The Consumer Financial Protection Financial Bureau (CFPB) announced that it plans to issue rules for the Property Assessed Clean Energy program, which allows homeowners to finance their home improvements to increase the home’s energy efficiency.
The CFPB will be issuing an “Advance Notice of Proposed Rulemaking” on PACE (Property Assessed Clean Energy) financing. It could see an Ability-to-Repay provision added to PACE regulations, which is similar to what currently exists in mortgage lending. This requires lenders to make a “reasonable and good faith determination” on whether a borrower can pay back a loan before approving them for that loan.
Under PACE, single families have the option to have energy financing programs be structured to make loans through their property tax assessment. This would require the borrowers to pay back their loans as part of their property tax bill. However, in some states, the PACE liens are given higher priority over the home’s mortgage.
PACE programs are not as heavily regulated as some other financial services, like mortgage lending. In addition, PACE financing has become more popular over the last few years but it has not been without issues.
CFPB Next Steps
The CFPB is asking for responses on more than 30 questions in the Advance Notice of Proposed Rulemaking. Questions include how PACE financing works and how it fits into the financial system. This feedback will aid the Bureau in better understanding the market and nature of PACE financing and will be used to create a Notice of Proposed Rulemaking, which is the next step in the rulemaking process.
The instability and the future of PACE programs should be cause to seek other options for consumer financing. Offering low monthly payments with Foundation Finance is a simple solution. FFC isn’t an “approve or deny” lender and therefore is a great fit for your business If you’re concerned your customers may not qualify for standard financing from a big bank. Our three credit approval tiers provide options for those without perfect credit.
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