How PACE Loans Are Hurting Homeowners

Real Property Management East San Gabriel Valley Blog - August 2, 2016 by michellea 

Kevin Pendergraft, CEO of Pacific Community Credit Union says “PACE loans look and act like loans, but they are really a tax lien on your property tax bill”. He also mentions, “If a consumer runs into financial problems, they will never be able to avail themselves of bankruptcy protection from this obligation. This is not stated upfront by the people who are selling these loans.”

The way PACE loans work, is that they’re typically offered by local contractors through door-to-door sales. Contractors may include a solar panel provider, an energy-efficient provider or a window installer. The PACE loan is paid through an assessment that appears on the homeowner’s semiannual property tax bill.

The PACE lending program may also  negatively impact the two major government-sponsored staples of the housing market, Fannie Mae and Freddie Mac. Currently, they are not allowed by their federal regulators to purchase mortgages from financial institutions, such as credit unions, on properties encumbered by liens.

If California is hit with another housing market downturn, credit unions fear they will have limited options to help their members who have liens attached to their properties. According to Courtney Jensen, a legislative advocate with the California Credit Union League, California is currently the biggest market place for PACE loans.

The popular trend of going green, a long with misleading sales pitches by contractors is hurting homeowners (many of them seniors) by leading them to becoming victims of predatory lending.

The good news is that Assemblyman Matt Dababneh, D-Encino has addressed issues associated with PACE financing through Assembly Bill 2693 and the measure was passed on the Assembly floor on May 23. It gained a vote of 75-0 and is now going to Senate for consideration.