The Consumer Financial Protection Financial Bureau (CFPB) plans to create new rules for the Property Assessed Clean Energy program (PACE), which will allow selected homeowners to obtain financing to better their home’s energy efficiency.
Programs like PACE will enable energy financing to gain a higher priority status over typical home mortgages, all borrowers will be able to repay their loans as part of their property tax bill.
The PACE “Advance Notice of Proposed Rule-making” will act as an “Ability-to-Repay” that would emulate the current mortgage lending system, requiring lenders to make a “good faith” determination on the borrowers capacity for repaying before making an approval.
The program is also not regulated as heavily as other financial services, including mortgage lending. Its financing has increased in popularity in the last few years, although the rise of the program hasn’t been without its problems.
“In many cases, we have found homeowners with PACE loans save money by rolling the PACE and other debts into their mortgage. The PACE, credit card, and other debt interest rates are usually much higher or have a much higher minimum payment to balance ratio than a mortgage. We have software to show if there is a value to refinancing a mortgage and include these debts. Sometimes it’s not a benefit, but other times it can be very beneficial. The monthly payment saved can go towards the new mortgage and save tens of thousands over the life of the loan.” - Phil Stevenson (PS Mortgage Lending)