Newsroom
May 12, 2023
NAFCU breaks down CFPB’s announcement on PACE loans
NAFCU sent members a Regulatory Alert Thursday highlighting the CFPB’s notice of proposed rulemaking seeking to prescribe ability-to-repay rules for Property Assessed Clean Energy (PACE) financing. While credit unions do not offer residential PACE financing, they are negatively impacted when PACE-financed improvements impose a superior lien on a property with a preexisting mortgage. The potential implications of regulating PACE financing under the Truth in Lending Act (TILA) could include greater consumer protections and increased transparency in affordability.
Through the Regulatory Alert, NAFCU highlighted that:
- a PACE loan obligation attaches to the property rather than to the borrower, creating a tax lien on the property that often takes priority over current and future mortgages;
- the rule would clarify PACE financing coverage under TILA and Regulation Z through amendments to Regulation Z’s exclusion for tax assessments and tax liens from the definition of credit, and prescribe ability-to-repay requirements for residential PACE financing; and
- the rule has a proposed effective date at least one year after the final rule is published in the Federal Register, but potentially longer to ensure compliance with a TILA timing requirement.
Comments are due to NAFCU July 12; comments are due to the bureau July 26. Subscribe to receive Regulatory Alerts in your inbox.