Advance Notice of Proposed Rulemaking on Residential Property Assessed Clean Energy Financing, 8479-8482 [2019-04177]

Download as PDF Federal Register / Vol. 84, No. 46 / Friday, March 8, 2019 / Proposed Rules licensed or otherwise legally able to practice in a State; * * * * * ■ 5. Section 161.2 is amended as follows: ■ a. By revising the section heading; ■ b. In paragraph (a) by removing the words ‘‘new State’’ each time they occur and adding the words ‘‘additional State’’ in their place and by removing the words ‘‘Veterinarian-in-Charge’’ each time they occur and adding the words ‘‘Program official’’ in their place; ■ c. By revising paragraph (b); and ■ d. In paragraph (c) by removing the words ‘‘new State’’ and adding the words ‘‘additional State’’ in their place. The revisions read as follows: § 161.2 Performance of accredited duties in additional States. * * * * * (b) An accredited veterinarian may not perform accredited duties in a State in which the accredited veterinarian is not licensed or in possession of a document from the State’s veterinary licensing authority indicating that he or she is legally able to practice veterinary medicine in that State without a license. * * * * * § 161.4 [Amended] 6. Section 161.4 is amended by removing the words ‘‘Veterinarian-inCharge’’ each time they occur and adding the words ‘‘Program official’’ in their place. ■ § 161.6 [Amended] 7. Section 161.6 is amended by removing the words ‘‘Veterinarian-inCharge’’ each time they occur and adding the words ‘‘Program official’’ in their place. ■ § 161.7 [Amended] 8. In § 161.7 paragraph (a) is amended by removing the words ‘‘B, C, and D’’ and adding the words ‘‘B, C, D, and G’’ in their place. ■ PART 162—RULES OF PRACTICE GOVERNING REVOCATION OR SUSPENSION OF VETERINARIANS’ ACCREDITATION 9. The authority citation for part 162 continues to read as follows: ■ Authority: 7 U.S.C. 8301–8317; 15 U.S.C. 1828; 7 CFR 2.22, 2.80, and 371.4. Subpart B [Amended] 10. Subpart B is amended by removing the words ‘‘Veterinarian-inCharge’’ each time they occur and adding the words ‘‘Program official’’ in their place. ■ VerDate Sep<11>2014 16:08 Mar 07, 2019 Jkt 247001 Done in Washington, DC, this 4th day of March 2019. Kevin Shea, Administrator, Animal and Plant Health Inspection Service. [FR Doc. 2019–04166 Filed 3–7–19; 8:45 am] BILLING CODE 3410–34–P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 [Docket No. CFPB–2019–0011] RIN 3170–AA84 Advance Notice of Proposed Rulemaking on Residential Property Assessed Clean Energy Financing Bureau of Consumer Financial Protection. ACTION: Advance notice of proposed rulemaking. AGENCY: The Bureau of Consumer Financial Protection (Bureau) is issuing this Advance Notice of Proposed Rulemaking (ANPR) to solicit information relating to residential Property Assessed Clean Energy (PACE) financing. The Bureau will consider the information it receives in response to this ANPR in implementing section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). In relevant part, EGRRCPA section 307 amends the Truth in Lending Act (TILA) to mandate that the Bureau prescribe certain regulations relating to PACE financing. Specifically, the regulations must carry out the purposes of TILA’s ability-to-repay (ATR) requirements, currently in place for residential mortgage loans, with respect to PACE financing, and apply TILA’s general civil liability provision for violations of the ATR requirements the Bureau will prescribe for PACE financing. The regulations must ‘‘account for the unique nature’’ of PACE financing. This ANPR solicits information to better understand the PACE financing market and the unique nature of PACE financing. DATES: Comments must be received by May 7, 2019. ADDRESSES: You may submit responsive information and other comments, identified by Docket No. CFPB–2019– 0011, by any of the following methods: • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Email: PACEFinancingANPR@ cfpb.gov. Include Docket No. CFPB– 2019–0011 in the subject line of the message. SUMMARY: PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 8479 • Mail: Comment Intake, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. • Hand Delivery/Courier: Comment Intake, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. Instructions: When responding to a particular question, please note the question number at the top of the response. Also, where applicable, please note whether any information provided is relevant to a PACE financing program that is specific to a particular jurisdiction or administrator. You are not required to answer all questions to receive consideration of your comments. The Bureau encourages the early submission of comments. All submissions must include the document title and docket number. Because paper mail in the Washington, DC area and at the Bureau is subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW, Washington, DC 20552, on official business days between the hours of 10:00 a.m. and 5:00 p.m. eastern standard time. You can make an appointment to inspect the documents by telephoning 202–435–7275. All submissions, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Submissions will not be edited to remove any identifying or contact information. FOR FURTHER INFORMATION CONTACT: Rachel Ross, Attorney-Advisor; Joel Singerman, Counsel; or Nora Rigby, Senior Counsel; at (202)–435–7700. If you require this document in alternative electronic format, please contact CFPB_ Accessibility.cfpb.gov. SUPPLEMENTARY INFORMATION: The Bureau is issuing this ANPR to solicit information relating to residential PACE financing.1 The Bureau will consider the information it receives in implementing EGRRCPA section 307, which was enacted by Congress on May 1 Although some jurisdictions may make PACE financing available for commercial projects, this ANPR solicits information relating only to residential PACE financing, in accord with EGRRCPA section 307, which defines PACE financing as available for home improvements. The Bureau is not soliciting information about commercial PACE financing. E:\FR\FM\08MRP1.SGM 08MRP1 8480 Federal Register / Vol. 84, No. 46 / Friday, March 8, 2019 / Proposed Rules 22, 2018, and signed into law on May 24, 2018.2 As defined in EGRRCPA, PACE financing is ‘‘financing to cover the costs of home improvements that results in a tax assessment on the real property of the consumer.’’ 3 Section 307 amends TILA to direct regulatory action on PACE financing. It provides in relevant part that the Bureau shall prescribe regulations that (1) carry out the purposes of TILA section 129C(a), and (2) apply TILA section 130 with respect to violations under TILA section 129C(a) with respect to PACE financing, which shall account for the unique nature of PACE financing.4 This provision directs the Bureau to prescribe regulations that achieve two objectives and account for the unique nature of PACE financing. As to the first objective, the regulations must ‘‘carry out the purposes of’’ TILA’s existing ATR requirements. In general, the existing ATR requirements prohibit creditors from making a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan according to its terms, and all applicable taxes, insurance, and assessments.5 In making that determination, a creditor is required to consider specific factors about the consumer’s finances, including, for example, the consumer’s income, assets, and debt obligations, and to verify the income or asset amounts it relied upon to determine the consumer’s repayment ability.6 TILA states that the purpose of the ATR requirements is ‘‘to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive, or abusive.’’ 7 As to the second objective, the regulations implementing EGRRCPA section 307 must apply TILA’s general civil liability provision for violations of Public Law 115–174, 132 Stat. 1296 (2018). EGRRCPA section 307, amending TILA section 129C(b)(3)(C)(i), 15 U.S.C. 1639c(b)(3)(C)(i). 4 EGRRCPA section 307, amending TILA section 129C(b)(3)(C)(ii), 15 U.S.C. 1639c(b)(3)(C)(ii). EGRRCPA section 307 also includes amendments authorizing the Bureau to ‘‘collect such information and data that the Bureau determines is necessary’’ in prescribing the regulations and requiring the Bureau to ‘‘consult with State and local governments and bond-issuing authorities.’’ 5 The ATR requirements are set forth in TILA section 129C(a), 15 U.S.C. 1639c(a). The Bureau has issued regulations implementing TILA’s ATR requirements. See 12 CFR 1026.43. 6 See TILA section 129C(a), 15 U.S.C. 1639c(a). 7 TILA section 129B(a)(2), 15 U.S.C. 1639b(a)(2). 2 3 VerDate Sep<11>2014 16:08 Mar 07, 2019 Jkt 247001 the ATR rules that will apply to PACE financing. That provision sets forth damages for TILA violations generally,8 as well as specific penalties for violations of the current ATR requirements.9 The Bureau is soliciting information through this ANPR that it believes will be helpful in developing a proposed rule that will meet these objectives and accounts for the unique nature of PACE financing. The Bureau is seeking five categories of information: (1) Written materials associated with PACE financing transactions; (2) descriptions of current standards and practices in the PACE financing origination process; (3) information relating to civil liability under TILA for violations of the ATR requirements in connection with PACE financing, as well as rescission and borrower delinquency and default; (4) information about what features of PACE financing make it unique and how the Bureau should address those unique features; and (5) views concerning the potential implications of regulating PACE financing under TILA. The Bureau anticipates that the information solicited will enable the Bureau to better understand the market and unique nature of PACE financing. This will help the Bureau formulate proposed regulations in a balanced manner, achieving the statutory objectives discussed above while avoiding the imposition of unnecessary or undue burden on industry. The Bureau hopes to receive information reflecting the diversity of residential PACE financing transactions in the market. Where applicable, please specify whether any information provided applies to a PACE financing program that is specific to a particular jurisdiction or administrator. When responding to a particular question, please note the question number at the top of the response. The Bureau invites comment on all aspects of the ANPR from all interested parties, including consumers, consumer advocacy groups, State and local governments, other PACE financing industry participants, or other members of the public. In the event that a respondent may have concerns about revealing proprietary or personal See generally TILA section 130, 15 U.S.C. 1640. See TILA section 130(a)(4), 15 U.S.C. 1640(a)(4) (providing liability for failure to comply with requirements in the ATR provisions in ‘‘an amount equal to the sum of all finance charges and fees paid by the consumer, unless the creditor demonstrates that the failure to comply is not material.’’); see also TILA section 130(k), 15 U.S.C. 1640(k) (generally providing that consumers facing foreclosure may assert a violation of the ATR provisions, among other provisions, as a defense by recoupment or setoff). 8 9 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 information, the Bureau welcomes comments from attorneys, consumer advocacy organizations, trade associations, or other representatives that do not identify their clients. I. Written Materials Associated With PACE Financing Transactions To better understand PACE financing transactions and potential areas of consumer risk, the Bureau is interested in receiving samples of any written materials used in PACE financing transactions. Please consider submitting samples of, for example, any contractual agreements, written materials provided to consumers before they sign a PACE financing agreement, and bills or statements that provide payment information to consumers. Please redact any personally identifiable information before submission. II. Current Standards and Practices in the PACE Financing Origination Process As described above, EGRRCPA section 307 requires the Bureau to prescribe regulations for PACE financing that carry out the purposes of TILA’s existing ATR requirements while accounting for the unique nature of PACE financing. In general, TILA’s existing ATR requirements prohibit creditors from making a residential mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan according to its terms, and all applicable taxes, insurance, and assessments.10 Developing an ATR rule for PACE financing that takes into account its unique nature will require a thorough understanding of origination and underwriting processes, including the roles and responsibilities of participating parties. Questions in this category solicit information to that end. 1. Please provide information about the process of obtaining a consumer’s application for PACE financing, including what documentation is required from consumers or third parties, what information is verified, and how any information is collected. What information gathered as part of the application process relates to the consumer’s ability to repay? Which parties collect the application information? How are policies and procedures relevant to the application process established? 2. Please describe current underwriting standards and how they 10 See E:\FR\FM\08MRP1.SGM TILA section 129C(a), 15 U.S.C. 1639c(a). 08MRP1 Federal Register / Vol. 84, No. 46 / Friday, March 8, 2019 / Proposed Rules are established. Does underwriting commonly include a determination of consumers’ ability to repay the financing? If so, which parties conduct that analysis, and what factors are considered in that determination? 3. Please provide information about the process for approving or denying PACE financing applications. For example, which parties determine consumer eligibility or make any offer to the consumer? Which parties are involved in determining the financing terms, and how do they do so for each consumer? 4. Please provide information about any written information provided to consumers before they sign a PACE financing agreement, including relevant contracts or written disclosures. Who delivers these materials, in what format, and when during the origination process? 5. Please describe any information provided to consumers orally before they sign a PACE financing agreement. Who provides the information and at what point during the origination process? 6. TILA’s existing ATR requirements apply to ‘‘creditors,’’ defined in part as the parties to whom debt obligations are ‘‘initially payable on the face’’ of the agreements.11 In PACE financing transactions, to which parties may the obligations be made ‘‘initially payable on the face’’ of the financing agreements? Please describe any requirements in State or local law governing to which parties PACE financing obligations may be made initially payable on the face of the financing agreements. 7. To the extent not addressed above, please describe the role of State or local governments in the origination and underwriting of PACE financing. 8. Please describe any relationship between the PACE financing agreement and the home improvement agreement. For example, do they involve separate contracts? Do consumers sign them concurrently? If a consumer is denied for the PACE financing, what is the effect on the consumer’s obligations under the home improvement contract? 9. To the extent not already addressed, please provide any information that may help the Bureau understand the origination process or any risks or benefits it produces for consumers. 11 See 15 U.S.C. 1602(g). VerDate Sep<11>2014 16:08 Mar 07, 2019 Jkt 247001 III. Civil Liability Under TILA for Violations of ATR Requirements in Connection With PACE Financing, as Well as Rescission and Borrower Delinquency and Default As noted above, EGRRCPA section 307 requires that the Bureau prescribe regulations that apply TILA section 130 to violations of the ATR rules that will apply to PACE financing, and that account for the unique nature of PACE financing. Section 130 sets forth TILA’s general civil liability requirements; and, with respect to violations of the existing ATR requirements, it allows for recovery of an amount equal to the sum of all finance charges and fees paid by the consumer and provides borrowers a foreclosure defense. In conjunction with questions elsewhere in this ANPR, the information solicited in this category is intended to help the Bureau identify the parties in a PACE financing transaction to whom TILA section 130 might apply and which parties would in fact bear the risk of any such liability. Additionally, this category of questions solicits information about any rescission rights available to consumers and what occurs when a homeowner becomes delinquent on a PACE financing obligation. 10. Please provide any information about the assignment or sale, including securitization, of PACE financing agreements or the rights and obligations therein, and the circumstances surrounding any assignment or sale. 11. Please describe any indemnification agreements that are commonly part of PACE financing transactions, whether involving local governments, private parties administering PACE financing programs, secondary market participants, home improvement companies, or others. 12. Please describe any rescission rights available to consumers with respect to PACE financing agreements or home improvement contracts, whether by virtue of the agreements or applicable State or local law. 13. Please provide information about what happens to PACE financing obligations when a consumer becomes delinquent or defaults. For example, please provide information about any loss mitigation programs available to consumers, any pre-foreclosure collection attempts, or foreclosure processes when applicable. Which parties are involved, and what are their roles? IV. Features of PACE Financing That Make It Unique and How the Bureau Should Address Those Unique Features As noted above, the regulations implementing EGRRCPA section 307 PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 8481 must account for the ‘‘unique nature’’ of PACE financing. Questions in this category solicit information that may be relevant to understanding the unique nature of PACE financing. They include questions about the structure, funding, and repayment of PACE financing transactions, and the relationship to local property tax systems. 14. EGRRCPA section 307 defines PACE financing as ‘‘financing to cover the costs of home improvements that results in a tax assessment on the real property of the consumer.’’ Please identify any public or private financing options that may satisfy this definition, whether or not commonly understood to be PACE financing. 15. Please provide information about the source of funding for PACE financing transactions. For example, are the transactions funded with public or private capital? Which parties supply the capital used to pay the contractors installing the home improvement projects? 16. Please describe the role of public bonds in PACE financing transactions. Please identify the bond-issuing authorities. What is the timing of bond issuance? Who purchases the bonds, and what effect does the purchase have? Where public bonds are not involved in PACE financing transactions, please describe the role of any other public financing mechanisms. 17. Please provide information about consumer repayment. For example: i. When does repayment begin after the financing agreement is signed? ii. How frequently are payments made? iii. Are payments roughly equal throughout a consumer’s full financing term, or can payments change? Are interest rates fixed or variable? Are balloon payments required? If so, in what circumstances? Do PACE financing agreements always provide for full amortization? iv. To which parties do consumers make payments? Does the party to which consumers make payments ever change over the life of the financing agreement? If so, in what circumstances does this occur and why? v. After a consumer remits a payment, how is the payment distributed, and by whom? vi. Please describe any changes to payments or payment processes when a consumer becomes delinquent or defaults. vii. Please describe any differences to payments or payment processes when a consumer has a mortgage loan with an escrow account for taxes. 18. Please describe how PACE financing is integrated with local E:\FR\FM\08MRP1.SGM 08MRP1 8482 Federal Register / Vol. 84, No. 46 / Friday, March 8, 2019 / Proposed Rules property tax systems and how specific information about the PACE financing obligation is distinguished from other real property tax obligations in the tax system. Who monitors repayment of the PACE financing? 19. To the extent not addressed above, please describe the role of State and local governments in PACE financing programs or individual PACE financing transactions following origination. Please identify any State or local government entities with regulatory or oversight authority over PACE financing or industry participants. 20. Please describe any financial costs to consumers that may be associated with PACE financing transactions, including, for example, costs resulting from interest, points, fees, or penalties. How do costs for home improvement projects financed using PACE financing compare to costs for comparable projects financed through other means? 21. Please describe any cost savings associated with home improvement projects funded with PACE financing, including, for example, utility savings or tax credits authorized under State or Federal law for PACE-eligible projects. Are projected savings calculated before PACE financing contracts are executed? If so, how, and over what period of time? Are actual savings tracked, and, if so, how do they compare with the projections? 22. In general, does the addition of PACE financing affect consumers’ ability to meet their financial obligations? Please describe any such effects and why they may occur. 23. Please provide information about the liens associated with PACE financing. How do they differ from liens securing other property tax obligations that may encumber residential real property? Do PACE financing liens arise by operation of law or contract? 24. Please provide information about the treatment of PACE financing obligations by servicers of mortgage loans responsible for servicing mortgages that were placed on the property before the PACE financing encumbrance. For example, do mortgage servicers typically administer PACE financing obligations through escrow accounts? Please describe the relevant processes and any effects on the mortgage servicer or the consumer. How quickly after PACE assessments are added do mortgage servicers learn about the increase to the consumer’s property tax bill? How quickly do mortgage servicers adjust consumers’ escrow payments, where applicable, to reflect the change? 25. To the extent not already addressed, please provide any VerDate Sep<11>2014 16:08 Mar 07, 2019 Jkt 247001 additional information about the unique nature of PACE financing, how the Bureau’s regulations should account for the unique nature, and any risks or benefits to consumers or industry participants attributable to the unique nature. V. Potential Implications of Regulating PACE Financing Under TILA As described above, EGRRCPA section 307 requires the Bureau to issue regulations applying TILA’s ATR and general civil liability provisions (as implemented through Regulation Z) to PACE financing, accounting for the unique nature of PACE financing. In this category of questions, the Bureau solicits information relating to how the existing TILA and Regulation Z provisions could be applied to PACE financing to implement EGRRCPA section 307. This information will assist the Bureau in developing a proposed rule adapting existing TILA and Regulation Z standards in light of potential impacts on consumers and industry and any implementation challenges specific to PACE financing. 26. If existing ATR requirements in TILA and Regulation Z were to apply to PACE financing transactions, please describe any likely effects on State and local governments or bond-issuing authorities. 27. Please describe any likely effects of such application on consumers or PACE financing industry participants. 28. If applied to PACE financing transactions, which specific ATR provisions under TILA and Regulation Z, if any, would conflict with existing State or local legal requirements, and how? What steps could the Bureau take to mitigate those conflicts? 29. Which specific ATR provisions under TILA and Regulation Z would be difficult for market participants to apply to current PACE financing origination practices, bond processes, or laws and practices implicating real property tax systems, and why would they be difficult to apply? 30. Which specific ATR provisions under TILA and Regulation Z, if any, would be beneficial for consumers, and how? Which, if any, would not provide consumer benefits, and why not? 31. How could TILA’s existing ATR requirements be tailored to account for the unique nature of PACE financing? Are there unique aspects of PACE financing that are relevant to whether and how the existing ATR requirements should apply, including the documentation and verification requirements or the specific information required as part of the analysis? PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 32. As described above, EGRRCPA section 307 requires the Bureau to apply TILA section 130 to violations of the ATR requirements that the Bureau will prescribe for PACE financing. Please provide your views on any likely impacts on consumers or PACE financing market participants of applying TILA section 130. Please describe any other concerns associated with applying TILA liability to PACE financing, including but not limited to TILA section 130. 33. Please share your views on whether the Bureau should address the application of TILA and Regulation Z provisions other than the ATR requirements to PACE financing, including any potential impacts on consumers, industry, or other stakeholders that may result from any such application. 34. Please share any other comments or concerns about implementing EGRRCPA section 307 under TILA and Regulation Z. Dated: March 4, 2019. Kathleen L. Kraninger, Director, Bureau of Consumer Financial Protection. [FR Doc. 2019–04177 Filed 3–7–19; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2019–0117; Product Identifier 2018–NM–169–AD] RIN 2120–AA64 Airworthiness Directives; 328 Support Services GmbH (Type Certificate Previously Held by AvCraft Aerospace GmbH; Fairchild Dornier GmbH; Dornier Luftfahrt GmbH) Airplanes Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: We propose to adopt a new airworthiness directive (AD) for all 328 Support Services GmbH Model 328–100 airplanes. This proposed AD was prompted by a report indicating that undetected cracks may develop at the roll spoiler bearing arms. This proposed AD would require a one-time nondestructive test (NDT) inspection for cracks in the roll spoiler bearing arms and, if necessary, corrective actions. We are proposing this AD to address the unsafe condition on these products. SUMMARY: E:\FR\FM\08MRP1.SGM 08MRP1

Agencies

[Federal Register Volume 84, Number 46 (Friday, March 8, 2019)]
[Proposed Rules]
[Pages 8479-8482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04177]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2019-0011]
RIN 3170-AA84


Advance Notice of Proposed Rulemaking on Residential Property 
Assessed Clean Energy Financing

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this Advance Notice of Proposed Rulemaking (ANPR) to solicit 
information relating to residential Property Assessed Clean Energy 
(PACE) financing. The Bureau will consider the information it receives 
in response to this ANPR in implementing section 307 of the Economic 
Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). In 
relevant part, EGRRCPA section 307 amends the Truth in Lending Act 
(TILA) to mandate that the Bureau prescribe certain regulations 
relating to PACE financing. Specifically, the regulations must carry 
out the purposes of TILA's ability-to-repay (ATR) requirements, 
currently in place for residential mortgage loans, with respect to PACE 
financing, and apply TILA's general civil liability provision for 
violations of the ATR requirements the Bureau will prescribe for PACE 
financing. The regulations must ``account for the unique nature'' of 
PACE financing. This ANPR solicits information to better understand the 
PACE financing market and the unique nature of PACE financing.

DATES: Comments must be received by May 7, 2019.

ADDRESSES: You may submit responsive information and other comments, 
identified by Docket No. CFPB-2019-0011, by any of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: PACEFinancingANPR@cfpb.gov. Include Docket No. 
CFPB-2019-0011 in the subject line of the message.
     Mail: Comment Intake, Bureau of Consumer Financial 
Protection, 1700 G Street NW, Washington, DC 20552.
     Hand Delivery/Courier: Comment Intake, Bureau of Consumer 
Financial Protection, 1700 G Street NW, Washington, DC 20552.
    Instructions: When responding to a particular question, please note 
the question number at the top of the response. Also, where applicable, 
please note whether any information provided is relevant to a PACE 
financing program that is specific to a particular jurisdiction or 
administrator.
    You are not required to answer all questions to receive 
consideration of your comments. The Bureau encourages the early 
submission of comments. All submissions must include the document title 
and docket number.
    Because paper mail in the Washington, DC area and at the Bureau is 
subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to http://www.regulations.gov. In addition, comments 
will be available for public inspection and copying at 1700 G Street 
NW, Washington, DC 20552, on official business days between the hours 
of 10:00 a.m. and 5:00 p.m. eastern standard time. You can make an 
appointment to inspect the documents by telephoning 202-435-7275.
    All submissions, including attachments and other supporting 
materials, will become part of the public record and subject to public 
disclosure. Sensitive personal information, such as account numbers or 
Social Security numbers, or names of other individuals, should not be 
included. Submissions will not be edited to remove any identifying or 
contact information.

FOR FURTHER INFORMATION CONTACT: Rachel Ross, Attorney-Advisor; Joel 
Singerman, Counsel; or Nora Rigby, Senior Counsel; at (202)-435-7700. 
If you require this document in alternative electronic format, please 
contact CFPB_Accessibility.cfpb.gov.

SUPPLEMENTARY INFORMATION: The Bureau is issuing this ANPR to solicit 
information relating to residential PACE financing.\1\ The Bureau will 
consider the information it receives in implementing EGRRCPA section 
307, which was enacted by Congress on May

[[Page 8480]]

22, 2018, and signed into law on May 24, 2018.\2\
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    \1\ Although some jurisdictions may make PACE financing 
available for commercial projects, this ANPR solicits information 
relating only to residential PACE financing, in accord with EGRRCPA 
section 307, which defines PACE financing as available for home 
improvements. The Bureau is not soliciting information about 
commercial PACE financing.
    \2\ Public Law 115-174, 132 Stat. 1296 (2018).
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    As defined in EGRRCPA, PACE financing is ``financing to cover the 
costs of home improvements that results in a tax assessment on the real 
property of the consumer.'' \3\ Section 307 amends TILA to direct 
regulatory action on PACE financing. It provides in relevant part that 
the Bureau shall prescribe regulations that (1) carry out the purposes 
of TILA section 129C(a), and (2) apply TILA section 130 with respect to 
violations under TILA section 129C(a) with respect to PACE financing, 
which shall account for the unique nature of PACE financing.\4\
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    \3\ EGRRCPA section 307, amending TILA section 129C(b)(3)(C)(i), 
15 U.S.C. 1639c(b)(3)(C)(i).
    \4\ EGRRCPA section 307, amending TILA section 
129C(b)(3)(C)(ii), 15 U.S.C. 1639c(b)(3)(C)(ii). EGRRCPA section 307 
also includes amendments authorizing the Bureau to ``collect such 
information and data that the Bureau determines is necessary'' in 
prescribing the regulations and requiring the Bureau to ``consult 
with State and local governments and bond-issuing authorities.''
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    This provision directs the Bureau to prescribe regulations that 
achieve two objectives and account for the unique nature of PACE 
financing. As to the first objective, the regulations must ``carry out 
the purposes of'' TILA's existing ATR requirements. In general, the 
existing ATR requirements prohibit creditors from making a residential 
mortgage loan unless the creditor makes a reasonable and good faith 
determination based on verified and documented information that, at the 
time the loan is consummated, the consumer has a reasonable ability to 
repay the loan according to its terms, and all applicable taxes, 
insurance, and assessments.\5\ In making that determination, a creditor 
is required to consider specific factors about the consumer's finances, 
including, for example, the consumer's income, assets, and debt 
obligations, and to verify the income or asset amounts it relied upon 
to determine the consumer's repayment ability.\6\ TILA states that the 
purpose of the ATR requirements is ``to assure that consumers are 
offered and receive residential mortgage loans on terms that reasonably 
reflect their ability to repay the loans and that are understandable 
and not unfair, deceptive, or abusive.'' \7\
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    \5\ The ATR requirements are set forth in TILA section 129C(a), 
15 U.S.C. 1639c(a). The Bureau has issued regulations implementing 
TILA's ATR requirements. See 12 CFR 1026.43.
    \6\ See TILA section 129C(a), 15 U.S.C. 1639c(a).
    \7\ TILA section 129B(a)(2), 15 U.S.C. 1639b(a)(2).
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    As to the second objective, the regulations implementing EGRRCPA 
section 307 must apply TILA's general civil liability provision for 
violations of the ATR rules that will apply to PACE financing. That 
provision sets forth damages for TILA violations generally,\8\ as well 
as specific penalties for violations of the current ATR 
requirements.\9\
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    \8\ See generally TILA section 130, 15 U.S.C. 1640.
    \9\ See TILA section 130(a)(4), 15 U.S.C. 1640(a)(4) (providing 
liability for failure to comply with requirements in the ATR 
provisions in ``an amount equal to the sum of all finance charges 
and fees paid by the consumer, unless the creditor demonstrates that 
the failure to comply is not material.''); see also TILA section 
130(k), 15 U.S.C. 1640(k) (generally providing that consumers facing 
foreclosure may assert a violation of the ATR provisions, among 
other provisions, as a defense by recoupment or setoff).
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    The Bureau is soliciting information through this ANPR that it 
believes will be helpful in developing a proposed rule that will meet 
these objectives and accounts for the unique nature of PACE financing. 
The Bureau is seeking five categories of information: (1) Written 
materials associated with PACE financing transactions; (2) descriptions 
of current standards and practices in the PACE financing origination 
process; (3) information relating to civil liability under TILA for 
violations of the ATR requirements in connection with PACE financing, 
as well as rescission and borrower delinquency and default; (4) 
information about what features of PACE financing make it unique and 
how the Bureau should address those unique features; and (5) views 
concerning the potential implications of regulating PACE financing 
under TILA. The Bureau anticipates that the information solicited will 
enable the Bureau to better understand the market and unique nature of 
PACE financing. This will help the Bureau formulate proposed 
regulations in a balanced manner, achieving the statutory objectives 
discussed above while avoiding the imposition of unnecessary or undue 
burden on industry.
    The Bureau hopes to receive information reflecting the diversity of 
residential PACE financing transactions in the market. Where 
applicable, please specify whether any information provided applies to 
a PACE financing program that is specific to a particular jurisdiction 
or administrator. When responding to a particular question, please note 
the question number at the top of the response.
    The Bureau invites comment on all aspects of the ANPR from all 
interested parties, including consumers, consumer advocacy groups, 
State and local governments, other PACE financing industry 
participants, or other members of the public. In the event that a 
respondent may have concerns about revealing proprietary or personal 
information, the Bureau welcomes comments from attorneys, consumer 
advocacy organizations, trade associations, or other representatives 
that do not identify their clients.

I. Written Materials Associated With PACE Financing Transactions

    To better understand PACE financing transactions and potential 
areas of consumer risk, the Bureau is interested in receiving samples 
of any written materials used in PACE financing transactions. Please 
consider submitting samples of, for example, any contractual 
agreements, written materials provided to consumers before they sign a 
PACE financing agreement, and bills or statements that provide payment 
information to consumers. Please redact any personally identifiable 
information before submission.

II. Current Standards and Practices in the PACE Financing Origination 
Process

    As described above, EGRRCPA section 307 requires the Bureau to 
prescribe regulations for PACE financing that carry out the purposes of 
TILA's existing ATR requirements while accounting for the unique nature 
of PACE financing. In general, TILA's existing ATR requirements 
prohibit creditors from making a residential mortgage loan unless the 
creditor makes a reasonable and good faith determination based on 
verified and documented information that, at the time the loan is 
consummated, the consumer has a reasonable ability to repay the loan 
according to its terms, and all applicable taxes, insurance, and 
assessments.\10\ Developing an ATR rule for PACE financing that takes 
into account its unique nature will require a thorough understanding of 
origination and underwriting processes, including the roles and 
responsibilities of participating parties. Questions in this category 
solicit information to that end.
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    \10\ See TILA section 129C(a), 15 U.S.C. 1639c(a).
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    1. Please provide information about the process of obtaining a 
consumer's application for PACE financing, including what documentation 
is required from consumers or third parties, what information is 
verified, and how any information is collected. What information 
gathered as part of the application process relates to the consumer's 
ability to repay? Which parties collect the application information? 
How are policies and procedures relevant to the application process 
established?
    2. Please describe current underwriting standards and how they

[[Page 8481]]

are established. Does underwriting commonly include a determination of 
consumers' ability to repay the financing? If so, which parties conduct 
that analysis, and what factors are considered in that determination?
    3. Please provide information about the process for approving or 
denying PACE financing applications. For example, which parties 
determine consumer eligibility or make any offer to the consumer? Which 
parties are involved in determining the financing terms, and how do 
they do so for each consumer?
    4. Please provide information about any written information 
provided to consumers before they sign a PACE financing agreement, 
including relevant contracts or written disclosures. Who delivers these 
materials, in what format, and when during the origination process?
    5. Please describe any information provided to consumers orally 
before they sign a PACE financing agreement. Who provides the 
information and at what point during the origination process?
    6. TILA's existing ATR requirements apply to ``creditors,'' defined 
in part as the parties to whom debt obligations are ``initially payable 
on the face'' of the agreements.\11\ In PACE financing transactions, to 
which parties may the obligations be made ``initially payable on the 
face'' of the financing agreements? Please describe any requirements in 
State or local law governing to which parties PACE financing 
obligations may be made initially payable on the face of the financing 
agreements.
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    \11\ See 15 U.S.C. 1602(g).
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    7. To the extent not addressed above, please describe the role of 
State or local governments in the origination and underwriting of PACE 
financing.
    8. Please describe any relationship between the PACE financing 
agreement and the home improvement agreement. For example, do they 
involve separate contracts? Do consumers sign them concurrently? If a 
consumer is denied for the PACE financing, what is the effect on the 
consumer's obligations under the home improvement contract?
    9. To the extent not already addressed, please provide any 
information that may help the Bureau understand the origination process 
or any risks or benefits it produces for consumers.

III. Civil Liability Under TILA for Violations of ATR Requirements in 
Connection With PACE Financing, as Well as Rescission and Borrower 
Delinquency and Default

    As noted above, EGRRCPA section 307 requires that the Bureau 
prescribe regulations that apply TILA section 130 to violations of the 
ATR rules that will apply to PACE financing, and that account for the 
unique nature of PACE financing. Section 130 sets forth TILA's general 
civil liability requirements; and, with respect to violations of the 
existing ATR requirements, it allows for recovery of an amount equal to 
the sum of all finance charges and fees paid by the consumer and 
provides borrowers a foreclosure defense. In conjunction with questions 
elsewhere in this ANPR, the information solicited in this category is 
intended to help the Bureau identify the parties in a PACE financing 
transaction to whom TILA section 130 might apply and which parties 
would in fact bear the risk of any such liability. Additionally, this 
category of questions solicits information about any rescission rights 
available to consumers and what occurs when a homeowner becomes 
delinquent on a PACE financing obligation.
    10. Please provide any information about the assignment or sale, 
including securitization, of PACE financing agreements or the rights 
and obligations therein, and the circumstances surrounding any 
assignment or sale.
    11. Please describe any indemnification agreements that are 
commonly part of PACE financing transactions, whether involving local 
governments, private parties administering PACE financing programs, 
secondary market participants, home improvement companies, or others.
    12. Please describe any rescission rights available to consumers 
with respect to PACE financing agreements or home improvement 
contracts, whether by virtue of the agreements or applicable State or 
local law.
    13. Please provide information about what happens to PACE financing 
obligations when a consumer becomes delinquent or defaults. For 
example, please provide information about any loss mitigation programs 
available to consumers, any pre-foreclosure collection attempts, or 
foreclosure processes when applicable. Which parties are involved, and 
what are their roles?

IV. Features of PACE Financing That Make It Unique and How the Bureau 
Should Address Those Unique Features

    As noted above, the regulations implementing EGRRCPA section 307 
must account for the ``unique nature'' of PACE financing. Questions in 
this category solicit information that may be relevant to understanding 
the unique nature of PACE financing. They include questions about the 
structure, funding, and repayment of PACE financing transactions, and 
the relationship to local property tax systems.
    14. EGRRCPA section 307 defines PACE financing as ``financing to 
cover the costs of home improvements that results in a tax assessment 
on the real property of the consumer.'' Please identify any public or 
private financing options that may satisfy this definition, whether or 
not commonly understood to be PACE financing.
    15. Please provide information about the source of funding for PACE 
financing transactions. For example, are the transactions funded with 
public or private capital? Which parties supply the capital used to pay 
the contractors installing the home improvement projects?
    16. Please describe the role of public bonds in PACE financing 
transactions. Please identify the bond-issuing authorities. What is the 
timing of bond issuance? Who purchases the bonds, and what effect does 
the purchase have? Where public bonds are not involved in PACE 
financing transactions, please describe the role of any other public 
financing mechanisms.
    17. Please provide information about consumer repayment. For 
example:
    i. When does repayment begin after the financing agreement is 
signed?
    ii. How frequently are payments made?
    iii. Are payments roughly equal throughout a consumer's full 
financing term, or can payments change? Are interest rates fixed or 
variable? Are balloon payments required? If so, in what circumstances? 
Do PACE financing agreements always provide for full amortization?
    iv. To which parties do consumers make payments? Does the party to 
which consumers make payments ever change over the life of the 
financing agreement? If so, in what circumstances does this occur and 
why?
    v. After a consumer remits a payment, how is the payment 
distributed, and by whom?
    vi. Please describe any changes to payments or payment processes 
when a consumer becomes delinquent or defaults.
    vii. Please describe any differences to payments or payment 
processes when a consumer has a mortgage loan with an escrow account 
for taxes.
    18. Please describe how PACE financing is integrated with local

[[Page 8482]]

property tax systems and how specific information about the PACE 
financing obligation is distinguished from other real property tax 
obligations in the tax system. Who monitors repayment of the PACE 
financing?
    19. To the extent not addressed above, please describe the role of 
State and local governments in PACE financing programs or individual 
PACE financing transactions following origination. Please identify any 
State or local government entities with regulatory or oversight 
authority over PACE financing or industry participants.
    20. Please describe any financial costs to consumers that may be 
associated with PACE financing transactions, including, for example, 
costs resulting from interest, points, fees, or penalties. How do costs 
for home improvement projects financed using PACE financing compare to 
costs for comparable projects financed through other means?
    21. Please describe any cost savings associated with home 
improvement projects funded with PACE financing, including, for 
example, utility savings or tax credits authorized under State or 
Federal law for PACE-eligible projects. Are projected savings 
calculated before PACE financing contracts are executed? If so, how, 
and over what period of time? Are actual savings tracked, and, if so, 
how do they compare with the projections?
    22. In general, does the addition of PACE financing affect 
consumers' ability to meet their financial obligations? Please describe 
any such effects and why they may occur.
    23. Please provide information about the liens associated with PACE 
financing. How do they differ from liens securing other property tax 
obligations that may encumber residential real property? Do PACE 
financing liens arise by operation of law or contract?
    24. Please provide information about the treatment of PACE 
financing obligations by servicers of mortgage loans responsible for 
servicing mortgages that were placed on the property before the PACE 
financing encumbrance. For example, do mortgage servicers typically 
administer PACE financing obligations through escrow accounts? Please 
describe the relevant processes and any effects on the mortgage 
servicer or the consumer. How quickly after PACE assessments are added 
do mortgage servicers learn about the increase to the consumer's 
property tax bill? How quickly do mortgage servicers adjust consumers' 
escrow payments, where applicable, to reflect the change?
    25. To the extent not already addressed, please provide any 
additional information about the unique nature of PACE financing, how 
the Bureau's regulations should account for the unique nature, and any 
risks or benefits to consumers or industry participants attributable to 
the unique nature.

V. Potential Implications of Regulating PACE Financing Under TILA

    As described above, EGRRCPA section 307 requires the Bureau to 
issue regulations applying TILA's ATR and general civil liability 
provisions (as implemented through Regulation Z) to PACE financing, 
accounting for the unique nature of PACE financing. In this category of 
questions, the Bureau solicits information relating to how the existing 
TILA and Regulation Z provisions could be applied to PACE financing to 
implement EGRRCPA section 307. This information will assist the Bureau 
in developing a proposed rule adapting existing TILA and Regulation Z 
standards in light of potential impacts on consumers and industry and 
any implementation challenges specific to PACE financing.
    26. If existing ATR requirements in TILA and Regulation Z were to 
apply to PACE financing transactions, please describe any likely 
effects on State and local governments or bond-issuing authorities.
    27. Please describe any likely effects of such application on 
consumers or PACE financing industry participants.
    28. If applied to PACE financing transactions, which specific ATR 
provisions under TILA and Regulation Z, if any, would conflict with 
existing State or local legal requirements, and how? What steps could 
the Bureau take to mitigate those conflicts?
    29. Which specific ATR provisions under TILA and Regulation Z would 
be difficult for market participants to apply to current PACE financing 
origination practices, bond processes, or laws and practices 
implicating real property tax systems, and why would they be difficult 
to apply?
    30. Which specific ATR provisions under TILA and Regulation Z, if 
any, would be beneficial for consumers, and how? Which, if any, would 
not provide consumer benefits, and why not?
    31. How could TILA's existing ATR requirements be tailored to 
account for the unique nature of PACE financing? Are there unique 
aspects of PACE financing that are relevant to whether and how the 
existing ATR requirements should apply, including the documentation and 
verification requirements or the specific information required as part 
of the analysis?
    32. As described above, EGRRCPA section 307 requires the Bureau to 
apply TILA section 130 to violations of the ATR requirements that the 
Bureau will prescribe for PACE financing. Please provide your views on 
any likely impacts on consumers or PACE financing market participants 
of applying TILA section 130. Please describe any other concerns 
associated with applying TILA liability to PACE financing, including 
but not limited to TILA section 130.
    33. Please share your views on whether the Bureau should address 
the application of TILA and Regulation Z provisions other than the ATR 
requirements to PACE financing, including any potential impacts on 
consumers, industry, or other stakeholders that may result from any 
such application.
    34. Please share any other comments or concerns about implementing 
EGRRCPA section 307 under TILA and Regulation Z.

    Dated: March 4, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-04177 Filed 3-7-19; 8:45 am]
 BILLING CODE 4810-AM-P