California Governor Signs Bills for PACE Loan Protections

California Governor Property Assessed Clean Energy PACE loans
Credit: Russ Allison Loar, Flickr Creative Commons

California Governor Jerry Brown recently signed two bills into law that aim to establish a consumer protection, underwriting, and regulatory framework for Property Assessed Clean Energy (PACE) loans.

The signing comes after a year of discussions and negotiations among low-income consumer advocates, environmental and clean-energy groups, the banking industry, and private sector PACE program administrators, according to a press release from PACE lender Renew Financial.

One of the two bills, AB 1284, establishes a regulatory structure for PACE at the state level. It establishes new underwriting standards that take a homeowner’s mortgage and tax payment histories into account, and requires that the most accurate Automated Valuation Models be used for establishing home values. The bill also establishes a licensing and regulatory framework for the loans in California.

The other bill, SB 242, puts consumer protections in place. “It bars lenders from paying kickbacks to contractors and requires PACE providers talk with homeowners before they take out the loan to ensure they understand the terms,” the LA Times reported.

“The new law also establishes data reporting requirements to local government partners, including data that speaks to the projected energy and water savings and local economic and job impacts, as well as on categories of products installed and homeowners served,” according to Renew Financial.

Public-private PACE programs began nearly a decade ago, offering owners financing for renewable and energy efficiency projects. PACE ties privately financed loans to a home, allowing homeowners to repay them as line items on their property tax bills, the LA Times notes.

Supporters of PACE financing argue that the loans offer low interest rates, shorter break-even times, and increased property values. Critics argue that the programs tend to limit financing to building owners, excluding developers and third-party-owned systems.

Responding to the two bills being signed into law in California, Renew Financial CEO Cisco DeVries said publicly, “This is a turning point for PACE and these laws will serve as a model for other states that adopt PACE financing so they can provide homeowners with an effective financing option to make their properties more efficient, comfortable and secure.”

Two major federal agencies, the US Department of Housing and Urban Development and the US Federal Housing Administration, issued PACE guidance last year, overcoming what had long been a hurdle for this type of financing.

Meanwhile, Commercial PACE programs have been gaining steam. Earlier this year, Renovate America and Greenworks Lending announced a partnership for C-PACE aimed at non-residential facilities. More recently, Renew Financial’s C-PACE program to fund projects in Florida and California reached a $100 million milestone. And last month Greenworks Lending completed securitization of solely commercial PACE assets, allowing properties that include industrial, retail, and multifamily buildings to finance energy-saving infrastructures.

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One thought on “California Governor Signs Bills for PACE Loan Protections

  1. We got a PACE loan (~$90K) – the fine print for fees (over 10% of total loan); the high-priced exclusive PACE contractors (who didn’t know anything about the fees) and HIGH (not low!) interest rates means that this has been a bust for us. After being huge proponents of the program, we would not recommend PACE. We tried to get Renew Financial to reduce fee, but no way.

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