Consumer Warns About Pitfalls in Financing Program for Home Improvement Projects

What you should know before using PACE program to finance home improvement projects

Jorge Andrade and Thomas Bavota are two consumers out of more than 21,000 in South Florida who have financed a home improvement project using what’s known as PACE, the Property Assessed Clean Energy Program. Both had different results.

In our area, consumers have financed more than $140 million in projects using the financing program.

The commercials for the PACE program advertise no upfront cost or financial verification needed.

The money can be used to finance energy efficiency projects like air conditioning, solar panel and impact window installation.

Jorge Andrade says the financing made his roof project possible.

“Since they said they had financing for roofing, we thought it would be a good avenue for us to go to,” Andrade told us.

But Thomas Bavota says going green left him with regrets.

“It was here to help homeowners not to hurt them,” Bavota told us. “I never would have gone through this if I had known about the lien.”

Bavota says a salesperson told him he qualified for $22,000 in financing to install impact windows.

He had the windows installed with no problems. But when he tried to refinance his mortgage, he realized the PACE financing for the windows appeared as a lien against his property. He says he wasn’t told about that detail ahead of time.

“I should be able to refinance it and take out whatever money I want, sell it if I want to, just do what we want to do with our house that we worked so hard for,” Bavota said.

When you finance using PACE, you are signing an agreement with a private finance company that has received approval to operate in your county.

A lien is placed on your property until you pay what you owe through a special assessment on your property taxes.

Some homeowners in California and Florida say the program was marketed with “deceptive” and “incomplete information.”

A federal lawsuit filed in California against PACE administrator Ygrene Energy Fund claims the lien makes it “nearly impossible for consumers to sell their homes without first paying off the loan and incurring a large prepayment penalty.”

Ygrene declined an on-camera interview but sent us this statement that says, “Ygrene does not engage in “lending” practices. PACE offers property owners financing to fund energy efficient home improvements, but the transactions are not “loans”. Related to the case cited, Ygrene has been and continues to rigorously defend the allegations of this lawsuit. The District Court Judge in the matter has already held that Ygrene’s written disclosures adequately advise property owners related to the ability refinance or sell their homes without paying off their PACE financing. Ygrene and the Plaintiffs are currently in the discovery phase of the litigation and Ygrene is confident that ultimately the Court will find all pending claims to be without merit.”

Ygrene is one of six companies approved to operate through the PACE program in South Florida.

“I know it’s a good program, I know there are a lot of people who have taken advantage of the program, but there are a lot of people who have been taken advantage of also,” Miami-Dade Property Assessor Pedro Garcia told us.

Garcia says homeowners should contact their mortgage lender to find out how the PACE program will impact them.

“Check on the interest, check with the company they are recommending you to do that, and check with the bank. Take a look and see what is the best advantage to you,” said Garcia.

It wasn’t until our interview that Bavota learned by the end of the 20-year term he’ll have paid $24,000 in interest, which is more than the principal he owed for the window project.

“None of that was ever explained,” Bavota said. “How the interest would work over 20 years.”

As more homeowners turn to PACE financing, the federal government is adding oversight. A new law passed earlier this year directed the Consumer Financial Protection Bureau to add regulations to the program. The new regulations are expected to require PACE financers to determine a homeowners’ ability to repay what they owe.

The Bavotas are not involved in a lawsuit against Ygrene. We asked the company about the Bavota’s experience and in a statement they told us,

Ms. Bavota interacted directly with a Ygrene representative during the entire process from application to completion and funding of the project. During this time, the homeowner completed application documents, received all program and financing related disclosures, and participated in a “welcome call” to confirm they understood all applicable terms and conditions.

PACE financing has numerous built-in consumer protections, more so than many other comparable types of financing, which is why we take great care to advise our customers of the financing clearly. We do this diligently by providing a disclosure of rights & responsibilities to property owners explaining how the PACE lien functions and the potential requirement by mortgage lenders to repay the assessment should they choose to refinance or sell their property. The disclosures are provided to the property owner in print, and we take a second step through a live recorded call with the property owner prior to the contractor commencing work on their property."

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