Monday, April 17, 2017

The greed of green: PACE’s predatory lending on solar

By Peter Hong

Well, predatory lending is back. But this time, lenders aren’t just prowling for green; they’re wrapped in it under the façade of environmental “do-goodism.” This latest scam is the so-called Property Assessed Clean Energy (PACE) lending industry, which provides financing for energy efficiency or renewable energy upgrades, like solar panels and window insulation. PACE loans are placed on a homeowner’s property tax bill as an assessment. Rather than make a monthly loan payment, borrowers typically pay the assessment on an annual or semi-annual basis; local governments then pass these payments on to the lenders. Because the loans are based on the value of the assessed property, the borrower’s creditworthiness is of little interest to PACE lenders. Also, the industry uses as its brokers plumbers and repairmen who pitch financing schemes to customers as a means of soliciting contracts and earning referral fees on the side. Like their predatory lending brethren of the past, these lenders and their contractor-brokers appear to prey on vulnerable and unsophisticated homeowners — particularly the elderly. A report by Elder Law & Advocacy, which offers legal services to senior citizens in the San Diego area, cited numerous accounts of misleading tactics being used by PACE lending brokers and sales personnel. One case cited a 79-year old widower who was offered new energy-efficient, noise reduction windows at a 1.5 percent financing rate with no payoff penalty, only to receive poorly insulating, noise amplifying windows — at a 26.99 percent interest rate!  Another account documented an 82-year old man who was never told that he would lose his ability to refinance his home if he took on a PACE loan.  And the horror stories don’t end there. Complicating matters is the entanglement of government at all levels to promote the PACE lending industry. Local governments in PACE communities effectively serve as the industry’s collections agency for the payment of assessments, which the government distributes to the lenders. Also, because PACE loans are technically property tax assessments, they generally get creditor priority status in case of non-payment or default. Yes, you read that correctly: in case of default, a loan for residential solar panels gets paid first — even before a homeowner’s mortgage. Non-payment of a PACE loan can result in a home or property being seized as collateral and sold to repay the PACE lender. In other words, you could lose your home, not because you defaulted on the mortgage you assumed to buy the house, but to pay off a loan for solar panels or attic insulation or LED lighting...

No comments: