Twenty-eight property industry trade and professional organizations have signed letters to the U.S. Senate and House sponsors of the Protecting Americans from Credit Entanglement Acts of 2017 (S. 838 and H.R. 1958). While these groups have expressed support for the bills' enhanced consumer protection requirements for Property Assessed Clean Energy (PACE) loans, other groups have voiced displeasure with the proposal.
The letters’ supporters include the Appraisal Institute, the American Bankers Association, the Mortgage Bankers Association, the National Association of Home Builders and the National Association of Realtors. Real estate professionals, home builders, and mortgage lenders and servicers are represented among the signers.
PACE loans are structured to finance energy-efficient retrofits on real property, such as solar panels. PACE program specifics usually vary by state or municipality. The loan’s payments are usually added to a property’s tax bill, and normally paid over 15 to 20 years in installments. The outstanding loan is tied to the property, and not to the borrower.
“PACE loans are – in substance – consumer loans secured by real property and should be subject to federal consumer protection requirements, not dependent on a patchwork of limited or non-existent state/municipal laws that do not adequately protect homeowners,” the letter said.
The Protecting Americans from Credit Entanglement Acts of 2017 would, if passed, provide PACE loans with Truth in Lending Act consumer protections, including Consumer Financial Protection Bureau’s “Ability-to-Repay” and “Know Before You Owe” rules and Home Ownership and Equity Protection Act standards.
“Although PACE loan obligations have all the attributes of a mortgage product, they are not subject to federal consumer protection requirements – as this alternative financing structure has been misclassified as a tax assessment rather than a loan,” the letter said. “Consequently, a standardized, comprehensive disclosure framework does not exist for PACE loans. Moreover, there are no requirements for an assessment of a borrower’s income, credit history, outstanding credit obligations, or expected monthly payments in connection with PACE products. Instead, PACE financing today is often based on a borrower’s equity in their property and their mortgage and property tax payment history, rather than on their true ability to repay their financial debt.”
Other industry groups have come out against the bills, saying they would effectively kill PACE programs nationwide. Renovate America CEO J.P. McNeill says the legislation would destroy jobs and small businesses, result in higher utility bills, and prevent Americans from investing in their homes.
The legislation is "extremely misguided" and would lead to job losses and reduced economic activity, adds Cisco DeVries, CEO of Renew Financial, a California-based clean energy financing company. "Because of PACE, 140,000 homeowners and business owners save money on their utility bills, reduce energy and water waste and live more comfortably in their homes," he says.
S. 838 has been referred to the Committee on Banking, Housing, and Urban Affairs, and H. R. 1958 has been referred to the House Committee on Financial Services.