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Blog Post
CFPB Issues PACE Financing Proposed Rule
Michael Christians • May 9, 2023
On May 2nd, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule related to Property Assessed Clean Energy (PACE) financing. PACE financing is a non-traditional funding mechanism in which a borrower obtains financing for energy efficient improvements (e.g., solar panels), and that financing is repaid through voluntary property tax assessments.
Among other things, the proposed rule:
- Makes it clear that PACE loans are subject to the Truth in Lending Act and Regulation Z. It also provides that PACE lenders are subject to civil liability for failure to comply with the regulation's requirements.
- Clarifies that PACE loans must meet the ability to repay standards set forth in Section 1026.43 of Regulation Z. The rule also states that for PACE loans, the creditor's only option to show repayment ability is to evaluate the eight factors. In other words, a PACE loan cannot be a qualified mortgage.
- Exempts PACE loans from the mandatory escrow requirement if the loan is considered higher priced and secured by a first lien.
- Exempts PACE loans from the periodic statement requirement under Section 1026.41 of Regulation Z.
- Establishes a model Loan Estimate and Closing Disclosure form specific to PACE financing transactions.
Comments are due on the proposal the later of 30 days following the rule's publication in the Federal Register or July 26, 2023. You can access a copy of the proposed rule here.
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5438 South Prairie View Drive
West Des Moines, IA 50266
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Michael Christians Consulting, LLC
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