CFPB PACE Loan Rules: Florida Homeowner Protections After BRIDGE v. CFPB
What Are PACE Loans?
A Property Assessed Clean Energy (PACE) loan is one given to a homeowner to put environmentally repairs or improvements (generally, windows and roofs) to their home. There is no “monthly” loan payment - the loan payment is due once per year with the property taxes for the property. These loans are not available in every county, and whether you can get them will vary based on where you are in Florida.
What Did the BRIDGE v. CFPB Ruling Decide?"
Judge Tom Barber issued a ruling in BRIDGE v. CFPB recently that cleared the way for the CFPB’s rules regarding Property Assessed Clean Energy (PACE) loans to become final and will help millions of homeowners.
This decision upheld mortgage-style requirements to Residential Property Assessed Clean Energy (PACE) financing, rejecting a trade association’s challenge under the Administrative Procedure Act and the Tenth Amendment. The Court rejected these arguments, finding PACE financing constitutes “credit” under TILA because it arises from a voluntary contract, even though repayment is collected through property tax assessment
How Does TILA Now Apply to PACE Financing?
Based on this ruling, The CFPB’s proposed rules that amends the Truth in Lending Act (TILA) to direct the CFPB to apply the TILA’s ability-to-repay requirements and associated civil liability provisions against lenders to PACE financing. The revised rule would also amend rules relating to TILA to classify voluntary PACE assessments as “credit,” thereby bringing PACE transactions within the scope of TILA and certain provisions of the Real Estate Settlement Procedures Act (RESPA) and the SAFE Act.
Can a PACE Loan Cause Foreclosure?
A common argument and complaint by many home owners dealing with PACE financing is the dramatic impact it can have on mortgage loans and property taxes, in some instances causing mortgage defaults and foreclosure sales. This happens because once the tax bill becomes due and adds the increased tax liability for the loan, an escrow shortage occurs with the mortgage loan holder, requiring a mortgage payment adjustment. This will then generally take the additional tax (the PACE loan installment) and add 1/12th of that amount each month. This can be a dramatic increase - a $5,000 PACE payment could be a $416/month mortgage increase.
What Are Florida Homeowners' Rights Under the New Rules?
These rules bring PACE transactions within the scope of TILA and certain provisions of the Real Estate Settlement Procedures Act (RESPA) and the SAFE Act. This can add significant causes of action to the tool kit for homeowners struggling with problematic PACE loans or may lead to rescission rights if a TILA compliant disclosure was not given.
If you are facing rising mortgage payments because of your PACE loan, I'm happy to help! For the earliest available time on my calendar, please visit https://intake.dunivanlaw.com. Please note, a $250 consult fee will apply.
