Ohio lawmakers will consider this far adding consumer protections to “clean energy” lending programs in a response to concerns that they can burden vulnerable homeowners.
Last year, a statewide clean-energy lending program stalled before making any loans. Republican lawmakers aim to add protections for consumers for any future program.
During State House committee hearings earlier this year, some proponents of the bill cited reporting by Pro-Publica as evidence that Ohio should closely regulate the lending. That reporting revealed that Residential Property Assessed Clean Energy (R-PACE) loans frequently leave low-income borrowers at risk of losing their homes.
House Bill (HB) 646, sponsored by Representatives Bill Roemer (R-Richfield) and Al Cutrona (R-Canfield), aims to pursue stricter rules for R-PACE if companies attempt to bring a statewide program to Ohio. A pilot R-PACE program offered by the Toledo-Lucas County Port Authority overseen by the Lucas County Land Bank is currently the only lending program in the state.
According to the Office of Energy Efficiency and Renewable Energy, homeowners use R-PACE loans to fund energy-efficient home improvement projects by adding the loans onto the borrower’s property tax bill. After which, the loans are paid through tax installments, which are added to a borrower’s escrow payments if they have a mortgage.
“R-PACE loans can lead to homeowners at risk of losing their homes to foreclosure due to the increases that will be incurred on their mortgage payments. It is clear that the risks associated in many of these loans do not justify the oftentimes needless energy-saving improvements they are used for. We hope to protect Ohio property owners from being unable to make increased property tax payments, or even lose their homes,” Cutrona said.
Missouri, California, and Florida are the only states with active statewide R-PACE programs. Last year, California-based Ygrene Energy Fund announced it would offer loans to homeowners in partnership with the Toledo-Lucas County Port Authority. Ygrene never started the program and has since halted all lending nationwide. Last month, the company agreed to settle a complaint by the federal government and the state of California that it harmed consumers with deceptive practices.
The complaint by the Federal Trade Commission and the California Department of Justice alleges the company deceived consumers about the potential financial impact of its financing and recorded liens on borrowers’ homes without their consent. To resolve the case, Ygrene agreed to provide monetary relief to some borrowers, end allegedly deceptive practices and meaningfully oversee the contractors who act as its sales force. A judge must approve the settlement.
If passed, Ohio’s bill would cap the annual interest rate on R-PACE loans at 8 percent and stop lenders from charging interest on fees. Lenders must affirm that a borrower can repay a loan by confirming that the borrower’s monthly debt does not exceed 43 percent of their monthly income and that they have enough income to meet basic living expenses.
The bill would also modify how R-PACE lenders secure their loans. In states where R-PACE has thrived in residential markets, R-PACE liens receive payment first if a home goes into foreclosure. And a homeowner can borrow without the consent of the bank holding the mortgage. Ohio’s bill would pay off R-PACE liens after the mortgage and any other liens on the property. In addition, the mortgage lender would have to agree to add an R-PACE
According to Cutrona, the laws governing R-PACE loans throughout the United States are uneven, thus leading to congress encouraging the Consumer Financial Protection Bureau to implement rules on R-PACE.
“Given this direction from congress, it would not be wise of any municipality to entertain adopting R-PACE programs without further rules being created, vetted, and tested. R-PACE loans are in need of serious regulation, and their negative consequences to be understood by Ohio consumers, especially by middle and middle-lower class homeowners,” Cutrona said.
Ygrene Energy Fund Representatives have said in opposition that if HB 646 passes legislatures would kill R-PACE before it even has a chance to get off the ground. They also argue that this legislation is not a consumer protection bill but rather a bank protection bill.
Roemer states that the legislation is “common-sense” and will protect Ohioans from unintended consequences.
“House Bill 646 is a common-sense attempt to protect vulnerable homeowners from risky and unstable financing practices. While we understand that these programs can help homeowners with clean energy improvements, we also have deep concerns that they may have unintended consequences that could put Ohioans in dire straits,” Roemer said.
The bill is under review by the Ohio House Civil Justice Committee. The legislative session ends on Dec. 31, leaving little time to pass the bill.
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Hannah Poling is a lead reporter at The Ohio Star and The Star News Network. Follow Hannah on Twitter @HannahPoling1. Email tips to [email protected].
Photo “Bill Roemer” by Bill Roemer. Photo “Al Cutrona” by Ohio House of Representatives. Background Photo “Ohio Statehouse” by Ɱ. CC BY-SA 4.0.
