Government Creates Rules for Paying Solar Panels Through Taxes
Published Date: 1/10/2025
Rule
Summary
Starting March 1, 2026, new rules will make sure homeowners using PACE financing—loans paid back through property tax bills for clean energy upgrades—can afford their payments. The Consumer Financial Protection Bureau is updating the law to protect borrowers and hold lenders accountable if they break the rules. This means safer, clearer deals for people improving their homes with eco-friendly projects.
Analyzed Economic Effects
8 provisions identified: 3 benefits, 2 costs, 3 mixed.
Ability-to-repay rules apply to PACE
Starting March 1, 2026, Regulation Z’s ability-to-repay requirements in Sec. 1026.43 apply to PACE transactions, with adjustments. Creditors must consider certain monthly payments they know or have reason to know the consumer will pay into their mortgage escrow account when determining repayment ability for PACE transactions made to consumers who pay property taxes through an escrow account on an existing mortgage.
New PACE loan disclosure rules
Beginning March 1, 2026, PACE transactions must use revised Loan Estimate and Closing Disclosure formats: certain escrow fields are removed, other fees are disclosed in the projected payments table, PACE charges and other property-tax obligations are shown separately, PACE company identifying information must be disclosed, and new qualitative disclosures cover assumption, late payments, servicing, partial payments, and liability after foreclosure. The CFPB also provides new model forms (H-24(H), H-25(K)) and Spanish translations (H-28(K), H-28(L)).
PACE loans not Qualified Mortgages
The final rule states that a PACE transaction is not a qualified mortgage (QM) under Sec. 1026.43, effective March 1, 2026.
TILA liability extends to PACE companies
The rule extends Regulation Z’s ability-to-repay requirements and TILA section 130 civil liability to any 'PACE company' substantially involved in making the credit decision for a PACE transaction, effective March 1, 2026. That holds those companies accountable under TILA for violations of the ability-to-repay rules.
Clarifies tax-lien exclusion
The rule clarifies that Regulation Z’s exclusion of tax liens and tax assessments from the definition of credit applies only to involuntary tax liens and involuntary tax assessments. This is an explicit change to how tax liens/assessments are treated under Regulation Z starting March 1, 2026.
Escrow requirement exemption for PACE
The final rule exempts PACE transactions from the Regulation Z requirement to establish escrow accounts for certain higher-priced mortgage loans, effective March 1, 2026. That means a higher-priced mortgage tied to a property with PACE financing may not require an escrow account under Sec. 1026.35(b)(2)(i)(E).
Periodic statement exemption for PACE
Effective March 1, 2026, PACE transactions are exempt from the Regulation Z requirement to provide periodic statements under Sec. 1026.41(e)(7).
Clarifies mortgage origination treatment
The final rule provides clarification about how PACE and non‑PACE mortgage creditors should treat pre-existing PACE transactions when originating new mortgage loans, effective March 1, 2026. This addresses how lenders consider existing PACE liens in new mortgage underwriting and closings.
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