Bipartisan legislation supported by NAR was introduced in the Senate and House yesterday that would subject Property Assessed Clean Energy (PACE) loans to the same Truth in Lending Act (TILA) consumer protections required of other mortgage products. In the Senate, Senators Tom Cotton (R-AR), Marco Rubio (R-FL), and John Boozman (R-AR) introduced the legislation. The House version was introduced by Representatives Brad Sherman (D-CA), and Ed Royce (R-CA).
PACE loans allow homeowners to pay for energy efficient home upgrades — such as solar panels and insulation — with a lien paid back through property tax payments. The loans currently require little to no underwriting, carry interest rates that are substantially higher than other available financing options, and contain repayment terms, typically 15 to 20 years, that often extend beyond the useful life of the financed improvements.
PACE loans are not currently subject to nationwide mortgage financing rules, meaning that a comprehensive underwriting of a borrower’s income, debt, and credit history is not being conducted when a PACE loan is originated.