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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 62 January 2025 J O U R N A L opment (HUD) has announced changes to help housing providers maintain affordable rents, while keeping up with rising expenses. HUD recently published a Federal Register Notice to update the Operating Cost Adjustment Factors (OCAFs) for eligible multifam- ily housing projects with project-based assistance contracts under the Section 8 program. This adjustment will help housing providers' allowable operating cost adjustments better ref lect rising operational expenses seen marketwide, particularly insurance costs while ensuring that residents have access to affordable, quality homes with stable rental rates. "As I have traveled across the na- tion, I have heard from property own- ers who have difficulty maintaining affordable rents while keeping up with rising expenses, impeding our efforts to boost the supply of available affordable homes," HUD Agency Head Adrianne Todman said. "Today, our new adjust- ment factors will help families and affordable housing providers keep up with increasing housing costs." HUD's latest actions are the latest taken to address rising insurance costs while managing potential risks: In 2023, HUD launched its Green and Resilient Retrofit Program (GRRP), which has awarded more than $1.1 billion to owners of HUD-assisted mul- tifamily properties to support energy efficiency and climate resilience up- grades that will help strengthen hous- ing to withstand future climate events and reduce disaster-related losses. HUD recently updated its multi- family insurance deductibles to address the rising costs of wind and storm cov- erage, reducing costs for owners while continuing to ensure that properties have adequate insurance coverage. This is a key element of HUD's work to address insurance costs and ensure that communities can recover from disaster. In July, HUD convened a summit of journalists, insurance industry executives, government leaders, non- profits, and academics to address rising insurance premiums and receding coverage. This event brought together leaders to discuss shared issues and common-sense solutions. "The escalating cost of property expenses and insurance is a growing concern for families and affordable housing providers across the country," said Julia R. Gordon, Assistant Secre- tary for Housing and Federal Housing Commissioner. "The new OCAFs rep- resent a significant policy response by HUD and the Biden-Harris administra- tion to address these ongoing challeng- es for multifamily property owners, managers, and residents." The Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) requires HUD to set OCAFs on a yearly basis to establish contract rental rates. OCAFs, which vary by state and territory, are developed with industry feedback and account for crit- ical changes in market conditions, such as f luctuations in energy costs, labor expenses, maintenance and repairs, and insurance premiums. According to HUD data, assisted multifamily prop- erties have seen their insurance costs almost double over the last five years on average, while properties located along the Gulf and Atlantic coasts saw the largest increases. The new OCAFs apply to eligible multifamily housing projects with contract anniversary dates on or after February 11, 2025. CFPB ENHANCES PROTECTIONS FOR HOME IMPROVEMENT LOANS T he Consumer Financial Protection Bureau (CFPB) has finalized a rule mandated by Congress that applies existing residen- tial mortgage protections to Property Assessed Clean Energy (PACE) loans. PACE loans are used by homeowners for clean energy upgrades and disaster readiness that are paid back through their property tax bills. Because of con- cerns about subprime-style lending that puts homeowners at risk of losing their homes, Congress required the CFPB to enhance protections. The CFPB's new rule will ensure that PACE loan borrowers have the right to receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other forms of financing, and the lender will be responsible for ensuring that the borrower is not set up to fail with an unaffordable loan. "Today's rule stops unscrupulous companies and salespeople from luring homeowners into unaffordable loans based on false promises of energy savings," CFPB Director Rohit Chopra said. "Homeowners deserve to know just how much they are paying when they put their home and financial future on the line." Most PACE loans are marketed to homeowners, typically through door-to-door sales, by a company that brokers financing and contracts for clean energy installation or other home improvements. These companies may promise that the improvements will pay for themselves with energy savings or through enhanced disaster prepared- ness. Analyzing PACE Loans While PACE financing can provide quick cash for home improvements, CFPB research shows that: • Most PACE borrowers are eligible for other forms of financing, often at much cheaper rates than PACE loans. • PACE loans caused borrowers' property taxes to increase by about $2,700 per year or an 88% increase. • PACE borrowers were more likely to fall behind on their first mortgage than people who chose not to finance home improvements with PACE. • PACE loans tend to be more expen-