News & Media
WASHINGTON — Homeowners with Property Assessed Clean Energy (PACE) loans have the right to receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other forms of financing, according to a new rule finalized by the Consumer Financial Protection Bureau (CFPB).
PACE loans are used by homeowners for clean energy upgrades and disaster readiness that are paid back through their property tax bills. Because of concerns about subprime-style lending that puts homeowners at risk of losing their home, Congress required the CFPB to enhance protections.
With the new rule, lenders will be responsible for ensuring the borrower is not set up to fail with an unaffordable loan, the CFPB said.
“Today’s rule stops unscrupulous companies and salespeople from luring homeowners into unaffordable loans based on false promises of energy savings,” said CFPB Director Rohit Chopra. “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 the improvements will pay for themselves with energy savings or through enhanced disaster preparedness.
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 expensive around five percentage points higher than first mortgages, even though PACE loans get paid at a foreclosure sale before first mortgages.
In August 2024 CFPB issued a report and advisory warning consumers that some residential solar lenders were misleading homeowners about the terms and costs of their loans, their payment plan, misrepresenting the energy and tax savings and cramming markup fees into borrowers’ loan balances.
Source: CFPB
© 2024 Florida Realtors®
