America's Fastest-Growing Loan Category Echoes Subprime Crisis

Property Assessed Clean Energy (PACE) loans, set up by local governments and designed to encourage homeowners to buy energy-efficient solar panels, window insulation, and air-conditioning units, are a growing corner of the lending industry, but they come with problems that eerily echo the subprime mortgage crisis. Contractors essentially function as loan brokers, but have scant training and oversight and often pitch PACE loans to help land jobs and earn referral fees from lenders. The loans are based on property values, not creditworthiness, but some borrowers don’t realize that the debt will be added to their property taxes.

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