On December 17, 2024, the CFPB finalized a rule mandated by Congress that applies existing residential mortgage protections to Property Assessed Clean Energy (PACE) loans. PACE financing is financing to cover the costs of home improvements that results in a tax assessment on the real property of the consumer.
The final rule:
Amends Regulation Z’s exclusion of tax assessments and tax liens from the definition of credit to clarify that voluntary tax assessments and tax liens, such as PACE financing, are not excluded under TILA and Regulation Z;
Recognizes PACE financing as meeting the definition of credit under TILA and Regulation Z;
Prescribes ability-to-repay requirements for residential PACE financing; and
Makes other amendments and exemptions to make clear how other rules in Regulation Z apply to PACE financing.
According to the CFPB’s press release, the new rule will ensure that PACE borrowers have the right to receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other forms of financing, and the lender will be responsible for ensuring that the borrower is not set up to fail with an unaffordable loan.
Read the CFPB’s press release here.
The final rule can be found here.