Kathryn Meas was in a bind.
The air conditioner in her 672-square-foot home died in mid-spring, and she couldn’t afford a new one. Poor credit and a fixed income put a traditional loan out of reach.
Her air conditioning company proposed a solution, a new program that helped finance energy-saving home improvements. No money down. No monthly payments. The loan was all but assured. The first payment wasn’t due until the end of the year, the air conditioning salesman said.
Meas, 61, agreed to the deal by signing an electronic tablet. She wasn’t given any paperwork, and she didn’t know the loan amount or the interest rate. She didn’t understand at the time that her annual property taxes would spike from about $300 to $1,200.
The financial fallout eventually forced her to sell the home.
“I hate selling it,” she said. “I love it here.”
In the last three years, more than 4,000 Tampa Bay homeowners financed projects through Property Assessed Clean Energy programs. Known as PACE, the initiatives help homeowners afford energy-efficient upgrades, such as new air conditioners and rooftop solar panels.
But the private companies that administer the programs have saddled low-income residents with risky loans tied to their property tax bills, a Tampa Bay Times investigation found.
The Times created a database of many of the state’s PACE loans, analyzed thousands of official records and spoke with more than three dozen local homeowners, all of who expressed misgivings about the program.
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Many homeowners didn’t know their property taxes would skyrocket. Salespeople working for the contractors who perform the work emphasized the idea of no immediate payments — and downplayed the tax hit, homeowners said. One Brandon man’s annual tax bill jumped from $900 to $6,250.
Some PACE recipients risk losing their homes because they can’t pay the hefty loans and thousands of dollars in interest. Several properties in the Tampa Bay area are already slated for government auction.
The length of the loans will force some people to keep paying after the products stop working. The companies, for instance, write 15-year loans for new air conditioners, but they don’t always last that long.
PACE companies also granted loans to homeowners who were delinquent on their taxes, a violation of the program’s eligibility requirements.
The state provides little oversight of the companies that run the program. Consumers have so little recourse that one county tax collector created his own system to ensure homeowners understand what they are buying before it’s too late.
The companies financing the loans say the program works, and any problems are isolated or small in scale.
“Property owner benefits are numerous,” said Mike Lemyre, senior vice president of Ygrene Energy Fund, Florida’s largest PACE provider. “We got into this business to provide financing to make homes and communities more resilient and more efficient.”
The Florida Attorney General’s Office says it is investigating Ygrene’s lending practices but declined to provide further details. At least one Florida county has temporarily banned PACE loans, and Hillsborough County commissioners voted in August to stop the program.
Absent any changes, consumer advocates and some public officials worry about widespread consequences.
“Honestly, the program should be shut down,” said David Hiller, a lawyer who handled several PACE cases in California.
• • •
PACE programs began in California in 2008 as a way to help more residents — including those with lower incomes — make their homes energy efficient. They later expanded to upgrades that protect against natural disasters, such as hurricane-resistant windows.
Many states have PACE programs for businesses. But Florida, California and Missouri also allow homeowners to participate.
Qualifying for a traditional mortgage or car loan typically hinges on someone’s financial track record. The lender will look at credit scores, bank statements and incomes to ensure a borrower has the means to make monthly payments.
In Florida, PACE loans have no such requirements. Homeowners qualify based on the equity in their homes. They also must have paid property taxes on time for the previous three years.
There’s another major difference: PACE loans are a tax lien tied to the home, not the homeowner. That means either the loan gets paid off when the home is sold, or the new owner takes over the payments. Homeowners pay their PACE loans through their annual property tax bill.
While the programs are outlined in state law, they are run by third parties. Three firms have dominated the state’s residential PACE program: Ygrene, Renew Financial Group and Counterpointe Energy Solutions. Counterpointe said it is no longer issuing residential PACE loans, but instead is focusing on commercial financing.
The companies hire and vet the contractors who pitch the program and perform the work.
“PACE has lower interest rates and longer terms, resulting in lower monthly payments that make it more affordable,” said Lemyre of Ygrene, which passed $1 billion in Florida PACE projects this year.
Many of the homeowners the Times spoke to say they don’t have enough income to afford the bigger-than-expected loan payments. And too many of the contractors who perform the work target low-income, elderly and non-English speaking residents, who don’t understand how the program works, lawyers and consumer advocates told the Times.
Some of those same critics said the borrowers don’t get a break on prices, either. A few accused contractors of charging excessive amounts for solar panels and air conditioners.
Homeowners often sign the contracts on mobile devices or tablets, making it difficult to review the terms. And the ones who spoke with the Times complained that they didn’t always get an honest rundown of what they were signing.
• • •
Meas had meticulously hand stamped her living room wallpaper with small, deep-green maple leaves, the same color as her carpet. Two large impressionist paintings hung on opposite walls.
“I was going for Italian countryside,” she said, when a reporter visited.
Meas has multiple sclerosis. Her immune system attacks her nerve cells, and heat makes the symptoms significantly worse. When she contacted her air conditioning company in 2017, she had gone nearly a week without cool air.
Her husband died in 2004, and she retired from part-time work in a medical office in 2014. Social Security, disability benefits and $350 a month from a roommate barely covered the bills.
A PACE loan felt like her only solution.
The air conditioning salesman, she said, told her the program wouldn’t cost anything up front. She should put $70 a month aside to help pay for the increase in her annual taxes, he said. The application could be approved that day.
“It was made to seem like it was a real new thing that just came over from California,” Meas said.
Jeffrey Tavernaro, 46, recounted a similar sales pitch when the air conditioner at his Pasco home broke in June 2017. The PACE loan, his air conditioning salesman said, would come with no interest, and the first payment wouldn’t be due for a year. Tavernaro also would get a tax break for installing an energy-efficient appliance, he remembers the salesman saying.
The new air conditioner cost about $14,000. He’d only need to set aside $100 a month, he was told. All he had to do was sign the tablet.
But after about a year, when his property tax bill came due, his mortgage company told him he would need nearly twice as much to cover the loan. He also discovered that the loan wasn’t zero interest; it was 7.69 percent. He didn’t get a tax break for installing the air conditioner, either.
The program seemed to come with so many benefits, he said. “Then it turns out that’s pretty much as far from the truth as you can get.”
Tavernaro had the financial means to make the extra payments. Meas wasn’t so lucky — she couldn’t pay her full tax bill. A few months later, the Pasco County tax collector told her that she had two years to pay her delinquent taxes or her home would be auctioned. She decided to sell.
After paying off her mortgage, Meas used some of the remaining money to settle her tax bill. She also paid off the $5,000 PACE loan.
She now lives in an apartment, which doesn’t feel as much like home.
“They don’t let you paint the walls,” she said.
As it turns out, Meas wasn’t even eligible for the loan.
Under state law, homeowners can participate in PACE if they paid their taxes on time the previous three years. The requirement helps establish that homeowners can afford the loans as well as pay the rest of their annual property taxes.
But the Pasco County tax collector found 15 homeowners who got PACE loans despite recent tax delinquencies including Meas. Lenders also granted loans to four homeowners without filing a required disclosure form with the tax collector’s office. One homeowner was behind on taxes and did not have a disclosure form on file.
Mike Fasano, the Pasco tax collector, was so dismayed with how the companies ignored the requirement that he said he would no longer collect money for those loans. The homeowners won’t have to make any more payments, Fasano said, unless the PACE companies push back.
• • •
PACE loans should not exceed 20 percent of a home’s value, consumer advocates told the Times. Even with low interest rates, big loans can be burdensome, and understanding the cost of a PACE loan can be confusing, they said. Salespeople typically give verbal estimates for monthly payments — despite the bill being paid annually.
A salesman told Charles Hannor that a PACE loan could solve his problem. His 35-year-old Brandon home had leaky windows and doors. Hannor, 68, discovered later that he had taken out two loans, not one. He said he wasn’t told the amount for either loan, or the interest rates.
A little over six months later, he found out that his property taxes would rise from $900 a year to more than $6,250 — a seven-fold increase. Public records show that his loans total more than an estimated $45,000 — about 26 percent of his home’s value.
The Times identified 40 homeowners in Hillsborough County who had two or more PACE loans on a single property. One homeowner had three loans, all from different companies, amounting to roughly 30 percent of the home’s value.
Alice Vickers, former director of the Florida Alliance for Consumer Protection, emphasized that even payday lenders must enter loans into a database so they don’t give more than one to a customer. The state’s PACE law has no similar requirement.
“It’s just creating an opportunity to prey on these consumers,” Vickers said.
• • •
PACE programs ran into similar problems in other locations.
In California, companies wrote about $300 million in PACE loans in 2014. Two years later, the number jumped to nearly $1.6 billion, according to the state treasurer’s office. With the growth came a torrent of complaints — confused consumers, deceptive sales pitches, unaffordable payments.
In 2018, California passed sweeping consumer protections. The changes made it mandatory for PACE lenders to check that a person could repay the loan and required the companies to disclose the financing terms in more detail, similar to home mortgages.
Since then, PACE loans plunged by more than half.
“It was predatory before,” said Hiller, the California lawyer. “It still is predatory, but it’s put somewhat of a check on it.”
In Florida, about 30 counties have a residential PACE program, including Pasco County. Pinellas County only participates in the commercial version. Pinellas commissioners considered opening it to homeowners in December 2018. But they tabled the idea, citing several concerns, including that companies didn’t check whether homeowners could repay the loans.
Last year, the Naples Daily News detailed how PACE companies in Collier County dogged Habitat for Humanity residents with sales calls and gave them loans they couldn’t afford.
Two months later, Elena Mola, a lawyer who lives in Naples and works in Washington, D.C., raised concerns about contractors taking advantage of low-income and non-English-speaking homeowners. At a Collier County Commission meeting, Mola presented research she said showed contractors who do the repair work charged significantly inflated prices for air conditioners and solar panels.
At the meeting, four representatives from PACE lender Ygrene, pushed back, saying any problems were isolated and that customer service was a top priority.
Unconvinced, the Collier County Commission banned the residential PACE program.
Hernando County stopped the program in May. And in August, Hillsborough County commissioners barred it, too. Commissioner Sandy Murman said the program “preyed upon” consumers.
• • •
One Thursday morning earlier this year, a group of Realtors gathered in Tampa for a meeting called “The Good, the Bad, and the Ugly of the Florida PACE program.”
The training session began quietly. But murmurs gave way to a flurry of questions as attendees learned how PACE loans can complicate buying and selling homes. Who pays off the loan when the home sells? How do buyers know if a home includes a PACE loan? Could sellers or their brokers be liable for failing to disclose a loan?
The loans can take months, even up to a year, to appear in tax records. That means some residents, the Realtors learned, might unknowingly buy homes that include PACE loans.
That’s what happened to a woman who bought a $150,000 home in Pasco County. The previous owner had taken out a PACE loan in the fall of 2019 to pay for an air conditioner. The tax lien hadn’t posted to the tax collector’s website at the time of the sale.
A few months later, the woman called Fasano’s office for an explanation of an extra charge on her annual taxes. The charge, she discovered, was the annual payment toward a $20,000 loan for the air conditioner.
“That’s why we encourage you as Realtors to ask the simple question of the seller: Is there a PACE loan?” said Fasano, who led the meeting.
And there’s another factor: Under state law, PACE lenders are first in line to be paid if a home goes into foreclosure. They leapfrog banks and other lenders who issue mortgages.
For that reason, Fannie Mae and Freddie Mac said in 2010 that they would stop backing mortgages on homes that had PACE loans. The financing giants hold about one-third of the country’s $16 trillion in mortgage debt. In 2017, the U.S. Department of Housing and Urban Development announced that homes with PACE loans would not be eligible for financing through the Federal Housing Authority. That can make it hard for homeowners to refinance, too.
Robert Salinas Jr., 71, said his PACE salesman didn’t tell him that. Salinas felt misled into signing a $13,225 loan to replace the central air conditioner on his 1,173-square-foot Brandon home. He’d like to refinance to free up cash to pay down the PACE loan faster. Otherwise, he’ll be 85 years old when the loan payments end.
“If you have a choice, take a traditional loan,” he said.
• • •
Homeowners dissatisfied with PACE loans have little recourse. No government agency in Florida oversees the program, so complaints often end up with the companies that provide the financing. Tax collectors and other local government agencies also field complaints, but they have little or no investigative power.
Homeowners can go to court, but they are often limited to suing contractors over shoddy or incomplete work. Proving they were misled into signing a contract is much harder.
There is no central repository for customer data in Florida, so would-be regulators cannot easily see whether someone has more than one loan, has a particularly high interest rate or whether a company is unfairly targeting a low-income neighborhood.
Tax collectors can see whether someone has more than one PACE loan. But even they don’t know the total amount of someone’s loan unless they specifically require the PACE companies to have contractors fill out a special form.
A bill proposed in the most recent Florida legislative session would have required verification that a homeowner could afford the loan. The bill died without a full vote of the House or Senate. The Consumer Financial Protection Bureau announced last year it was considering implementing similar consumer protections on the loans nationwide, but the rules have not been formalized.
Frustrated with a lack of consumer protections, Fasano set up his own safeguards in Pasco County. His office requires that the homeowner and the contractor sign a consumer protection form that outlines the loan in plain language. Samantha Bisconti, a customer advocate in Fasano’s office, then calls homeowners to ensure they understand what they are buying, how much it costs and that they often have three days to back out.
Linda Neary, 72, wanted to reduce her energy costs at her Port Richey home. Solar panels seemed like the right solution, she said. A salesman left the impression that the loan was for about $1,200 to be paid over a year, she said.
“I thought, ‘Well I guess I could scrape that up,’” she said, and signed the contract.
Bisconti called the next day. The loan, she explained, was for $25,800 paid over 30 years. With interest, Neary would have paid more than $50,000. Her yearly tax bill would have jumped from about $700 to just under $2,400.
Neary, who was within her three-day window, opted out.
• • •
PACE lenders argue that the program helps homeowners afford energy-efficient upgrades, particularly because there isn’t any money required up front.
The long loan terms — typically 10 to 20 years — are a boon to consumers, said Lemyre, the Ygrene executive. The length allows for more affordable payments. And the interest rates, which can go up to about 9 percent, can be lower than the rates consumers would get through other financing.
“Unlike banks, the ultimate goal of these programs is not to earn interest for their shareholders,” Ygrene’s website said. “Rather, PACE options are implemented to help more people afford upgrades that will make their homes more efficient and more resilient.”
Two days before the Times published this article, Renew sent a release about the results of a survey of its Florida PACE customers. It found they were highly satisfied with the program, and that Renew scored higher in customer satisfaction than “beloved consumer brands" like investment company Vanguard and luxury department store chain Nordstrom.
“As a company, we’ve been fortunate enough to help Floridians through hard times, including hurricanes Irma, Michael and Dorian,” Renew CEO Mark Floyd said in the release. "Even now, I’m heartened to see that we’re helping Floridians get through the COVID-19 crisis by not only providing access to the financing they need to make their homes safer, healthier and more comfortable, but also by treating them well along the way.”
Counterpointe declined to provide a response for this story for several months following two certified letters and several emails and calls. On Wednesday, a spokesman called and said the firm decided to stop issuing residential loans last year and instead will focus on commercial lending.
PACE companies also tout the low number of complaints. Renew Financial said in an earlier statement that more than 99 percent of its complaints aren’t about financing agreements, and most are resolved within 30 days. The company reported 440 complaints since the program launched, according to an agenda for a September meeting. The complaints, it said, most often centered around the quality of the work or how quickly it was done.
As for Ygrene, less than 1 percent of complaints focused on financing, Leymre said. He attributed the low rate to an enhanced disclosure process the company put in place.
“We provide the fastest service while still completing all of the requirements for the program,” he said.
Lemyre told the Times that he wasn’t aware that the state attorney general’s office was investigating his company.
“We are confident that in working with the (Florida Attorney General’s Office) it will show Ygrene’s steadfast commitment to our customers and effectiveness of our consumer protections,” he said in a later statement.
• • •
A small but growing number of PACE customers have fallen behind on their property tax bills. In Florida, homeowners have two years to pay delinquent taxes. After that, homes can be sold to the highest bidder.
In Hillsborough, five PACE customers failed to pay their taxes in 2017. A year later, the number grew to 27, topping out at 32 in 2019, the most recent data available.
In Pasco, 17 fell behind in 2017. Another 48 joined them in 2018, followed by 69 in 2019. Pasco County has seven homes with PACE loans slated for auction later this year. None were scheduled in Hillsborough.
But those are just the struggling homeowners who are easy to spot in public records.
In some cases, banks that hold mortgages on PACE homes step in and pay the delinquent taxes. The intervention protects the homes from falling into foreclosure, where the banks risk losing some or all of the unpaid portion of the mortgages. In California, the problem grew to the point that the state set up a $10 million reserve fund in 2013 that would cover banks in the event they lost a PACE property to foreclosure.
The number of times banks have paid PACE assessments is difficult to track in public records.
Fasano warned: “This will be Florida’s next mortgage crisis if we’re not careful.”
Times staffer John Martin and former Times news researcher Caryn Baird contributed to this report. The lead photo was taken by Times photographer Luis Santana.
Got a PACE tip?
If you have a tip about PACE or want to share your experience with the program, please contact Tampa Bay Times reporter Malena Carollo at firstname.lastname@example.org or (727) 892-2249.