WASHINGTON—Bipartisan members of the California congressional delegation have written to Bureau of Consumer Financial Protection Acting Director Mick Mulvaney to urge the agency to implement consumer protections regarding Property Assessed Clean Energy (PACE) financing.
The California Credit Union League worked with the members of Congress to create and build support for the letter, CUNA reported.
“The California and Nevada Leagues have been working on PACE regulations in both states, at the state and federal levels. Our membership flagged this issue as one of potential harm to consumers and credit unions, which is why we’ve been heavily engaged in building a regulatory framework around PACE lending,” said Jeremy Empol, the leagues’ vice president of federal government affairs.
PACE loans offer financing for energy efficiency upgrades, but cause concerns for credit unions because they are recorded as property tax assessments, superior to an underlying mortgage, thus encumbering a credit union’s interest in a property in case of default, CUNA explained.
What Provisions Require
The Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) contains provisions requiring the Bureau to prescribe ability-to-repay regulations that account for the unique nature of PACE financing.
“We encourage the Bureau to make implementing regulations a high priority. Residential PACE lending programs should be subject to the Truth in Lending Act or similar protections created specifically for the PACE program,” the letter reads. “Otherwise, consumers can be left vulnerable to unscrupulous lenders, which we have seen in some cases in our states.”
The Specific Requests
The members of Congress also note any Bureau regulations should:
- Require protections for residential PACE loans, including “Ability-to-Repay” and TILA-RESPA integrated closure (TRID) rules. Financing must be properly underwritten to ensure a consumer’s ability to afford to the repayment
- Consumers must be provided with proper disclosures written in plain terms with a fee and amortization schedule
- Underwriting standards should include traditional factors for a conventional loan, including income verification, debt assessment and others
- Debt-to-income ratio should not exceed what is currently required for a traditional loan, as PACE financing established a super-priority lien over the entire property
- Any type of PACE lending, regardless of name or marketing, should be covered by Bureau regulations
Other Provisions
The legislators also called for the Bureau to consult with state regulators and other government agencies.
The letter was signed by Reps. Brad Sherman (D), Ed Royce (R), Julia Brownley (D), Pete Aguilar (D), Ken Calvert (R), Alan Lowenthal (D), Paul Cook (R), Adam Schiff (D) and Doug LaMalfa (R), all representing California.
The Federal Housing Administration announced in December it will no longer ensure new mortgages on properties that include PACE assessments, CUNA noted.