On July 25, 2017, the Board of County Commissioners discussed whether or not to approve a Property Assessed Clean Energy (PACE) Funding Agency. Pursuant to Florida statute section 163.08, provides that “certain improvement/repairs to real property for energy conservation and efficiency, renewable energy improvements or wind resistance improvements may qualify for financing made available by certain special purpose “local governments” such as the Florida PACE Funding Agency (PACE), to private residential or commercial property owners, with repayment over time being collected on the property owner’s annual tax notice as a non-ad valorem assessment under the Florida Uniform Collection Process.”
Essentially, this means that the loan, used for energy conservation and improvements to the borrower’s property is paid back as an assessment on the property rather than a regular loan or mortgage payment. This, and other PACE Funding Agency practices stirred some controversy during the July 25 meeting, citing issues found on public websites such as Wikipedia and the National Consumer Law Center.
The discussion began when Clerk of Circuit Court and Comptroller Don Barbee addressed the board to report that his office would not be substantially impacted by the approval of the resolution. Mr. Barbee, acknowledging that he is “also a conservative Republican” asked, “Is this the direction the county should be going, becoming a debt collector for a mortgage company?”
Commissioner Steve Champion stated, “The banks will obviously be against it because it will take away their revenue.”
Commissioner John Allocco cited a report by the National Consumer Law center and expressed concern that this could be another type of predatory lending organization, “because of the way they’re pushing these loans, and … it has to do with some of the loopholes this particular program gets in state and federal law … removing consumer controls put in place to protect seniors and more vulnerable loan recipients.”
Chairman Wayne Dukes said, “I don’t doubt that this country is full of people that will take a process and try to figure out a scam to make it work ...That would leave us the responsibility for due diligence on anything we do.”
Mr. Allocco also brought up that according to his findings, large or corporate projects would be required to adhere to ‘green’ standards, but smaller residential projects would not.
Commissioner Jeff Holcomb’s concern is that in the case of seniors or low-income loan recipients, complications may leave them unable to sell their house if they don’t understand the finer points of the loan terms.
Tax Collector Sally Daniel stated simply, “I don’t like it.” She went on to say that other Tax Collectors she’s spoken with don’t like it either. “It’s a first lien. It attaches to everything. They [recipients] can’t get a Fannie Mae loan, they can’t get a Freddie Mac loan …”
Chairman Dukes countered her concerns regarding mortgage lenders by stating, “...This is not something you would get if you’re buying a house to live in for thirty years.” Mr. Dukes said that the loan stays with the property, not the person. Such an arrangement can be attractive to seniors and those who have built equity in their home.
Ms. Daniel went on to say that in a case that she used as an example, the homeowner was paying a 7.5% interest rate on the PACE loan, and mentioned, “other people are getting these loans with the air conditioning company with no interest.”
Continuing his research, Commissioner Allocco quoted the statement, “Federal housing and finance administration will not purchase mortgages encumbered by a PACE lien.” He then said, “I’m out on this one. I cannot do this in good faith at this point.”
John Emerson, Property Appraiser shared the concern of Mr. Allocco and Ms. Daniel, that buyers may have difficulty finding a lender that will accept the attached PACE lien.
A realtor representative addressed the board, and further added that, “PACE was created for people who cannot get funding through traditional methods. This is zero competition to banks. These are people who banks won’t lend to.” He also added that there is a substantial penalty for prepayment or paying off a PACE loan early.
The representative for PACE agencies, Conrad De Santis addressed the board to answer the questions raised during the discussion. Mr. De Santis is the Head of Government Relations for CounterPointe Energy Solutions, which is the program administrator for one of the four PACE providers in Florida.
He began by stating answers to all topics raised before he approached the board: “5.99%. Period. Five year … thirty years. All residential. No prepayment penalties. Never had one, never will.”
Mr. De Santis went on to say that there is a lot of misinformation, and brought up Mr. Allocco’s findings mentioned earlier. “It’s a little insulting to tell people that ‘only poor people can use this’ … over half of our customers have FICO scores over 700”. Between 92% and 98% of CounterPointe’s and the industry’s business is residential, he explained.
According to De Santis, The population that PACE is targeting are unable to obtain home equity loans due to the amount of the loan needed, not the individual’s credit score. TD Bank and Citibank would not offer a home equity loan for under $25,000.00. CounterPointe’s weighted average balance is $21,000.00.
Regarding the loan relationship to the core mortgage, Commissioner Allocco asked, “Does this loan supercede the primary mortgage?” De Santis answered “It’s an assessment, not a loan. It’s like the property taxes you assess, they do go ahead of the mortgage.”
When Mr. Allocco asked why the PACE loan was structured this way, Mr. De Santis stated, “It was designed by policymakers who felt that moving capital for infrastructure, to reduce greenhouse gas emissions, to address global warming, and protect the state against hurricanes and floods was a compelling state interest, that they needed to turbo-charge it and augment it with the power of the state.” He went on to say, “For the free market, it is an alternative. We recommend cash, we recommend you go to your bank … this is just another arrow in the quiver for consumers in a free market … it was designed to augment, not replace.”
In addressing the questions of mortgage brokers disapproving of the program, Mr. De Santis explained, “Fannie and Freddie don’t like this … what no one mentioned was Ginnie Mae.” Ginnie Mae, short for the Government National Mortgage Association, was established in 1968 to promote home ownership. Ginnie Mae is backed by FHA and VA, all which have guidance in place to work with PACE loans.
Commissioner Champion renewed the question of predatory lending practices. De Santis answered by saying that contractors are vetted and monitored to make sure they are licensed and insured and go through the proper permitting procedures. “And we check their work.”
Commissioner Nick Nicholson began his opinion by reminding the board and public that unlicensed and unscrupulous contractors have been a big problem for Florida homeowners. “If people getting these loans have to have their contractor certified … and vetted by this company, that’s a tremendously good thing to protect the consumer.”
A motion for approval came from Commissioner Champion, and seconded by Commissioner Nicholson. The motion carried 3-2 as a result of a roll-call vote, with the nays coming from Commissioners Allocco and Holcomb.
Florida PACE website: www.floridapace.gov