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Financial Services Law Insights and Observations

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  • CFPB seeks comments on PACE financing

    Agency Rule-Making & Guidance

    On March 4, the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) on Property Assessed Clean Energy (PACE) financing, which often takes the form of loans to facilitate residential solar energy and other home improvement projects. The ANPR was issued in response to Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended TILA to mandate the CFPB propose regulations related to PACE financing. Specifically, the regulations are required to carry out the purposes of TILA’s ability-to-repay requirements and apply TILA’s general civil liability provisions for violations, accounting for the “unique nature” of the transaction. In addition to seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA, the ANPR also requests commenters (i) provide samples of any written materials used in PACE financing transactions; (ii) describe the current standards and practices in PACE financing origination, including application information obtained and underwriting standards used; and (iii) identify parties in a PACE financing transaction to whom civil liabilities may apply, including information related to any rescission rights and loss mitigation programs available upon borrower default. Comments must be submitted within 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance CFPB PACE Programs ANPR Federal Register TILA EGRRCPA

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  • CFPB publishes fall 2018 rulemaking agenda

    Agency Rule-Making & Guidance

    On October 17, the Office of Information and Regulatory Affairs released the CFPB’s fall 2018 rulemaking agenda. According to the Bureau’s preamble, the information presented is current as of August 30 and represents regulatory matters it “reasonably anticipates” having under consideration during the period of October 1, 2018, to September 30, 2019. The Bureau also states it plans on “reexamining the requirements of [ECOA] in light of recent Supreme Court case law and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.”

    Key rulemaking initiatives include:

    • Property Assessed Clean Energy Loans (PACE): The Bureau is planning to complete an assessment of its 2013 rules for assessing consumers’ ability to repay mortgage loans by January 2019, which will inform the drafting of a request for information or advance notice of proposed rulemaking (ANPR) on PACE issues to facilitate the Bureau’s rulemaking process.
    • HMDA/Regulation C: The Bureau plans to follow-up on its action in August 2017 to amend Regulation C to increase the threshold for collecting and reporting data with respect to open-end lines of credit for a period of two years so that financial institutions originating fewer than 500 open-end lines of credit in either of the preceding two years would not be required to begin collecting such data until January 1, 2020. 
    • Debt Collection: The Bureau states it plans to issue an ANPR addressing issues such as communication practices and consumer disclosures by March 2019, and has received support from industry and consumer groups to engage in rulemaking to explore ways to apply the FDCPA to modern collection practices.
    • Small Dollar Lending: The Bureau anticipates it will issue a proposed rule on small dollar lending in January 2019.
    • Payday Rule: The Bureau estimates it will issue an ANPR in January 2019 to reconsider the merits and compliance date for its final payday/vehicle title/high-cost installment loan rule. 
    • FCRA: Comments must be submitted by November 19 on the changes and underlying disclosures implemented by its interim final rule, which amended certain model forms under the FCRA and took effect September 21. (See previous InfoBytes coverage on the interim final rule here.)

    Long term priorities now include rulemaking addressing (i) small business lending data collection; (ii) consumer reporting; (iii) amendments to FIRREA concerning automated valuation models; (iii) consumer access to financial records; (iv) rules to implement the the Economic Growth, Regulatory Relief, and Consumer Protection Act, concerning various mortgage requirements, student lending, and consumer reporting; and (v) clarity for the definition of abusive acts and practices.

    Agency Rule-Making & Guidance CFPB Rulemaking Agenda HMDA Debt Collection Small Dollar Lending Payday Lending FCRA UDAAP PACE Programs EGRRCPA

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  • FHA Will Stop Insuring Mortgages With Pace Loans

    Federal Issues

    In ML 2017-18, FHA announced that it will no longer insure mortgages encumbered by Property Assessed Clean Energy (PACE) obligations due to their superior lien status. The December 7 letter is a reversal of the policies outlined in ML 2016-11, which allowed for, in certain circumstances, the continued payment obligation to PACE on foreclosed FHA-insured properties. The new guidance is effective 30 days after issuance of the letter. 

    Federal Issues FHA Mortgages PACE Programs

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  • Trade Organizations Express Opinions on Proposed Legislation Regarding PACE Financings

    Federal Issues

    On April 24, various trade associations submitted a joint letter to U.S. Representatives Brad Sherman (D-CA) and Edward Royce (R-CA) expressing their opinions on the legislators’ recently-introduced bill, the Protecting Americans from Credit Entanglements (PACE) Act of 2017 (H.R.1958). The PACE Act of 2017 would, among other things, require specific consumer disclosures for Property Assessed Clean Energy (PACE) financings—a financial product that allows homeowners to pay for energy-efficient retrofitting (such as solar panels and high-efficiency air conditioners) through their property tax assessments. More than 30 states currently have PACE programs. The proposed legislation and its companion bill, S. 838, introduced by Sen. Tom Cotton (R-AR) in the Senate, would subject PACE financing originators and sales personnel to TILA requirements.

    Federal Issues Congress Lending PACE Programs TILA

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  • Dept. of Energy Releases Updated PACE Loan Guidelines

    State Issues

    On November 18, the Department of Energy released new best practices guidelines for residential Property-Assessed Clean Energy (PACE) mortgages, which provide homeowners a way to finance energy-efficient home improvements through property tax assessments. The new guidelines are intended to help state and local governments as they expand their PACE programs, and address the various problems that have emerged in the market since the PACE framework was first established in 2009. Among other things, the guidelines suggest that PACE programs confirm property owners’ ability to repay their assessments, and that state and local governments work with program administrators to establish underwriting guidelines and criteria for PACE programs.

    State Issues Mortgages Mortgage Servicing PACE Programs

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