Department News GOVERNMENTAL RELATIONS
Ygrene Residential PACE Exits Missouri By Emily Lewis, Vice President of Legislative and Advocacy Programming
Ygrene Energy Fund, one of the nation’s largest residential “clean energy” lenders, has suspended making new loans to homeowners in Missouri, citing a new state law that improved oversight and consumer protections.
In 2021, MBA prioritized legislation that placed guardrails on residential property assessed clean energy (R-PACE) lending. House Bill 697, sponsored by Sen. Sandy Crawford, R-Buffalo, and Rep. Bruce DeGroot, R-Chesterfield, was approved by the General Assembly, signed by the governor and took effect Jan. 1, 2022.
R-PACE is a financing product that allows homeowners to borrow against the equity in their property for supposedly energy-efficient home improvements and repay the loan as a special assessment on their annual property tax bill. Items like new windows, insulation and HVAC units are eligible. If borrowers default on their loan, they risk losing their homes because the assessment takes first lien position, just like property taxes. Te product is oſten sold on doorsteps by home-improvement contractors, and borrowers have stated they did not understand the terms or risks when signing up. We recognize the need for financing options for necessary home improvements, as well as the benefit of choosing more energy-efficient products, but R-PACE puts borrowers and banks that hold home mortgages in jeopardy.
Te new law reins in R-PACE lenders and provides much- needed consumer protections and state and local oversight. Most important, the bill requires home valuations to be based on the local government’s assessment, not a third-party estimate that could be manipulated to justify a more expensive or unnecessary project. Te combined loan-to-value ratio is capped at 97%, and the total project cost cannot exceed 20% of the property value, ensuring the homeowner retains some equity.
House Bill 697 has shined a light on this flawed program. Tanks to these new requirements, it is more difficult for R-PACE lenders to contract with homeowners who cannot repay these loans. Te pool of potential borrowers has shrunk to the point that Ygrene announced it is not currently making new residential loans in Missouri. Ygrene has not exited the national R-PACE market and other providers still operate in the state, but this is a big step in the right direction. We look forward to seeing more positive outcomes because of this legislation.
Tis is a victory for our members but also for our neighbors at risk for predatory lending practices.
House Bill 697 does not impact commercial PACE transactions.
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Send achievements, news and announcements to Lori Bruce, MBA communications director, at
lbruce@mobankers.com for posssible inclusion in The Missouri Banker.
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