ALTA, Trade Groups Support PACE Bills

April 25, 2017

ALTA and more than two dozen other industry trade groups support identical legislation that would modify consumer protection requirements for Property Assessed Clean Energy (PACE) loans.

Senate Bill 838 was introduced by Sens. John Boozman (R-Ark.), Tom Cotton (R-Ark.) and Marco Rubio (R-Fla.). House Resolution 1958 was introduced by Reps. Brad Sherman (D-Calif.) and Ed Royce (R-Calif.) Both bills are titled the Protecting Americans from Credit Entanglements Act of 2017.

PACE loans are a financing program that allows homeowners to pay for solar panels or other housing improvements, such as air conditioning and window insulation, through a lien paid back through property tax payments. The loans require no underwriting, often have high fees and interest rates (as high as 12 percent) for 20 years for solar panels or other housing improvements that risk obsolescence after just a few years. Additionally, PACE lenders receive first priority of repayment, in conjunction with property taxes, before mortgage loans. Currently, there is no standardized rate or fee disclosure required for PACE loans.

The bills support concerns by ALTA that residential PACE loans are a form of mortgage financing and should subject to federal consumer protection requirements. The bills put such loans under the same Truth in Lending Act consumer protections required of other mortgage products.

"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 letters note. "Consequently, a standardized, comprehensive disclosure framework does not exist for PACE loans." 

The letters further noted PACE loan consumer protections currently vary from state-to-state, municipality-to-municipality and do not treat PACE loans like mortgage financing products.

"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 letters said.


Contact ALTA at 202-296-3671 or [email protected].