PACE loans, otherwise known as Property Assessed Clean Energy Bonds, are quick personnel loans provided by cities to homeowners. Beyond the fact they are intended solely for energy retrofits, PACE loans are also paid off by property taxes. 3 other federal agencies, the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac have all joined forces to try and remove these loans from the market.
How PACE loans work
Considered “bond backed loans,” PACE loans are administered by city governments. The homeowners apply for PACE for finance loans they can use to improve the energy use of their home. These loans are sold as bonds to investors. Property taxes on the house are increased by the payment of the loan. The energy improvements, like solar panels or extra insulation, stay with the house — and so do the payments. These loans are a way for cities to help their residents finance personal short term loan that move each city towards energy independence. The federal stimulus program provided cash to cities to help get the programs started.
How PACE loans are frustrating
What about PACE loans is causing other federal agencies to have a mild heart attack? In short, because they might not get paid. To make their money, a mortgage holder has to sell a house that goes into foreclosure. Taxes and liens on the property have to be paid before the house can be sold by the mortgage lender. If the homeowner stops paying their mortgage, then the PACE loan gets paid off before the mortgage.
Will PACE Loans continue?
Officially, PACE loans are nevertheless a working program. The standards for mortgage short term loans programs where PACE is available, though, are being tightened. House Energy and Commerce Committee Chairman Henry Waxman and House Financial Services Committee Chairman Barney Frank have written a letter “urging officials to work together quickly to resolve the uncertainty surrounding PACE programs”.
