PACE Energy Efficiency Mortgages Still Risky Despite New Department of Energy Guidelines

Stronger, Enforceable Protections Needed to Stop Predatory Loans

FOR IMMEDIATE RELEASE: November 18, 2016

(WASHINGTON) New best practices guidelines released 11/18 by the U.S. Department of Energy (DOE) for Property Assessed Clean Energy (PACE) mortgages could encourage states and localities to begin to address some of the growing problems and potential for abuse in this market. The new guidelines are a significant improvement from earlier guidelines but far stronger, enforceable protections are needed to ensure true energy savings and to protect homeowners, according to national and state advocates at the National Consumer Law Center (NCLC), Americans for Financial Reform, Consumer Federation of America, Bet Tzedek Legal Services, Public Counsel, Public Law Center, and Elder Law & Advocacy.

“Home energy efficiency is important, and well-designed programs like the federal Weatherization Assistance Program can be a cost-effective way to promote energy independence and help low-income homeowners save on energy bills. But PACE mortgages lack consumer protections, have few checks to ensure that energy savings are real and cost effective, and are inappropriate for homeowners who may be eligible for free or lower cost programs,” said Charlie Harak, senior energy attorney at the National Consumer Law Center.

“PACE mortgages may be the next wave of Wall Street-funded predatory lending,” said National Consumer Law Center Associate Director Lauren Saunders. “Through loopholes in state and federal law, PACE loans do not comply with ability-to-repay rules or other federal protections for mortgages or contractor fraud.”

“We are seeing aggressive door-to-door salesmen targeting seniors with false claims of savings and government subsidies,” said Leigh Ferrin, directing attorney at Public Law Center of Santa Ana, California.

“Older adults living on fixed incomes are duped and stuck with thousands of dollars a year in new property taxes for unnecessary so-called home improvements they were told would be provided to them for free through a government program, putting them at risk of foreclosure and the loss of homes in which they lived for years,” explained Dipti Singh, Directing Attorney of Impact Litigation at Bet Tzedek of Los Angeles, California. “PACE financing costs more than a home equity loan, and the tax lien can make it difficult to refinance or sell. The program is a risky deal with uncertain benefits for many homeowners,” added Charles Evans, Senior Staff Attorney at Public Counsel.

Currently, PACE loans are most prevalent in California and are being rolled out in Florida and Missouri, followed by other states. Where permitted under state and local law, PACE loans are marketed to homeowners through private contractors but are secured by property tax liens and are collected through the homeowners’ tax assessments. Interests in the homeowners’ payments are then sold to private companies that securitize and sell them on Wall Street. Because the loans become part of the tax assessment, lenders claim that the loans fall outside the rules adopted after the mortgage crisis and early waves of predatory lending.

“The Consumer Financial Protection Bureau should close the tax lien loophole so that PACE mortgages don’t evade mortgage protections. State and local PACE programs need to prevent contractor scams, predatory lending, and elder abuse,” Saunders urged. “PACE loans are marketed to investors as easily collectable because they can ‘quickly foreclose’ if a homeowner falls behind on payments without the protections of a typical mortgage,” said Brian Simmonds Marshall, policy counsel at Americans for Financial Reform. “At a minimum, PACE loans should have at least as strong of protections as conventional mortgages. States also need to adopt enforceable rules to protect homeowners from abusive sales practices.”

The tax liens also typically become a super-priority lien, ahead of the existing mortgage. For that reason, homeowners often have trouble refinancing or selling their home without paying off the lien in full. Mortgage bankers and realtors have also complained about the PACE program.

The DOE Final Guidelines recommend “best practices” for states and localities regarding program design, eligibility criteria for homeowners, and consumer protections. “States should require an energy audit to ensure that claims of energy savings are real, and lower income homeowners should be independently screened for whether they can obtain lower-cost or free energy efficient improvements from another program or a utility company before taking on a PACE loan,” said Harak. “Additionally, we need more investment in the existing federal Weatherization Assistance Program, which has a proven track record of saving money and energy.”

Related Links
National Consumer Law Center policy brief: PACE Energy Efficiency Loans: Good Intentions, Big Risks for Consumers, (Sept. 2016): http://www.nclc.org/issues/pace-energy-efficiency-loans.html

National Consumer Law Center comments to U.S. Department of Energy: supplemental comments (Oct. 18, 2016), http://bit.ly/2fhywm4 and original comments (Aug. 18, 2016): http://bit.ly/2ceBOJF.

###

Disclaimer

The information contained in this communication from the sender is confidential. It is intended solely for use by the recipient and others authorized to receive it. If you are not the recipient, you are hereby notified that any disclosure, copying, distribution or taking action in relation of the contents of this information is strictly prohibited and may be unlawful.

This email has been scanned for viruses and malware, and may have been automatically archived by Mimecast Ltd, an innovator in Software as a Service (SaaS) for business. Providing a safer and more useful place for your human generated data. Specializing in; Security, archiving and compliance. To find out more Click Here.

Contacts:
National Consumer Law Center: Jan Kruse ([email protected] or 617.542.8010) or Lauren Saunders ([email protected] or 202.595.7845)
Americans for Financial Reform: Jim Lardner ([email protected] or 202.466.1854)
Consumer Federation of America: Barry Zigas ([email protected] or 202.387.6121)
Bet Tzedek Legal Services: Allison Lee ([email protected] or 323.939.0506)
Public Counsel: Charles Evans ([email protected] or 213.385.2977 ext. 188)
Public Law Center: Leigh Ferrin ([email protected] or 714.541.1010 ext. 290)
Elder Law & Advocacy: Carolyn Reilly ([email protected] or 858.565.1392)

No Author Biography has been linked to this Article.

Related Articles

February 2, 2020
By The Honorable William Houston Brown (Retired) Limitations period for actions under FDCPA. Construing the statute of limitations for actions against debt collectors under the Fair Debt Collection Practices Act (FDCPA), the Supreme Court held that “absent the application of an equitable doctrine, the statute of limitations in § 1692k(d) begins to run on the date on which the alleged...
Members
June 16, 2019
By Henry E. Hildebrand, III, Chapter 13 Standing Trustee for the Middle District of Tennessee Mortgage creditor may not withdraw a notice of fees, costs, and charges filed in a case after the supplement to the claim has been challenged without court approval; the allowance of such a notice will not be permitted where a state statute forbids it. Quicken...
Members
May 3, 2020
By Cathy Moran, Esq. (Redwood City, CA) After the pandemic, when the economy lurches back into motion, bankruptcy lawyers will confront a clutch of troubled Chapter 13 cases. In the face of disruption, distress, and the unknown, we'll be called on to guide clients forward, in one direction or another. Let's review the questions we'll need to answer in order...
Members
Copy of Hildebrand-2016
August 20, 2023
Equity that accrues as a result of market conditions in debtor’s assets between the time of confirmation of a Chapter 13 plan and conversion to Chapter 7 constitutes property of the estate which may be administered by the Chapter 7 trustee.
Members
June 30, 2019
By Phil Lamos, Chief Legal Counsel, Office of the Chapter 13 Trustee Lauren A. Helbling (Cleveland, OH) Section 1322(b)(2) of the Bankruptcy Code states that a Chapter 13 plan may not modify a claim that is “secured only by a security interest in real property that is the debtor’s principal residence.” But the inverse of this statute is true; if...
Members
August 23, 2020
By Cathy Moran, Esq. (Redwood City, CA) It started as a means test question: could emergency medical expenses be deemed non consumer debt. It ended up as a step back to get the bigger picture. Well-seasoned bankruptcy counsel brought the fact pattern to a list serve of colleagues. The prospective debtors’ income in a small consulting corporation is declining, his...
Members
February 24, 2019
On June 26, 2017, Bradford W. Caraway was appointed as the Chapter 13 Standing Trustee for the Northern District of Alabama, Southern Division. He replaced D. Sims Crawford who had been appointed as a United States Bankruptcy Judge for the Northern District of Alabama. Trustee Caraway maintains his office in Birmingham. At the time of his appointment as Standing Trustee,...
Members
Brandi headshot
November 19, 2023
“The chief obstacle we have had since starting Zoom revolves around the lack of high-speed internet in our division.”
December 20, 2020
(To be sung to the tune of Julie Andrews’ version of “These Are a Few of My Favorite Things” from The Sound of Music) Raindrops on roses, and whiskers on kittens, Bright copper kettles and warm woolen mittens– Hey, wait a minute, that’s not what I mean; It’s time that we focus on Chapter Thirteen. We’ve been Trustees for so...