Ratings Agency Report: PACE Loans Rarely Go Into Default

A new analysis from the credit rating agency DBRS shows that homeowners who participate in the PACE (Property Assessed Clean Energy) program rarely default.

California, one of the few states where the residential PACE program has been embraced, the PACE delinquency rate "is exceptionally low" 22 months after origination the analysis found. 

DBRS evaluated the performance of PACE loans for the 2013-14 through 2016-17 tax years and found that the PACE delinquency rate peaked at a range of 2 percent to 4 percent one month after the first installment payment was past due. That level falls to under 1 percent within 12 months the study said. 

“This suggests that PACE delinquencies are consistently and quickly resolved within 12 to 18 months following the first installment being past due,” DBRS reported.

PACE loans are a new type of financing for energy-efficiency improvements and pay for them over a period over terms of up to 25 years. PACE loans are only available in areas like California where the taxing authority has passed laws allowing it. PACE loans are attached to the home's tax assessment and are more common for commercial properties. Resident PACE loans were first made available in California in 2009. 

Renovate America, the nation's biggest provided of PACE loans, said they welcomed the new analysis. The company offers communities HERO financing which has been used by the owners of over 114,000 homes to make energy and efficiency improvements. 

Photo: Getty Images

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