A new PACE financing program is launching in Florida on July 24 with protections to address concerns that some consumers aren't informed about the program's liens, service fees and property tax assessments
Renovate America, a pioneer of the Property Assessed Clean Energy home improvement financing market, says the company's HERO program will offer Florida homeowners competitive interest rates and enhanced safeguards reflecting lessons learned from past mistakes.
"We've learned a lot by doing and Florida homeowners will benefit as a result," said Ari Matusiak, executive vice president at the San Diego-based company.
With Renovate America's entry, four PACE providers now provide financing for such improvements as rooftop solar systems, impact doors and windows, hurricane-resistant roofing, energy-saving air conditioning systems, hot water heaters, insulated siding and even awnings.
Initially, financing from Renovate America will be available in 26 Broward County cities, the unincorporated area of the county, five cities in Palm Beach County including Boynton Beach and West Palm Beach, and four cities in Miami-Dade County. The company hopes to add other cities and unincorporated areas in the near future, spokesman Matt Bevens said.
Interest rates ranging from 3.99 percent for five-year loans to 7.99 percent for 25-year loans will be offered. Those are lower than what the company has offered in the past, Bevens said.
Borrowers will be given a disclosure form modeled after "Know Before You Owe" mortgage loan disclosure forms that break down all costs, including annual payments, application fees, interest rates, financing charges, total amount financed and cost of project.
In addition, Renovate America will personally telephone all borrowers before they sign to ensure they understand financing terms. Customers over 65 years old will be asked additional questions to catch any discrepancies between what they were told by contractors and what contractors submit to the lender.
Conceived as a way for homeowners to finance energy efficiency and storm hardening upgrades with no credit checks and no money down, PACE programs have come under scrutiny over the past year.
A 2016 report by several watchdog groups, including Consumer Federation of America, called for federal regulation, saying PACE loans lack consumer protections, have few checks to ensure energy savings are real and cost effective, and are inappropriate for homeowners eligible for free or lower-cost programs.
Elderly homeowners in particular are at risk of targeting by contractors who fail to explain that PACE loans are recorded as liens against their homes and must be repaid through assessments on property tax bills.
Because the program does not require credit checks, some borrowers are approved for loans they can't afford to pay off and some have lost their homes as a result, the report said.
A federal class action suit filed in March in Northern California in March by plaintiffs in Florida and California accuses Ygrene Energy Fund, Florida's largest PACE provider, of failing to disclose to homeowners that most banks won't finance mortgages for homes with PACE liens. Ygrene has denied the allegations.
Meanwhile, U.S. Sen. Marco Rubio, of Florida is co-sponsoring a bill in Congress that would require "Truth in Lending"-type disclosures to PACE consumers, while Florida Rep. Mario Diaz-Balart is sponsoring a measure that would bar the Federal Housing Authority from backing mortgages with PACE assessments.
The three other PACE finance companies operating in Florida also interview would-be borrowers and provide "Know Before You Owe"-type disclosures, said Jay Neal, president of the Fort Lauderdale-based Florida Association for Insurance Reform, a nonprofit insurance industry watchdog organization.
They are Ygrene Energy Fund, Florida PACE Funding Agency and Renew Financial.
Last year, Neal announced FAIR is creating a PACE watchdog organization called Clean PACE that will audit contracts to verify participants are following guidelines.
That's necessary because of the potential for abuses, Neal said.
"If you don't closely manage contractors, there will be an element that will figure out a shortcut, and act in ways not on the up and up," he said. "But the good ones like a more stringent review because it keeps the riff raff out."
Prior to launching in Florida, Renovate America reformed its method of selecting and maintaining its network of local contractors, Matusiak said. The company will not invite contractors with ratings of less than three stars on social network sites such as Yelp and Google, he said.
Contractors who are selected will be monitored and assigned performance ratings based on customer satisfaction, issues about quality of work, and how fast they resolve complaints. Although rankings won't be made available to the public, the highest ranked contractors will appear at the top of Renovate America's contractor search results, Matusiak said.
