Study: Homeowners paying off PACE energy upgrade loans
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Homeowners who take advantage of Property Assessed Clean Energy (PACE) financing are less likely to default on their loans than other borrowers, according to a study from credit rating agency DBRS.
The PACE program provides homeowners with financing to make improvements to their homes to increase the home’s energy efficiency. The loans can be structured through the homeowner’s property tax assessment and require that borrowers repay their loans as part of their property tax bill. In some states, the PACE liens are given super-priority status above the home's mortgage.
The DBRS study was the first comprehensive analysis of residential PACE (R-PACE) delinquency rates that combine data across multiple years and PACE providers. Using data on R-PACE assessments over four tax years, the analysis found lower delinquency rates compared to all properties and single-family homes in California.
DBRS rates R-PACE asset-backed securitization transactions. The agency remarked that their analysis of delinquency rates showed “strong performance with very low delinquency levels,” and “consistent performance and very low volatility across tax years.” The analysis highlights the following:
- The limited performance history shows strong performance with very low delinquency levels around 2 percent to 4 percent at the peak, declining to less than 1 percent within 12 months;
- PACE delinquency metrics are lower than general aggregate property tax and single-family residential only property tax delinquency levels. PACE also shows consistent performance and very low volatility across tax years; and
- Healthier performance relative to all residential taxpayers may reflect self-selection of PACE homeowners to improve their properties.
"This data provides further confirmation that R-PACE remains a consistent and reliable way for homeowners to fund energy efficiency, renewable energy and resiliency upgrades to their properties," said PACENation Executive Director David Gabrielson. “This report shows that PACE is a great option for homeowners who choose to make their homes more efficient, safer, and more comfortable – as over 180,000 homeowners already have.”
The DBRS report made use of data on R-PACE assessments from PACE providers Renew Financial and Renovate America, which comprised 81.3 percent of total ABS issuance over 2016 and 2017. Today, Renew Financially and Renovate America welcomed the report and reiterated the role of strong consumer protections.
“We’ve put consumer protections at the heart of our company since our founding. The very low delinquency rates in this report show that PACE financing is a great way to safely and effectively make important home improvements. And new consumer protections and oversight will only make PACE – already one of the most successful energy efficiency financing programs in history – even better for homeowners,” said Cisco DeVries, CEO of Renew Financial.
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