Property Assessed Clean Energy (PACE) was conceived over a decade ago as a way to help homeowners access financing to install otherwise prohibitively expensive clean energy upgrades.
Homeowners who want to install energy efficient home improvements can apply for PACE loans from finance companies or “PACE Administrators” (which include Renew Financial, FortiFi Financial, Ygrene Enery and PACE Funding Group) in order to pay for the products. PACE loans are often sold door-to-door by contractors. The loans require no money down but are secured by the equity in the homeowner’s property, just like a traditional mortgage. The payment amount is added onto the homeowner’s annual property tax bill as a special line-item assessment.
Because these loans are paid as part of a homeowner’s property taxes, they get “first lien” position, which means that if the home is sold or foreclosed upon, PACE loans get paid off first before any other secured loans such as a mortgage.
The assessment amount includes the cost of the improvements plus capitalized interest and financing charges, and is typically repaid over 10-25 years. In our experience, most homeowners can expect to pay back roughly twice the amount they borrowed.
A homeowner who cannot afford to pay the increased property taxes — either directly to the County or as part of their mortgage payment — will face foreclosure.
Program flaws, such as gaps in consumer protection and reliance on door-to-door salespeople, have led to homeowners being defrauded, and to the local governmental sponsors of some of the state’s largest PACE programs abandoning the program.