Many of you no doubt saw the January 10th Journal article, “America’s Fastest-Growing Loan Category has Eerie Echoes of Subprime Crisis.” We hope you share our disappointment that the article was so unfair to PACE. It might have emphasized that to date, over 130,000 homeowners report high satisfaction using it to finance often-necessary energy-related investments in their homes. Instead of leaving the reader with the impression that PACE is a new and dangerous form of finance, it might have noted that for decades, local governments have relied on the same property tax line-item mechanism to fund improvements that benefit property owners and meet a public purpose. It could have emphasized that PACE providers are committed to serving that public purpose, and as such, take seriously their responsibility to protect consumers.
The story did capture many of the enhancements made in legislation and industry standards to ensure clear disclosures and protections for homeowners. It could have concluded that some PACE consumer protections, like post-funding investigative and dispute resolution support, go well beyond those of other home improvement financing products.
The facts reported simply do not imply a looming subprime crisis. The “less than 1% default rate” on PACE homes reported in the story is actually lower than the California average. No foreclosure has been initiated by a PACE program. For that matter, those defaults may have been caused by something completely unrelated to PACE, such as a loss of a job. PACE projects can help reduce energy costs and increase a home’s value, according to analysis published in the Winter 2016 edition of the Journal of Structured Finance. Given that PACE homes must have equity, there is no evidence that mortgage lenders to those homes suffered any losses.
A Lawrence Berkeley National Labs study in 2016 said PACE financing is one of the most effective tools for improving the energy efficiency of homes. These investments safeguard our environment and have already created tens of thousands of jobs in local communities. With so much at stake, it’s important that the PACE industry gets it right and as the story shows, we’re on the right track.
We suspect that there will be more negative stories to come. Stay tuned for positive messaging on PACE!
Executive Director, PACENation