PACE loans in Ohio could require more consumer protection – ProPublica

The Ohio state legislature will do so this fall Consider adding consumer protection on “clean energy” lending programs, responding to concerns they could burden vulnerable homeowners.

in the Transcript during State House Committee hearings This year, some supporters of the bill pointed this out Reporting by ProPublica as evidence that Ohio should tightly regulate lending. This coverage showed that PACE (Property Assessed Clean Energy) loans often put low-income borrowers in Missouri at risk of losing their homes.

Two members of the Republican House of State from eastern Ohio are pursuing rules for PACE, although such a loan program was only offered through a pilot program in Toledo. But lawmakers Bill Roemer of Richfield and Al Cutrona of Canfield said they want to make sure companies follow stricter rules when trying to bring a statewide program to Ohio.

PACE offers financing for energy-efficient renovations that borrowers pay back in the form of their property taxes. Unlike some other types of financing, defaulting on a PACE loan can result in a home being sold in a tax sale.

Missouri, California and Florida are the only states with active statewide PACE residential programs. Ohio came close last year finish fourthafter the California-based Ygrene Energy Fund announced it would be offering loans to homeowners in partnership with the Toledo-Lucas County Port Authority.

But the program never started. Ygrene has since halted all lending nationwide and agreed to a settlement last week Complaint by the federal government and the state of California that the company harmed consumers through deceptive practices.

Römer said in an interview that he supported the measure after talking to a coalition These included mortgage lenders, real estate agents, and advocates for affordable housing and the homeless.

“You never really see all of these people coming together on one bill,” he said. “I did my research and I said, ‘This is really a bad program that is taking advantage of the most vulnerable people.'”

The legislative period ends on December 31, leaving little time to pass the law.

“It’s going to be a lot of work,” said Römer, “but I think it’s very important that we do it.”

Ben Holbrook, an adviser to Cutrona, said that after Ygrene’s withdrawal, the bill was “less a reactive bill and more proactive.”

ProPublica found that Missouri state and local officials exercised little oversight over the two entities that operated the state’s clean energy lending programs. Ygrene and the Missouri Clean Energy District charged high interest rates and fees for terms of up to 20 years, collected loan payments through tax bills, and enforced debt by placing liens on property — all of which left some borrowers vulnerable to losing their homes when they falls into arrears.

Reporters analyzed approximately 2,700 loans originated in Missouri’s five counties with the most active PACE programs. They found that borrowers, particularly in predominantly black neighborhoods, sometimes paid more in interest and fees than their homes were worth.

PACE lenders said their programs provided much-needed financing for home upgrades, particularly in predominantly black neighborhoods where traditional lenders don’t typically do much business. They said their interest rates are lower than payday lenders and some credit cards.

Weeks after ProPublica’s investigation, the Missouri Legislature and Gov. Mike Parson passed signed a law prescribe more consumer protection and oversight of PACE. In Ohio, according to our reporting, executives in the state’s two most populous cities, Columbus and Cleveland, said so would not attend in every residential PACE plan.

Ohio’s bill would limit the annual interest rate on PACE loans to 8% and prohibit lenders from charging interest on fees. Lenders must verify a borrower’s ability to repay a loan by confirming that the borrower’s monthly debt does not exceed 43% of their monthly income and that they have sufficient income to cover basic living expenses.

The measure would also change how PACE lenders secure their loans. In states where PACE has been successful in the residential real estate markets, PACE liens are paid first when a home goes into foreclosure. And a homeowner can borrow without the consent of the bank holding the mortgage. The Ohio bill would pay off PACE liens on the mortgage and all other liens on the property. In addition, the mortgage lender would have to agree to take out a PACE loan.

Ygrene officials did not respond to requests for comment. However, a company official told the Legislative Committee that the bill would “clearly kill residential PACE.” Crystal Crawford, then Ygrene’s vice president, told the committee in May that the law was “not consumer protection law — it was bank protection law.”

Ohio’s limited experience with PACE illustrated how, with sufficient oversight, the program could be a cost-effective option for borrowers. The Port Authority of Toledo-Lucas County ran a pilot program that allowed residents to borrow money for energy-saving projects without paying high interest or fees. A local nonprofit, Lucas County Land Bank, ensured borrowers had the funds to pay off the loans, matched homeowners with contractors, and ensured renovations were completed correctly before the loans were released.

Ygrene announced in August that this was the case suspended from awarding residential PACE loans in Missouri and California, but continued to make PACE residential loans in Florida and PACE commercial loans in more than two dozen states. Commercial loans have not attracted as much attention from regulators because they tend to involve borrowers with more experience and access to capital, who are less likely to default than private borrowers.

More recently, Ygrene’s website suggests that instead of issuing loans directly, Ygrene is now functioning as an online loan marketplace where consumers seeking personal home improvement loans can enter personal information and receive offers from third-party providers.

The complaint from the Federal Trade Commission and the California Department of Justice alleges that the company misled consumers about the potential financial impact of its financing and registered liens on borrowers’ homes without their consent. To solve the case, Ygrene agreed to provide financial relief to some borrowers, end alleged fraudulent practices, and put meaningful surveillance on the contractors who act as sales staff. The settlement must be approved by a judge.

Ygrene said in an email that the complaints date back to the “earliest days” of the company’s marketing of PACE loans in 2015 and that it has since taken “significant steps” to protect consumers.

“We deeply regret any negative consequences a customer may have experienced, as even one dissatisfied customer is too many,” the company said.

Comments are closed.