Clean energy loans have trapped black homeowners in debt. The legislator has just started to try to solve the problem. – ProPublica


Missouri officials have begun to review and are considering measures to curb programs that provide high-interest “clean energy” loans to state homeowners, after a ProPublica investigation found the programs weighed heavily. disproportionately on borrowers in predominantly black neighborhoods.

The Missouri Senate on Tuesday voted 31-1 on a bill requiring clean energy programs rated by residential property to be reviewed by the state’s Finance Division at least every two years. Currently, PACE programs are required to submit annual reports to the state, but ProPublica’s investigation found little oversight.

The Senate measure would also require PACE programs to provide residential borrowers with full information about the potential impact of their loan, including a notice that their home could be sold as part of a tax sale if they do not repay. not the loan. The proposal now returns to the House, which has already approved a version of the bill. The legislature is due to adjourn on May 28. House godfather Bruce DeGroot R-Chesterfield said the story of ProPublica “has opened a lot of eyes to what we’ve been saying from the start: this is a privacy bill. consumers.

Leaders in the City of St. Louis and County of St. Louis, meanwhile, were evaluating residential PACE loans in their communities, with the city deliberating on whether to extend a contract with the lender that executed its PACE program. and county planning. a public hearing to examine consumer protections in light of the issues identified by ProPublica.

PACE programs provide funding for energy efficient heating and air conditioning systems, solar panels, and other home improvements, and require borrowers to repay their loans with their property taxes. ProPublica has found that Missouri lenders charge high interest rates and enforce debts through liens, leaving many borrowers at risk of losing their homes in tax-forced sales. Loans have a median annual percentage rate of 10% and can extend for up to 20 years, charging some borrowers with interest and fees that sometimes exceed the cost of the project – and sometimes the value of their home.

PACE supporters say the program provides loans in predominantly black neighborhoods in Missouri, where banks typically don’t do much business. Lenders claim that their rates tend to be lower than some credit cards and payday lenders, other avenues of credit for low income borrowers.

ProPublica’s analysis found that more than 100 homes with PACE loans in metropolitan Kansas City and St. Louis were at risk of being sold at public auction after their owners lost at least two years of late payments . Of these, at least 29 were due to be auctioned this year.

ProPublica found that 28% of borrowers in predominantly black neighborhoods were at least a year late in repaying their PACE loans, compared to 4% in predominantly white areas. Borrowers in predominantly black neighborhoods also paid a larger share of their home’s value in interest and fees, sometimes more than what county appraisers said their home was worth.

Officials at Ygrene Energy Fund, the largest lender in the St. Louis market, and the Missouri Clean Energy District, or MCED, which operates primarily in the Kansas City area and outside St. Charles County. of St. Louis, took issue with ProPublica’s use of government estimates to compare with the amount of a loan. Instead, many lenders use private appraisers, whose valuations are often higher.

The Senate proposal would force PACE programs to base lending on local government assessments, which would drastically reduce the availability of PACE for owners of very low land value homes. This would avoid some of the imbalanced loan-to-value ratios highlighted by ProPublica.

David Pickerill, executive director of MCED, said the change “reduces the eligibility of many properties, especially in minority areas of metropolitan cities.” But he said the MCED felt the Senate proposal as a whole was “a clear ratification of the importance” of the 2010 law that created PACE.

Ygrene declined to comment on the legislation or the actions of local leaders in St. Louis and St. Louis County. But a company spokesperson defended the loan program. “What you lose in your reports is that PACE makes significant (or real) improvements to properties when a homeowner needs them most, like heaters in cold weather, air conditioning in sweltering summers and replacing the roof during the rain, ”spokesman Rob O’Donnell said in an email.

State oversight would mark a significant change for Missouri’s PACE residential program. ProPublica has found that weak oversight from local boards has allowed lenders and entrepreneurs to sometimes act in ways that are not in the best interests of borrowers, with little impact. Some borrowers have reported taking out PACE loans that they could not afford out of desperation. Others said they did not understand what they were signing or that they did not understand how the loans would affect their property taxes. Board members for programs that serve the St. Louis and Kansas City areas have said they allow lenders to manage operations.

After the ProPublica story, St. Louis County Executive Sam Page fired Jim Holtzman, chairman of the county PACE board and critic for Page. Holtzman, who continued to serve on PACE’s board after his term expired in 2019, told ProPublica he didn’t ask Ygrene many questions. He had said that it was not his “responsibility to seek out” information on overdue loans.

“I served on the Clean Energy Development Board for six years as chairman. I’m glad someone else is taking over at this point, ”Holtzman said Thursday.

PACE debt affected communities in St. Louis County Council’s First District around Ferguson, where about 40% of Ygrene borrowers were at least a year behind on their property taxes.

St. Louis County Council has scheduled a May 18 hearing to investigate its PACE program after Councilor Kelli Dunaway said in a letter to council chairperson Rita Heard Days that ProPublica’s findings were “disturbing And that the county government should not be in the business of ripping people off. “

April 26 letter from St. Louis County Councilor Kelli Dunaway to Council Chair Rita Heard Days.

The city of Saint-Louis – where one in three borrowers with a PACE loan are late in paying their property taxes – opened Ygrene’s contract to bid. A committee, which includes representatives from the mayor’s office, city comptroller and council of aldermen, as well as the PACE program, met on Tuesday to assess proposals from Ygrene and other bidders. The committee did not name the other bidders and excluded the public after a general discussion of the program. The committee later said it took no action following the closed-door discussion.

Across the state, Jackson County Executive Frank White Jr. vetoed a bill that would have allowed a second PACE program to operate across much of the Greater Toronto Area. Kansas City, saying it was troubled that ProPublica found “significant differences between how the program affects majority white and majority black areas” in the county. Despite a 9-0 vote to approve the bill, lawmakers refused to overturn White’s veto. Lawmakers have said they need to revisit the issue.

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