CFPB Seeks Public Comment On PACE Loans
PACE financing often takes lien priority over first mortgage
The Consumer Financial Protection Bureau is requesting public feedback on Property Assessed Clean Energy loans, a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting — such as solar panels and high-efficiency air conditioners — through their property tax assessments. These loans often take lien priority over the first mortgage.
S. 2155 requires the CFPB to apply the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to PACE loans. Bankers have long raised concerns about these loans over their lack of full consumer protections and have supported efforts to enhance that protection.
The bureau specifically requested examples of:
- PACE loan documentation
- current origination standards and practices
- to which parties to a PACE loan TILA’s civil liability provisions should apply
- unique features of PACE loans
- potential implications of regulating PACE loans under TILA
The ANPR was published in the Federal Register on Friday, March 8. Comments are due Tuesday, May 7.
PACE lending also is among the bills under consideration by the Missouri General Assembly. The Missouri Bankers Association is pursuing additional consumer protections for the residential PACE program through two measures, House Bill 215 and Senate Bill 173.
“PACE financing presents significant consumer risks because a delinquent PACE assessment carries significant interest penalties, and the delinquency must be cleared under the strict and inflexible procedures of a county tax sale, which puts the consumer at the risk of losing their home,” said Keith Thornburg, MBA vice president and general counsel.
He added PACE loans are marketed and originated by home improvement contractors who have an inherent conflict of interest because they also are selling and profiting from the installation of improvements to the dwelling.
The Missouri Banker
March 2019