CFPB Issues Final Rule for PACE Loans

December 19, 2024


TitleNews Magazine

The Consumer Financial Protection Bureau (CFPB) issued a final rule related to residential Property Assessed Clean Energy (PACE) transactions. 

The final rule:

  • amends Regulation Z’s exclusion of tax assessments and tax liens from the definition of credit to clarify that voluntary tax assessments and tax liens, such as PACE financing, are not excluded under TILA and Regulation Z
  • recognizes PACE financing as meeting the definition of credit under TILA and Regulation Z
  • prescribes ability-to-repay requirements for residential PACE financing
  • makes other amendments and exemptions to make clear how other rules in Regulation Z apply to PACE financing

The final rule, which goes into effect March 1, 2026, includes model Loan Estimate and Closing Disclosure forms to be used to comply with the TILA-RESPA Integrated Disclosure (TRID) Rule for PACE transactions. Click here to access an executive summary of the rule.

In July 2023, ALTA sent a letter to the Federal Housing Finance Agency expressing support for the CFPB’s proposed rule.

PACE loans are a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting through their property tax assessments. These loans often take lien priority over the first mortgage lien. ALTA has said that when buying a home, Americans need to know if they are going to be responsible for someone else's debts. ALTA has supported proposed federal legislation that would modify consumer protection requirements for PACE loans.

ALTA believes PACE loans should be subject to all the same consumer protections under TILA as any other mortgage loans. For this reason, the association supported the proposed rulemaking to require that PACE lenders conduct an ability to repay analysis and provide disclosures to consumers on PACE loan costs.

In November 2022, the Federal Trade Commission (FTC) and the California Attorney General took action against home improvement financing provider Ygrene Energy Fund Inc. for deceiving consumers about the potential financial impact of its financing, and for unfairly recording liens on consumers’ homes without their consent.


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