Published: October 2016

Green loans may cause homeowners to see red

Coalition: Mortgage coalition

PACE (Property Assessed Clean Energy) loans are a special kind of financing sponsored by local governments and used to pay for energy-efficiency improvements, such as solar panels, energy-efficient appliances and windows. The Department of Energy (DOE) provides best practice guidelines for homeowners, but these guidelines don’t adequately educate property owners of the loans’ drawbacks. In a letter to the DOE, Consumer Action joined advocates in urging the agency to better alert consumers of the serious risks associated with taking out the seemingly appealing loans.

PACE (Property Assessed Clean Energy) loans allow homeowners to finance 100% of energy efficient, renewable energy and water conservation upgrades to just about any property, including homes and commercial properties. Many of these upgrades are not only costly, but require a substantial amount of upfront funds. Families have found PACE Loans to be very attractive in their efforts to upgrade their property and save monthly on their utility bills because there is no upfront cost and income requirements which makes for fast approvals. However, PACE programs can pose serious risks, especially for low-income people and seniors, since there is no assessment of the borrower’s ability to pay. Instead, lenders assess borrowers based on their home equity—a practice that uncomfortably mirrors the steps that led to the housing crisis.

In addition, to properly alerting consumers to the drawbacks of these loans, the Department of Energy should emphasize the responsibility of state and local governments to address risks created by government-sponsored PACE programs and subject the loans to the same rigorous federal disclosure and consumer protections as mortgages.

Lead Organization

National Consumer Law Center (NCLC)

Other Organizations

Action, Inc.| Americans for Financial Reform | Arkansans Against Abusive Payday Lending | Bet Tzedek Legal Services (Los Angeles) | California Reinvestment Coalition | Center for NYC Neighborhoods | Center for Economic Integrity (Arizona) | Connecticut Association for Human Services | Connecticut Legal Services | Consumer Action | Consumer Federation of America| Consumers Union| Empire Justice Center | Florida Alliance for Consumer Protection | Housing and Economic Rights Advocates (San Francisco) | Iowa Community Action Association | Jacksonville Area Legal Aid, Inc. | Legal Aid Services of Oklahoma, Inc. | Long Island Housing Services, Inc. | Low-income Energy Affordability Network | National Association of Consumer Advocates | National Association of Consumer Bankruptcy Attorneys | National Consumer Law Center (on behalf of its low income clients)| National Fair Housing Alliance| National Housing Resource Center| Neighborhood Housing Services of Greater Cleveland | New Haven Legal Assistance Association| North Carolina Justice Center | Pennsylvania Utility Law Project (on behalf of our low-income clients)| People's Action Institute | Public Citizen| Public Counsel (Los Angeles)| Public Good Law Center| Public Law Center (Santa Ana, CA) | Public Justice Center (Baltimore) | Public Utility Law Project of New York | Southern Poverty Law Center | Tennessee Citizen Action | Virginia Citizens Consumer Council | Virginia Poverty Law Center | Woodstock Institute (Chicago)

More Information

For more information, please visit NCLC's website.

Download PDF

Green loans may cause homeowners to see red   (DOEletteronPACE.pdf)