Credit Union National Association (CUNA) wrote to the Consumer Financial Protection Bureau (CFPB) seeking stronger requirements for Residential Property Assessed Clean Energy (PACE) loans. The letter was sent in response to the Bureau's Advance Notice of Proposed Rulemaking (ANPR) as credit unions are concerned with the impact that PACE financing programs could have on their members due to lack of proper disclosures, transparency and consumer protections.
CUNA highlights the need for an “ability-to-repay" (ATR) analysis and disclosure requirements. President/CEO Jim Nussle is calling on the Bureau to act quickly but also coordinate with other federal regulators in the housing market.
The letter recommends that the Bureau’s rule address:
- Proper underwriting requirements for PACE financing, including an “ability-to-repay” (ATR) analysis based on verified and documented information about the borrower;
- Clear, understandable disclosures of the key terms, repayment and potential impacts of a PACE lien provided to the homeowner prior to the execution of the contract;
- Debt-to-income (DTI) ratios should not exceed the ratio established for traditional mortgage loans;
- Its application to any type of residential PACE lending, regardless of brand name or how the program is marketed to the consumer; and
- Preemption of state laws, unless a state has established a higher standard of consumer protection.
CUNA also recommends the Bureau continue to work with other relevant regulators and industry stakeholders during the development of a PACE Financing Rule. Although the Bureau is likely unable to address the issue of lien status, CUNA reiterated their concern with PACE lending’s first lien status under several state laws and state our strong opposition to any type of lien priority that makes PACE loans preferable to other loan options.