Unpaid PACE solar financing makes the house ineligible for a Home Equity Conversion Mortgage until the assessment is gone. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. Mortgagee Letter 2017-18 is blunt: a property that remains encumbered with Property Assessed Clean Energy financing is not eligible for an FHA HECM.
Consider what happens when Beatriz, 66, in Palmdale has a rooftop array financed through a PACE assessment that still prints on the county tax bill. Owned panels that were paid in cash are a different file. A solar lease with a UCC-1 is a third file. This page is the PACE assessment. The sibling solar panels page is the owned-versus-leased walkthrough. Stay here for the eligibility bar HUD actually published.
A HECM is FHA-insured. It is not a solar-financing program and it is not a government benefit.
Does an unpaid PACE assessment make the house HECM-ineligible today?
Yes, while it still encumbers the property. Mortgagee Letter 2017-18 did not turn PACE into a regular electric bill. It is a recorded assessment. Title will find it. A first-lien HECM needs that assessment paid or otherwise removed in a form the underwriter and title company will accept before the new deed of trust records.
24 CFR 206.45 still requires eligible real estate with marketable title. PACE is not “just another junior” you hope the closer ignores. Hoping the administrator “won’t notice” is not a closing condition.
Age, occupancy, and counseling still apply. 24 CFR 206.33, 24 CFR 206.39, and 24 CFR 206.41 do not pause because the roof makes power. A PACE-encumbered house you will not occupy is two fails, not one workaround.
Run leftover cash after a written PACE demand before anyone treats “pay it from the reverse” as a large check. PACE-payoff capacity still lands in the mid-30s to low-50s percent of appraised value, depending on age and expected rate. This page will not quote a live factor.
Can HECM proceeds retire PACE at closing, or must it be gone first?
Paying PACE at closing from HECM proceeds is the usual curative path when the principal limit covers the assessment plus other mandatory obligations. The payoff is a 24 CFR 206.25 stack item when it must be cured for first position. You do not have to prepay PACE from savings if the new loan can retire it and still close.
24 CFR 206.36 can still matter if the PACE was placed last month and you also want a large leftover draw. The rule shall not bar paying a non-HECM lien from HECM proceeds if the lien has been in place more than twelve months, or if cash to you is $500 or less. A last-month PACE plus a large cash-out is the file that regulation is built to catch. On PACE, paying from other funds, waiting, or a $500-or-less cash structure are the legal 206.36 forks.
A PACE payoff does not shrink initial MIP of 2.00% of maximum claim amount under Mortgagee Letter 2017-12. The 2026 cap is still $1,249,125 (Mortgagee Letter 2025-22). Origination is still capped at $6,000 under 24 CFR 206.31. Annual MIP still accrues at 0.50% of outstanding balance on whatever you drew. An adjustable HECM still uses 1-month CMT plus lender margin. I do not quote a live index.
If residual income later requires a LESA, that set-aside is origination-only. It holds future taxes and insurance. It does not pay a PACE administrator after closing.
How is PACE different from a solar-lease UCC-1 on the same roof?
PACE rides the tax bill. A UCC-1 fixture filing rides the equipment. Mortgagee Letter 2017-18 is the PACE letter. The UCC is a 24 CFR 206.45 title problem. Some lessors will release. Some will subordinate in a form the lender accepts. Some will not. I will not promise a Palmdale PACE-plus-lease stack will clear because a Mesa solar file did.
I work with multiple lenders. Their solar overlays are not identical. Confirm the live overlay with the underwriter before you book a counselor. This page will not invent a lender that closes with an uncleared UCC-1 still of record.
A second geography: an 74-year-old in Mesa with a PACE sticker on the tax bill and a first mortgage that already eats most of the principal limit. Paying PACE at closing only works if capacity remains after the first, initial MIP, and costs. If it does not, bring cash or do not originate.
Counseling still costs $125–$175. The certificate lasts 180 days. California Civil Code 1923.2(k) still adds seven days after counseling. Arizona skips that Civil Code clock and still needs 24 CFR 206.41 counseling. Neither clock pays the PACE administrator for you.
See a home with liens when the stack is broader than solar. See how long origination takes for where a stale payoff sits on the calendar.
Who should not book counseling while PACE is still on the tax bill?
Do not book it if you have no written payoff. Do not book it if the principal limit clearly cannot cover PACE plus the first mortgage. Do not book it if the plan is to hide the assessment and “sort it later.” Title will sort it later, after the 180-day paper is aging.
This path does not help a household that wants me to originate around Mortgagee Letter 2017-18. I will not. It does not help a file whose only proceeds story is a PACE payoff so large that leftover cash is a token. Paying initial MIP of 2.00% of claim amount for a PACE-only leftover token is a poor trade.
What can go wrong: the family completes counseling, then learns the PACE recapture clause is larger than the dinner-table number. Or a solar lease UCC-1 is sitting next to the PACE and nobody called the lessor. Or someone treats an expired PACE “estimate” as a closer’s demand.
Heirs who later keep a house that closed after a PACE payoff still repay the outstanding HECM balance under 24 CFR 206.125(a)(2)(i). Retiring the assessment at origination does not rewrite the heir rule.
Complete PACE-payoff refinances in Jay’s shop still average about 30 days after the file is whole. That is not a guarantee. An expired PACE letter is how that average stretches.
I will originate when PACE is paid at closing and title is actually first. I will turn away a rooftop slogan that still has an assessment on the treasurer’s printout.