Loan Officer | NMLS #882792
Branch NMLS #1370156
Posted On May 03, 2017
Property Assessed Clean Energy (PACE) loans are a type of financing homeowners use to fund the installation of solar panels or other home efficiency improvements, like air conditioning and window insulation. The loan is a lien paid back through property tax payments, requires no underwriting, and often has high fees and interest rates. Currently, these loans are not subject to federal consumer protection requirements, even though they have all the attributes of a mortgage product.
Two identical bills, called the Protecting Americans from Credit Entanglements Act of 2017, have been introduced to the Senate and the House of Representatives. The Mortgage Bankers Association (MBA) and other trade groups have sent in letters supportive of the legislation.
According to the letters, “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 proposed bills would put the loans under the same Truth in Lending Act consumer protections as other mortgage products.
The major concern with PACE loans is that their repayment takes priority over the mortgage. This can be especially problematic in the case of foreclosure. Currently, PACE loan consumer protections vary on a state-to-state basis. The new legislation would subject them to federal consumer protection requirements.