The National Association of Federally-Insured Credit Unions (NAFCU), along with 27 other trade associations, expressed support for a bill that would bring financing for Property Assessed Clean Energy (PACE) loans under the same consumer protections required of other mortgage products.
The Protecting Americans from Credit Entanglements Act of 2017 would impose the federal Truth in Lending Act requirements on PACE loans, to which they are currently not subject. The Senate bill was authored by Sens. John Boozman (R-AR), Tom Cotton (R-AR), and Marco Rubio (R-FL), while the House version was sponsored by Reps. Ed Royce (R-CA) and Brad Sherman (D-CA).
PACE loans enable mortgage borrowers to finance environmentally friendly home upgrades, such as solar panels and energy efficient appliances. Since the loans are typically initiated by the private companies making these improvements, the financing is raised by issuing municipal revenue bonds. These bonds, secured by the payments on the PACE loan obligation, are added to the borrower’s property tax bill and are paid through property tax installments.
“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,” NAFCU stated in a letter to the bill’s authors. “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.”