Ohio lawmakers introduce R-PACE measure to protect consumers
By Beth Wanless, Ohio REALTORS Director of Government Affairs
Ohio REALTORS is pleased to announce the introduction of House Bill 646 jointly sponsored by Representatives Bill Roemer (R-District 38) and Al Cutrona (R-District 59). The legislation will enact guardrails around Residential Property Assessed Clean Energy (R-PACE) financing to protect consumers and homeowners.
In 2009, the White House released policy framework to help local governments create Property Assessed Clean Energy (PACE) programs. Shortly after, Ohio passed a law to allow for “Energy Special Improvement Districts” (ESID) where PACE “loans” can be used. PACE loans allow property owners to finance certain expensive energy efficient property improvements. The loan is added to the borrower’s property tax bill and paid through tax installments and rest as a priority lien, ahead of the mortgage lien position.
PACE programs exist in Ohio for commercial properties without many issues and can work very well for a property owner. The residential component, or R-PACE, is not available in Ohio yet, however there are plans by PACE administrators to enter into the market soon. HB 646 will only enact protections around the residential program. Ohio REALTORS joined a broad-based coalition of organizations to bring transparency and consumer protections to the program.
Concerns with R-PACE financing:
- R-PACE administrators are not required to apply the “ability to repay” rules or “Know Before You Owe” disclosures. This could financially devastate a homeowner if they are not fully aware of what they’re signing up for. Since the R-PACE loan is a “super lien” if the homeowner cannot afford the increased property tax bill, they could lose their home to foreclosure.
- Home energy audits are also not required to obtain a PACE loan, leaving a homeowner uncertain if a financed improvement achieves the promised energy and financial savings.
- Disclosure and transactional complexity creates confusion for both the seller and buyer. A seller may not know when to disclose an existing R-PACE loan to their REALTOR, leading to an interruption or cancellation of a home sale.
- The Federal Housing Administration, Fannie Mae, Freddie Mac and the Veterans Administration do not back mortgages with PACE loans. And since the loan stays with the property until sold, borrowers cannot access cost-saving refinancing options, or obtain a loan for home purchase.
- There are growing reports of fraud and abuse, including predatory targeting of low-income and elderly homeowners resulting in financial distress of the property owner, and even foreclosure
Ohio REALTORS believes that R-PACE loans should be subordinate to any first mortgage, and consumer protections such as disclosures and sound underwriting should be a mandatory component of R-PACE programs.
We look forward to working with Rep. Roemer, Rep. Cutrona and members of the General Assembly in passing this commonsense legislation to protect Ohioans.
CLICK HERE to read the op-ed, "Residential PACE Loans: Too Good to be True," written by the coalition -- that includes Ohio REALTORS, Ohio Bankers League, Ohio Mortgage Bankers Association, Ohio Credit Union League and others.
Further, listen to the Ohio REALTORS The Real View podcast episode about R-PACE, featuring Don Boyd, of the Ohio Bankers League; Jay Pascoe, with the Ohio Mortgage Bankers Association; and myself: