Tougher Standards For Certain Home Improvement Loans

On May 1, 2023, the Consumer Financial Protection Bureau (CFPB) issued a report and a proposed rule to clarify and strengthen its regulation of so-called Property Assessed Clean Energy (PACE) financing.

PACE. PACE financing is home improvement financing secured by a tax lien, rather than a mortgage. See 15 U.S.C. 1639C(b)(3)(C)(i). Despite the "clean" in the title, PACE loans are more frequently used for natural disaster preparedness than for clean energy improvements such as solar panels. The defining feature of PACE loans is that they are repaid via a tax assessment on the improved real property. The obligation to repay the loan through higher property tax payments remains with the property even if the property is sold to a new owner. Like any tax lien, a lien that secures a PACE loan is usually senior in priority to any private mortgage liens. PACE loans are made between the consumer and the consumer's local government, or a government entity operating with the