Changes in the tax law could reduce demand for the controversial Property Assessed Clean Energy Loans, according to a new ratings agency report.

As a result of the Tax Cuts and Jobs Act, the mortgage interest deduction has been reduced on PACE loans. In addition, deductions for state and local taxes have been cut.

Investors of mortgage-backed securities are being advised that the changes may potentially result in faster prepayments, especially for higher FICO borrowers who can afford to pay off the lien, and lower origination volumes.

Source: Mortgage Daily