Predatory PACE Loans

By MNR News posted 07-21-2021 12:07


illustration of a house with solar panelsHow MNR’s GA Team Stopped Them from Ripping Off Minnesota Homeowners

Though it seems like old news by now, a recent episode of John Oliver’s Last Week Tonight featured an eye-opening segment on how PACE loans are exploiting and hurting unwitting homeowners in other states across the country. Fortunately, PACE loans aren’t a problem in Minnesota because Minnesota Realtors® (MNR) Government Affairs team, working with a diverse coalition of groups, successfully lobbied the Legislature to suspend residential PACE loans in 2017 until consumer protections for Minnesota homeowners could be developed and implemented. Those consumer protections were enacted in 2018.  This colossal win for the state’s homeowners is a reminder of why it’s so important to have a strong advocacy team at the Capitol.

What is a PACE Loan?
PACE stands for Property Assessed Clean Energy; the loans are designed to help homeowners invest in environmentally friendly technology like solar panels and energy-efficient appliances and windows. With residential PACE loans, a local unit of government (city or county) allows a private company (the PACE administrator) to offer financing for renewable energy and energy efficiency improvements, secured by special assessments imposed by the local unit of government and collected on the homeowner’s property tax statement.  Because PACE loan repayments is collected as a special assessment, a “super-priority status” lien is established on the property.

In John Oliver’s segment, he discusses some critical problems with PACE:

  1. PACE loans are generally offered by the contractors who will perform the renovation, meaning people who are not trained in finance are touting a complex loan tied to property taxes.
  2. There is no requirement that an independent energy audit be done to the home before the installation or renovation. That means there’s no way for a homeowner to truly assess if the energy savings are worth the financial burden of obtaining a PACE loan.
  3. PACE administrators often market them by claiming “the loan is on the house, not on you.” The problem, however, is that this lien is now attached to the property – if the homeowner goes to sell the property before fully paying the PACE loan, the assessment transfers to the buyer.

MNR worked with other stakeholder groups during the 2017-18 legislative sessions to suspend PACE loans in the state until consumer protections could be implemented. and then MNR participated on the  task force established by the law in 2017  developed robust consumer protections, which were signed into law in 2018. As a result, there are now numerous policies in place that protect Minnesota homeowners from the perils of PACE loans that homeowners in other states, like California and Missouri, have experienced.

You can view the Last Week Tonight segment on PACE loans here: (strong language warning)