July 26 comment date set on bureau’s PACE loan ability-to-repay proposal

A proposal to prescribe ability-to-repay rules for Property Assessed Clean Energy (PACE) financing, with Truth-in-Lending Act (TILA) civil liability provisions applicable for violations, is out for comment until July 26, according to a consumer bureau notice in Thursday’s Federal Register.

The proposed rule, the Consumer Financial Protection Bureau (CFPB) said, would bring its TILA-implementing Regulation Z into conformance with section 307 of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) with respect to the treatment of PACE financing, which is financing to cover the costs of home improvements that results in a tax assessment on the consumer’s real property.

The bureau said its proposal would implement section 307 of the statute and revise Reg Z “to address how TILA applies to PACE transactions to account for the unique nature of PACE.”

The proposed rule would, among other things:

  • Clarify an existing exclusion to Reg Z’s definition of credit that relates to tax liens and tax assessments. Specifically, the CFPB is proposing to clarify that the commentary’s exclusion to “credit,” as defined in section 1026.2(a)(14), for tax liens and tax assessments applies only to involuntary tax liens and involuntary tax assessments.
  • Make a number of adjustments to the requirements for loan estimates and closing disclosures under sections 1026.37 and 1026.38 that would apply when those disclosures are provided for PACE transactions, including:
    • eliminating certain fields relating to escrow account information;
    • requiring the PACE transaction and other property tax payment obligations to be identified as separate components of estimated taxes, insurance, and assessments;
    • clarifying certain implications of the PACE transaction on the property taxes;
    • requiring disclosure of identifying information for the PACE company;
    • requiring various qualitative disclosures for PACE transactions that would replace disclosures on the current forms, including disclosures relating to assumption, late payment, servicing, partial payment policy, and the consumer’s liability after foreclosure; and
    • clarifying how unit-periods would be disclosed for PACE transactions.

See the notice for more details.

Reg lookup: Residential Property Assessed Clean Energy Financing (Regulation Z)