Missouri Bills May End Home Efficiency Loans



Missouri homeowners could lose the cheap financing option for energy efficiency upgrades as proposed by the State General Assembly.

House and Senate committees passed bills (HB 814, SB 105) that will require property-assessed clean energy or PACE programs to be audited by the state finance department every 24 months, with lending programs paying a $ 50,000 commission each time.

Another account in the house (HB 697) will give mortgage holders a veto on any PACE loans that critics say could be fatal to programs due to the opposition of mortgage companies to specialized clean energy loans.

PACE loans are fundamentally different from mortgages and home equity loans. Funding is paid on a separate line added to the property tax invoices of borrowers and is handled by county collectors. When the borrower sells his property, the repayment obligation passes to the next owner. These typically range from $ 10,000 to $ 15,000 and cannot exceed projected savings on utility bills.

The programs offer lower interest rates and less stringent credit standards, which means that people with lower income or less successful credit history can often qualify for the programs.

The Ygrene Energy Fund is one of three lenders to PACE in Missouri. Managing Director Byron DeLear shared the story of a woman who runs a kindergarten at home and whose oven died in a deep freeze last month.

“If PACE were not available,” DeLear said, “she would have put the system on her credit card, which carries an 18% interest rate. PACE fills the gap for homeowners who may not have the funds to get a second mortgage or line of credit, but are still responsible homeowners. ”

The bills under consideration are aimed only at PACE lending to improve housing conditions. While the vast majority of PACE loans in Missouri go to commercial projects, about $ 40 million in loans has been disbursed to 2,900 housing projects statewide to date.

Legislative advocates portray this as consumer protection. They say that some homeowners do not understand the nuances of PACE loans and may be vulnerable to manipulation, or at least misunderstanding. Opponents say the bills will mostly protect banks that do not want competition from low-interest PACE loans.

“They want to correct the fact that they see it as a competition,” said James Owen, who lobbies against the bills on behalf of Renew Missouri.

DeLear said that oversight is already built into the system. Current law only allows PACE loans in cities and counties that have regulations permitting the loan. In 2019, the City of Springfield and surrounding Green County ended their PACE programs, demonstrating, in DeLear’s words, that “local fences have been installed. We must do what is right for the communities we serve. ”

Springfield’s programs were terminated because several borrowers “did not understand how they would be paid back,” said Richard Ollis, a Springfield city councilor. “Some were caught that their escrow was not properly managed and therefore had a large account that they were not ready for. There was also some confusion in the collector’s office about how to properly collect the money for this. “

The city has resumed PACE commercial loans and is likely to consider renewing home loans, but with a different lender, PACE, Ollis said.

The credit industry has supported the tightening of supervision by the PACE. The Missouri Bankers Association, Heartland Credit Union Association and Missouri Realtors spoke on behalf of the latest bills.

Max Cook, president and chief operating officer of the Missouri Bankers Association, expressed concern that in some cases the outstanding mortgage debt plus the PACE loan was too high, sometimes exceeding market value. The proposed legislation would limit the PACE loan plus outstanding mortgage debt to no more than 80% of the property’s appraised value plus the cost of improvements made.

More troubling to lenders, Cook said, in the event of default, PACE lenders receive their money before mortgage holders. This is because county collectors process PACE payments as if they were taxed.

“This is a real problem not only for lenders but also for borrowers,” Cook said. “If traditional lenders in the mortgage business risk losing their first lien, they are unlikely to make these loans.”

He noted that federal mortgage lenders Freddie Mac as well as Fannie Mae do not authorize PACE loans other than their existing mortgages.

This is the third consecutive year that Missouri lawmakers are considering bills introducing more PACE lending rules. Owen of Renew Missouri said he expects some language to pass by the House. Senate members are less supportive, he said.


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