On December 17, the CFPB finalized a rule concerning Property Assessed Clean Energy (PACE) financing. The final rule integrated existing residential mortgage protections to PACE loans, providing TILA and RESPA disclosure requirements in connection with PACE loans. As previously covered by InfoBytes, in addition to clarifying the application of existing laws providing residential mortgage protections to PACE loans, the final rule mandated that creditors consider pre-existing PACE transactions as mortgage-related obligations when originating new mortgage loans. The rule implemented Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which directed the CFPB to establish ability-to-repay rules for PACE financing and apply the civil liability provisions of TILA for violations related to PACE financing.

The CFPB noted commenters expressed various views in response to its proposed rule, with some consumer groups supporting the rule as providing transparency for consumers considering PACE financing, while other stakeholders and commenters expressed concerns about the rule’s potential impact on the availability of PACE financing, which may limit the availability of low-cost financing for consumers.

After considering comments, the Bureau’s final rule will allow creditors to substitute the name of a specific PACE financing program that is recognizable to the consumer instead of using the term “PACE” on loan documents, as long as the name of the specific PACE financing program is used consistently in financing documents and marketing materials related to the PACE transaction.

The CFPB also decided to apply the existing ability-to-repay framework for mortgage credit to PACE financing, noting that this is consistent with the directive of EGRRCPA Section 307 and provides sufficient operational flexibility while ensuring adequate consumer protection. In response to industry comments, the final rule included adjustments to the commentary and introduced a new section to accommodate the “unique nature” of PACE financing, including “requiring PACE creditors to consider certain monthly payments that they know or have reason to know the consumer will have to pay into the consumer’s escrow account as an additional factor when making a repayment ability determination for PACE transactions extended to consumers who pay their property taxes through an escrow account on their existing mortgage.” Additionally, the CFPB clarified that the exclusion of tax liens and assessments from the definition of credit under TILA applies only to involuntary ones, not to voluntary ones like PACE transactions.

The final rule will go into effect on March 1, 2026.