Tuesday, September 26, 2017

Collier County Reconsidering PACE Loans for Homeowners

county commissioners room

“naplesA state program for financing storm resistant or energy-efficient improvements is getting yet another look from Collier County Commissioners.

Property Assessed Clean Energy, or PACE, allows homeowners to borrow against their homes for certain improvement projects, such replacing roofs and windows, or adding solar panels.

Twice before the county has looked into setting up PACE. First in 2010, when the program was established, and again in November before three members of the current board took office.

“When a homeowner has old windows and maybe they’ve been cancelled by the insurance company because they have an old roof, this gives them the ability to make that replacement,” said Jay Neal, the President of FAIR, the Florida Association for Insurance Reform.

Neal contends that the program can reduce insurance premiums and utility bills, and create new construction jobs.

“All these dollars we spend on insurance go offshore,” Neal said. “By diverting those funds back into the Florida economy we create a heck of a lot of jobs. For every $10 million invested we create 6,000 jobs over 20 years.”

The program extends credit more freely that other lending methods, with borrowing standards generally looser than traditional home improvement loans, as the payments are tacked onto a homeowners’ property tax bill.

Interest rates are also higher than most typical equity or home improvement loans, says Jamie French, the county’s deputy director of growth management.

Then there’s another catch, says Collier County Tax Collector Larry Ray. Failure to pay can lead to liens and foreclosure, and the PACE lender gets to be first in line – even ahead of a mortgage company. And since payment is owed and handled by the county’s tax collector, instead of a bank, borrowers have few options when they fall behind.

“No negotiation. That’s the point. We don’t negotiate, we don’t take a little now, we don’t let a friend pay,” Ray said.  “I’m not being cavalier about this. The process is the process. We deal with it all the time, sometimes it’s not comfortable, and all this means to me if you want one man’s opinion is we’re going to have a few more uncomfortable situations.”

A representative from a PACE lender said Tuesday that default rates are very low, and Neal said that between insurance and utility savings, most loans are paid back within a few years.

But commissioners aren’t yet sold on the idea.

“I interpret this as government supporting private for-profit businesses, and that makes me very uncomfortable because I don’t think that that’s been our practice ever,” Commissioner Donna Fiala said. “Why are we then stepping into that arena? I have a real problem with that.”

Commissioners Bill McDaniel and Andy Solis wanted to see more information before they would make a decision, and the commission plans to discuss the matter more at their next meeting.

“This is a complicated issue. It merits a more detailed explanation to the board as to how this works. We’re really talking about creating a special district,” Solis said. “I would just like to see some more information.”

It doesn’t help that PACE has come under intense scrutiny in recent days. A federal lawsuit was filed Tuesday in California against one PACE lender, alleging the loans are made under deceptive pretenses.

The suit accuses the lender of “Fraudulent inducement, negligence, unjust enrichment, negligent misrepresentation, and violation of consumer protection laws in Florida and California,” reports the Sun-Sentinel.

Last week, Arkansas Senators Tom Cotton and John Boozeman, along with Florida Senator Marco Rubio introduced a bill which would bring PACE loans under the control of the Truth in Lending Act, and the Senators did not mince words.

“Residential PACE loans are a scam,” Cotton said in a statement. “Predatory green-energy lenders are changing state and local laws to trick seniors into taking out high-interest rate loans for 20 years, along with liens on their homes, for technology that could be obsolete in a few years.”

Chairwoman Penny Taylor voiced similar concerns about the program Tuesday.

“There are some very vulnerable folks out there, especially the elderly, and I’m really worried that this is not going to be the right program for Collier County,” Commissioner Penny Taylor said. “I’m very concerned about it.”

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