies for insuring mortgages secured by 1- to 4- family properties encumbered with Property Assessed Clean Energy (PACE) obligations. Per the Mortgagee Letter, properties encumbered with a PACE obligation will no longer be eligible for FHA-insured forward mortgages. The Mortgagee Letter also clarifies that PACE obligations are existing debt that may be paid off using a Rate and Term Refinance. Current policies allowing the use of a Cash-Out refinance to pay off PACE obligations remain unchanged. With respect to HECMs, PACE obligations must be paid off at closing, and may be paid off using HECM proceeds. The revised policies are effective for case numbers issued on or after January 6, 2018.
FHA
FHA Revises and Streamlines Policy Established in Mortgagee Letters 2024-24 and 2025-12
FHA issued Mortgagee Letter (ML) 2025-14 revising and streamlining policy established in ML 2024-24 (Modernization of Engagement with Borrowers in Default) and providing clarifications to
June 4, 2025
