Morningstar Dismissed Misconceptions, Yet U.S. Senator Tom Cotton and Others Take Up the Cause of the Mortgage Bankers and Real Estate Lobbies
Over the years, Checks and Balances Project has investigated special interest lobbies, often aligned with government officials, working to preserve and grow powerful, incumbent industries and block the growth of energy efficiency and renewable energy.
Recent stories in the media have caused us to take a closer look at what appears to be a coordinated attack on Property Assessed Clean Energy. Commonly known as PACE, this increasingly popular way to finance residential and commercial energy efficiency and renewable energy, as well as hurricane-mitigation and other improvements, is done through property tax assessments.
Today, more than 30 states across the country have enacted PACE legislation and 19 states plus D.C. have active programs. In California alone, PACE has helped to add 28,500 jobs. But a review of recent reporting indicates that a disinformation campaign is ramping up, apparently sponsored by the mortgage bankers and realtors’ lobbies, that claims PACE financing is a sub-prime mortgage-type of disaster coming soon.
Prominent names have recently joined this campaign. Last month, Senator Tom Cotton (R-AR) introduced legislation to require local PACE programs to follow the same regulations and disclosures as banks and mortgage lenders.
PACE Isn’t a Mortgage
The only problem is that a PACE assessment isn’t a mortgage and local governments aren’t bankers. PACE financing is a public-private partnership that enables local governments to create jobs in the community and lower greenhouse gas emissions, while also giving homeowners another financing option to make their homes more efficient and secure.
Most PACE programs use 100% private capital so these benefits come at no cost to taxpayers. PACE works by enabling homeowners to finance the full cost of a qualifying home improvement based on the equity in their home and other factors, and then repay the financing as part of their property taxes. The local government collects the payments and passes them along to the private capital provider. Repayment terms as long as 30 years and single-digit financing rates make PACE an attractive alternative to shorter term and often more expensive revolving credit lines or home improvement loans offered by banks and credit unions.
That appears to be why the Mortgage Bankers Association (MBA) and their allies are mounting their campaign. They view PACE as a direct threat to their market share.
A Beneficial Program
Morningstar — the respected source for many financial websites and publications, including Barron’s — issued a definitive research report in February that directly refutes the misconceptions that Senator Cotton, MBA and others continue to flog.
But that hasn’t stopped the MBA, Senator Cotton and others. Because PACE tax assessments are transferrable when a property owner sells a property, the National Association of Realtors and its local affiliates view a residence with a PACE assessment as an impediment to a quick sale and commission check.
Encouraging homeowners to make their dwellings more energy efficient and install renewable energy to reduce their carbon footprints is an important element in building a more sustainable economy. We believe the apparent disinformation campaign to undermine PACE is a critical issue that deserves to be examined.
Scott Peterson is executive director of Checks and Balances Project, a national watchdog blog that seeks to hold government officials, lobbyists and corporate management accountable to the public. Funding for C&BP comes from sustainable economy philanthropies and donors.