LOS ANGELES — A measure to strengthen consumer protections on California's property assessed clean energy programs passed the state Senate.
PACE allows homeowners and commercial property owners to finance energy efficiency and safety projects like solar panels, windows or earthquake proofing for up to 25 years through tax liens on their properties. The tax payments are structured to stay with a property until paid even if it is sold to a new owner.
The industry had faced criticism that homeowners are not being adequately informed about how the program works before they agree to the tax liens.
State Sen. Nancy Skinner, D-Berkeley, who co-authored the state’s original PACE legislation in 2008, said she introduced the bill to make sure the program operated as intended.
“SB 242 strengthens California’s role as the national leader in PACE financing by ensuring that contractors are qualified, consumers are protected, and buildings are upgraded to achieve water, energy and seismic goals,” Skinner said.
The measure passed the Senate Monday by a vote of 33-3 and moves on to the Assembly.
The measure adds underwriting standards, telephone confirmation for all homeowners, eligible measures standards, contractor standards, marketing standards, forbearance, and reporting requirements.
Underwriting for PACE previously had focused more on how much equity there was is on the property without requiring credit scores for homeowners.
The bill would require that property taxes are current and no late payments have been made on property taxes in the past three years and that the property owner be current on all mortgage debt. It also requires that improvements are eligible projects and that the total PACE assessment and mortgage not exceed 96.5% of the market value of the property. The program administrator would also have to check credit reports, and in some cases, verify income, assets and debt obligations.
The program administrator also would have to receive a recorded oral confirmation from the homeowner after a dozen key aspects of the program are explained.
Gov. Jerry Brown had signed some protections into law in September to make lending terms closer to those for mortgages. That law, for instance, gives homeowners three days to back out of the loan.
The measure incorporates many of the consumer protections and best practices recommended by PACE Nation, a non-profit advocacy organization, and the U.S. Department of Energy, according to a Senate analysis.
Those included assurances that PACE contractors are properly licensed, consumers are property evaluated for their ability to pay back the assessment and that payment relief and protection is provided if the loan recipient faces temporary hardship.
California also set up a $10 billion loss reserve program in 2013 to compensate mortgage lenders for any losses resulting from PACE liens.
That program covers more than 56,000 residential PACE financings valued at about $1.2 billion. Through June 2016, California Alternative Energy and Advanced Transportation Financing Authority, which administers the loss reserve program, had not received any claims on the loss reserve, according to the Senate report.