Sending Office: Honorable Brad Sherman
Residential Property Assessed Clean Energy (PACE) programs allow consumers to make energy efficient upgrades to their homes using money secured by a lien on the property, and to repay the loan through annual assessments on their property tax bills. Residential
PACE programs are currently operating in three states, California, Florida, and Missouri, although multiple states are in the process of setting up their own programs. Though designed with admirable goals in mind, these PACE products do not have the same level
of consumer protections as traditional lending products.
While I support green and clean energy, we must ensure that adequate safeguards are put in place to protect consumers. Fortunately, recently enacted law has directed the Consumer Financial Protection Bureau (CFPB) to issue consumer protections regulations
for PACE financing.
In order to ensure that the forthcoming regulations contain common sense consumer safeguards, I am sending the below letter to the CFPB requesting that the Acting Director and his team thoroughly review the ability to repay rules and underwriting standards
to ensure home owners have a complete picture of what their PACE loan would cost them.
Please join me in sending this letter to ensure consumers are fully aware of costs and benefits of using PACE financing. For more information or to co-sign please contact Mark Snyder in my office at
Member of Congress
Dear Acting Director Mulvaney,
With the passage of S.2155 (Public Law 115-174) we write regarding the implementation of Section 307, with regards to Property Assessed Clean Energy (PACE) Financing. With PACE programs operating in over 20 states, we need to ensure there are uniform consumer
protections in place, especially for the residential programs in California, Missouri, and Florida. Properly ensuring that consumers are aware that PACE programs are vehicles for lending will help bring credibility to PACE providers and most effectively help
our constituents reach their ultimate goal of accessing credit for energy efficiency modifications to their homes.
We encourage the Bureau to make implementing regulations a high priority. Residential PACE lending programs should be subject to the Truth in Lending Act (TILA) or similar protections crafted specifically for the PACE program. Otherwise, consumers can be
left vulnerable to unscrupulous lenders, which we have seen in some cases in our states.
The purpose of PACE programs is to allow home-owners to finance energy efficiency upgrades and modifications using the borrower’s equity in the property and to repay the loan through annual assessments on their property tax bills. Many consumers were, and
still are, unaware of technicalities and restrictions involved with repayment via a tax lien, including the challenges of refinancing or selling their home without first paying off the entire PACE loan.
Section 307 requires the Consumer Financial Protection Bureau (CFPB) to prescribe “Ability to Repay” (ATR) regulations that account for the unique nature of PACE financing. In carrying out this mandate, we strongly encourage the CFPB to include the following
in their regulations:
- Require protections for residential PACE-loans including “Ability-to-Repay” and “Know Before You Owe” Rules. PACE financing must be properly underwritten to ensure a consumer’s ability to afford the repayment.
- Consumers must be provided with proper disclosures written in plain terms. The Bureau’s regulations should also include a fee and amortization schedule.
- Underwriting standards should include traditional factors for a conventional loan such as: income verification, an assessment of all debts, monthly household expenses, and so forth.
- Debt-to-income ratio should not exceed what is currently required for a traditional loan, as PACE financing establishes a super-priority lien over the entire property.
- Any type of PACE related financing, regardless of the name it is marketed or sold under, should be covered by CFPB regulations.
We also strongly encourage the Bureau to consult with state regulators, such as the California Department of Business Oversight, which is in the process of developing comprehensive regulations on PACE financing.
In addition, we also encourage the Bureau to consult with other government agencies, including the Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), and the Department of Veterans Affairs to assess the impact of a super-priority
lien that PACE financing establishes.
We appreciate your attention to this matter and look forward to working with you on implementing this regulation.
e-Dear Colleague version 2.0