Controversial lending option discussed at council meeting

Controversial lending option  discussed at council meetingBy BRIAN COSNER

News Review Staff Writer

The Ridgecrest City Council fielded a roughly 90-minute discussion regarding the Property Assessed Clean Energy Program, a lending options that is currently available to Ridgecrest residents. The item was brought up for public discussion after the council received a letter from the Ridgecrest Area Association of Realtors to withdraw from the program because of “lack of oversight of the program and predatory lending practices.”

Since 2008 PACE has allowed California propertyowners to secure financing for energy-efficient property improvements with little upfront cost. Applicants who are unable to put money down on their projects can qualify for PACE loans, which are based on payment history instead of credit standing, making them an appealing option for solar-power upgrades, energy-efficient windows, or other improvements.

Rather than traditional monthly payments these debts are incurred on the property tax roll, a practice that local realtors say can leave homeowners struggling to sell their homes.

Additionally, the realtors reported that PACE lenders can generally mislead participants, specifically elderly customers, by misrepresenting actual costs.

“The Ridgecrest Area Associ-ation of Realtors supports energy conservation efforts,” said local realtor Clint Freeman. “PACE loans are a great idea. However, there are troubles with regulations surrounding the loans.”

Freeman reported that there was “essentially no financial oversight” for PACE loans and that the interest rates “border on usury.” Additionally loans can put consumers at risk by putting super liens on their homes – meaning that the PACE lender collects owed funds before any other liens on the property.

Realtors were well-represented at the meetings, and all who spoke voiced similar concerns and encouraged council to withdraw from the program.

Representatives of the local credit unions also approached the podium to express their concerns as lenders. Sandra Torrence of AltaOne Federal Credit Union reported that the super lien status of PACE loans can come into play after she’s already finalized a loan process with a client, landing them in a financing situation they can’t actually afford.

“We want to make sure that people get into their homes and stay in their homes,” said Torrence. She added that while it’s nice to have top-of-the-line efficient appliances and solar panel systems, “not everybody is qualified to manage that debt. This is where we got into trouble with the housing bubble years ago.”

Desert Valleys FCU President Eric Bruen also spoke in opposition to the PACE program. “You can’t reasonably expect a lender to be able to make a good loan when somebody else can come in and put a lien in front of it at any time with not notice.”

A handful of representatives from Renovate America were present as well to speak to the benefits of PACE loans.

“PACE was created as a legislative solution to help small businesses and homeowners to do energy renovations,” said Director of Market Development Dustin Reilich. “This is a private property owner’s right to do what they wish with their property.”

He reminded the public that nothing about PACE is mandatory; it is a voluntary financing option. “When homeowners need something this is just another option,” said Brian McCarty, an account manager for Renovate America. “PACE is a program where the amount of the loan doesn’t appear on their personal credit. People who hit economic downturns still need a heater. They still need air conditioning. This is a private property ownership right in my mind.”

Renovate America representatives reported that concerns regarding oversight and high interest rates have since been addressed through multiple recent legislative adjustments like AB 2693 (2016), SB 242 (2017), AB 1284 (2017) and the PACE Act of 2017.

But the legislative fixes wasn’t seen as a good omen by everyone. “The different legislative changes – why did those occur?” asked Bruen. “They occurred because you have financiers who are taking advantage of the system, so legislative process had to correct it.”

He said that PACE “had a lot of things right when it started” but that the program had too many liabilities for “bad apples to ruin the bushel.”

Councilmember Wallace Martin spoke approvingly of PACE loans.

“It’s just another tool in the tool chest for businesses and homeowners to consider when trying to find some way out from being battered by constantly increasing utility costs,” said Martin. He said PACE loans are a way for citizens to afford energy-efficient improvements while “being hit from every angle” by utility companies.

He also lauded new legislation that more heavily regulates the financing process.

But Martin seemed alone in his endorsement of the program.

“It disturbs me that people can get a $30,000 lien on their property without ever finding out if they even qualify for it,” said Councilmember Mike Mower.

“I’ve learned a lot tonight,” said Councilmember Eddie Thomas. “I’m not totally comfortable with the program as it was presented.”

Councilmember Lindsey Stephens recognized several of the concerns and added that private, for-profit business should be handled separately from government taxes.

“These loans are being put on public tax rolls, and that’s not done by any other entity,” she said. “I just don’t think these are programs we should be involved with.”

The item was on the agenda only for discussion. Mayor Peggy Breeden asked staff to come back to the next meeting with a resolution to withdraw from the program.

Pictured: Local realtors in attendance during council's discussion of PACE lending. -- Photo by Laura Austin

Story First Published: 2017-09-22