- The main story discusses home renovations and a financing program called PACE.
- PACE was designed to help low-income homeowners make their homes more environmentally friendly.
- PACE loans are repaid through property taxes and are technically a lien on the house.
- There have been issues with PACE loans, including contractors not fully explaining the potential increase in property taxes.
- There is no independent energy audit required before renovations, leading to potentially unnecessary and expensive improvements.
- If the energy savings do not cover the increased taxes, homeowners could lose their homes as the house is collateral for the debt.
- PACE financing does not have the same consumer protections as standard home loans.

- PACE financing, which is a tax lien rather than a loan, lacks consumer protections and can lead to predatory lending practices.
- PACE providers in Florida are not required to explain the costs or ensure borrowers can afford the payments.
- Many homeowners end up with significant debt on their homes, often in minority or non-English speaking neighborhoods.
- Contractors use fast approval processes and electronic signatures to push homeowners into signing contracts they may not understand.
- PACE loans have priority lien status, meaning they are repaid before mortgage lenders in the event of foreclosure.
- Fannie Mae and Freddie Mac stopped backing mortgages on homes with PACE loans due to the risks involved.
- The lack of accountability and passing the blame among administrators, contractors, and homeowners perpetuates the problem.
- Tax collectors, who have to collect on PACE debts, warn of the potential for foreclosures and a mortgage crisis if action is not taken.

- The conditions are prime for a disaster, but no action is being taken to prevent it.
- Reforms like stopping door-to-door sales may not be enough to prevent people from losing their homes.
- There are other programs available for low-income homeowners to finance green energy upgrades.
- If considering a PACE loan, check eligibility for other programs first.
- If your county is considering a PACE program with for-profit administrators, try to stop it.
- The business model of PACE loans is flawed and puts vulnerable people at risk of losing their homes.
- Well-meaning public programs have been corrupted by private companies.

The text discusses the PACE financing program, which was created to help low-income homeowners make their homes more environmentally friendly. However, there have been issues with PACE loans, such as contractors not fully explaining the potential increase in property taxes and the lack of consumer protections. This has led to homeowners accumulating significant debt and being at risk of losing their homes. The flawed business model of PACE loans and the corruption by private companies have put vulnerable people in danger. It is advised to explore other programs and to take action to prevent the potential mortgage crisis caused by PACE loans.

John Oliver explains how PACE, a program meant to pay for environmentally-friendly home renovations, is fundamentally flawed and can put people at risk of losing their homes. 

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Our main story tonight concerns home renovations.

There are big commitments that always turn out great, unless, that is, you're on trading spaces, in which case, they can turn out like this.

Open your eyes and see your new family room.

Kudos to Pam there for being gracious enough to step out.

She's showing a level of restraint that those designers very much did not.

Who would look at a sexy, flickering fire and say, great, but what if it was blurry?

Also, that is just too many candlesticks.

The whole room is a windowless inferno waiting to happen.

It's deranged, it's unsafe, and frankly, Pam deserved better.

But specifically, we're gonna talk about a way to finance home improvements called PACE.

It was originally designed to provide low-income homeowners a way to make their homes more environmentally friendly.

And to explain more, here is Netflix's very own Barack Obama.

We're making it easier for American homeowners to take advantage of a new program called PACE.

If you make the switch to solar, you can now install solar panels or retrofit your home to make it more energy efficient at no upfront cost, all by paying for them through the future savings on your energy bills.

Well, that sounds like a great program for homeowners.

And by the way, if you are under the age of 35, let me quickly clear up your confusion here.

A homeowner is a person who owns their home.

You know how your parents live in a house, but they don't have a landlord, and they don't have to sign a lease, and they don't pay a security deposit?

Don't worry, though, that will never be you.

America decided a few years back that if you're born after 1985, you don't get to own a house.

You do get to rent apartments for the rest of your life, though, as you gradually pay off the student loan debts from your liberal arts degree.

So, if you're under 35, you can actually skip this story.

Go fight with a 15-year-old on TikTok about the coolest way to part your hair.

PACE, though, stands for Property Assessed Clean Energy.

And The idea originated in California as the brainchild of this guy, Cisco DeVries, the former chief of staff to the mayor of Berkeley, who described himself as a capitalist hippie, which absolutely tracks for a guy whose name sounds like he's about to gentrify jazz.

There are actually 2 PACE programs, 1 for commercial properties and 1 for residential ones.

And we're gonna focus on the second 1, where there are huge problems.

Because after a trial run in Berkeley, the residential PACE program exploded across California.

In just the second half of 2014, lenders issued 148 million dollars in PACE loans.

And just a year later, as more counties across the state signed on, that number quadrupled to over half a billion dollars.

Right now, these 3 states have active PACE programs, but plans to expand to other states, including New York and Ohio, are very much in development.

And that should be a cause for real concern.

Because when PACE loans go wrong, they can go very wrong.

Take this California couple who ended up losing their home.

They say their problem started when a contractor turned up at their house pitching a PACE-funded improvement.

Their house badly needed a new roof, so they signed up.

Once he saw the roof, he says, well, it looks like this wall...

Jumped our mortgage payments, $600 a month.

Our life began to unravel at that very moment.

My thought is that we're gonna wind up in a tent.

Look, there are some situations where the idea of ending up in a tent is exciting.

If you're going camping, for example, or seeing the circus, or walking into the forest to finally abandon society forever and live among the trees.

But it shouldn't really be the desired outcome when you're just trying to fix your fucking roof.

Unfortunately, the story of PACE is a cautionary tale about how good intentions, when not paired with careful, smart design, can end in disaster.

And given that Joe Biden promoted the program as vice president and promised on his campaign website to expand the utilization of PACE, it seemed that tonight it might be a good idea to take a look at it.

Because basically, It's money designated for repairs or upgrades to your house.

The average PACE loan is about $25,000, and repayment periods usually stretch between 5 and 25 years.

But the way you pay it back is both unusual and very complicated.

Even though I've already called it a loan, it's technically a lien on your house.

A kind of debt directly attached to your property, in which, in this instance, you gradually pay back through your property taxes.

And ads promoting Pace have liked to put that fact front and center.

Your house is actually borrowing the money, and not you personally.

It's more like the house is getting the financing, because payments are made through an assessment on your property taxes.

It's as if Your house is borrowing the money, not you personally.

Okay, stop, because there is an obvious problem there.

Even if your house is technically borrowing the money, that money comes in the form of property taxes, and you pay for those.

Your house doesn't, because houses can't pay taxes.

It's the equivalent of buying a new sweater and telling the cashier, oh, the sales tax is on the sweater, so the sweater will pay that.

That's not how taxes or indeed sweaters work.

Those are private companies hired by cities to handle the logistics of the program, including providing financing and approving loans.

Some of the biggest players are these companies, the largest of which is called Y Green, which is just objectively a stupid name.

It sounds like a contemplative jazz album from Kermit the Frog.

But the real origin of the name is somehow even stupider, as a YGREEN representative explained during a local sponsored content segment.

It's easy to remember because it's actually energy spelled backwards.

Most people don't figure that out, but a couple of reminders, they usually get it.

Yeah, of course they get it, because it's not a hard thing to get.

YGREEN basically put about as much effort into their name as trading spaces put into Pam's family room.

There are a number of big flaws in how PACE programs are designed.

While companies like YGreen may promote PACE through ads and SponCon segments, the majority of actual sales to customers are done by individual contractors who'll be performing the renovations.

And think about what that means for a moment.

The people with responsibility of pitching a very complicated financial product, a pseudo loan that's technically a tax lien, are contractors whose training is not in finance.

No judgment here, it's just people are trained for different things.

It's the same reason that you don't ask a banker to re-grout your bathroom tile.

In practice, the way it usually works is, a contractor will approach you, maybe outside a shopping center, or at your church, or even knocking directly on your door.

And they'll offer to install, let's say, solar panels, or a new air conditioner, with the promise of no money down, and that, crucially, the improvements should pay for themselves through huge future savings.

The thing is, though, contractors are not always completely straight with customers about just how much their property taxes could go up.

They came to my house, they said that I needed the solar system, that it was gonna dramatically reduce my light bills.

When my property taxes came back in November, I went from $600 property taxes to almost $10,000 property taxes, which I could not pay.

The only time the value of something should change that dramatically is if Elon Musk shits out a tweet about it.

We truly live in the best possible system.

But also, it seems pretty unlikely solar panels are gonna cut her electricity bill by $10,000.

In fact, for all of the talk about how PACE improvements will pay for themselves, there is a fundamental flaw there, as this professor who has studied them will tell you.

A foundational flaw of the PACE program is that there is no independent energy audit required of a home before home contractors can start suggesting all sorts of things to do to it.

Some of these things are maybe put in incredibly expensive high-efficiency windows, even though the existing windows are not the main source of energy waste, and you would do much better just caulking a few leaks.

There is no independent party required to assess whether your renovations would cut close to enough energy costs to be worth it.

Which really seems like something you'd want verified by a third party.

It's the same reason that we have independent health inspectors put a letter grade outside a restaurant, as opposed to letting the owner put up his own sign that says, trust me, it's clean.

And that actually brings us to the next key quirk of the PACE program.

Because if those energy savings don't cover the additional taxes you incur, you could be in big trouble.

Remember those ads about how your house pays for the financing, not you?

What that means is your house is now the collateral for the debt.

So if things go wrong, you could well lose your home and, you know, end up in a tent.

And there are far fewer protections to prevent that than you might think.

Because this is a tax lien rather than a loan, the financing isn't subject to the same consumer protections that you would get with a standard home loan.

So, for instance, in Florida, the state doesn't require PACE providers to explain the cost of improvements, check if the people who sign up can actually afford to pay back the money, or if they even understand the terms.

And Pace administrators will insist that they do all of those things anyway.

That they're diligent about vetting homeowners, the projects that they take on, and their ability to repay.

But there are so many examples of failures to do that.

Thanks to Pace, 1 Missouri homeowner wound up with $25,000 of debt on a home that was appraised by the city at the time at just $8,400.

And if at this point you're wondering why on Earth people sign up for these loans, it's because they're often presented as a government program, 1 that remember, President Obama promoted, which might instill a false sense of security.

They did mention a government program, and that's why you hear government, you think this is an awesome deal.

And you don't expect what happened to happen.

In a hidden camera investigation last May, we caught contractors touting claims of government programs.

So because of what you have going on, this government problem could actually help you.

When we showed up, the sales pitch was over, and they had some parting words.

that reporter, who was clearly just doing his job,

and was then met with a man berating him from his compact Toyota.

But think of it this way, at least now he knows what it's like to be a woman on the street who doesn't smile back.

And if all of this is starting to feel potentially predatory, that's because it often is.

And if you know anything about the history of predatory lending, it will not remotely surprise you to learn that an analysis of

the largest markets for PACE in Florida found that many of those with the highest debt burdens under PACE financing were found to be in majority-minority zones.

And it doesn't stop there, because contractors have also been accused of targeting neighborhoods of non-English speakers, senior citizens, and even those with intellectual disabilities, like this man, who as his lawyer points out, absolutely did not understand what he was signing up for.

It's very apparent from speaking with him that he doesn't understand these loans.

He doesn't understand the contracts that he entered into.

He had kitchen remodeling done, and he doesn't even cook.

He wants someone to talk to, so he invites them in, he talks to them, and they talk him into, hey, you need these windows replaced, you need your kitchen remodeled.

Look, I get that you're on his side, and I do appreciate that, but your client is sitting right there.

Someone should, at the very least, have thought to move that interview outside.

The number 1 rule of talking about someone behind their back is that their back should not be anywhere in your immediate vicinity.

And companies routinely defend themselves by arguing that they disclose everything clearly, and that people simply shouldn't sign these contracts if they can't understand them.

But that's a little disingenuous, when their whole operation so often emphasizes speed over slow, deliberative consideration.

These companies' websites brag about their super-fast approvals or their speedy approval process, or make claims like, get approved for white green financing in 30 minutes or less.

And the clear implication there is you can basically get your money like that.

I snapped my fingers without really thinking.

Actually, what are you up to right now, George?

The point is, though, a common sales tactic here is fast approvals.

Contractors often go door-to-door with a tablet, encouraging people to sign electronically.

And in 1 company's video, a contractor talks openly about just how fast the e-sign process is.

I just take the people to the adopt and sign portion of it, have them pick a signature, sign all the remaining pages, and we're done in just a matter of minutes.

I was in a house in Rialto, patio door was open behind me, the rain was pouring, the TV was on loud, 3 dogs barking, 4 kids yelling, and we got through it, and I fell in love with the e-sign program after that.

Although I'm not sure, look how easy it was to get this stressed out homeowner to sign a legally binding document is quite the flex he seems to think it is.

There are indeed several things you can do in a matter of minutes while 4 children are screaming and 3 dogs are barking in the background.

You can schedule a grocery delivery or have a tense eye contact only argument with your spouse, or like an Instagram post from an ex announcing they're making music now, then find that ex's music on SoundCloud, then send that ex's new songs to your group thread, then watch as they mercilessly tear Tevis' amateur EDM tracks a new arsehole.

All of that can be accomplished under those chaotic circumstances, but signing up for a massive lean on your house from a guy who is in love with his iPad probably shouldn't be.

Because this isn't like agreeing to the terms and conditions of an iTunes update.

This is like sitting across the table from a banker, potentially signing your house away.

The problem is, the incentives just aren't really there for contractors to make sure that the people that they're selling to can actually pay back the loans they're taking on, especially because in the final quirk of this program that makes it so dangerous, the PACE loan isn't just a lien on your house, it's what's called a priority lien.

Meaning that, in the event of a foreclosure, PACE lenders get to collect their money first ahead of the mortgage lender or anyone else.

The fact that that's the case enables companies like Y Green to bundle that debt together and sell it on Wall Street as a very safe investment because for those investors, it's a near guaranteed return.

But for homeowners themselves, it can spell complete disaster.

For 1 thing, it can make it much harder to sell your house because no 1 wants to buy a house where they lean on it for tens of thousands of dollars for renovations that might have been done a decade ago.

If you are house hunting and you find that out, it's like hearing the realtor say, here's the garage slash meth lab, or here's the basement where the kidnapped kids were chained up, or here are the popcorn ceilings.

It immediately kills any appeal the House ever held.

And it's not just homeowners raising the alarm here.

That priority lien placement is the primary reason why, in 2010, Fannie Mae and Freddie Mac stopped backing mortgages on homes that had PACE loans.

And this is yet another potentially devastating consequence to a system with no real accountability baked in.

Here is their contractor explaining why none of what happened to them is his fault.

Did you, as a contractor, though, ever confirm if they had the ability to pay, because this is an older couple on fixed income.

They say there's no way they could have paid for the work that you took on in their house.

Well, there's a lot of passing the buck here because...

What you should do is talk to Wygreen, who they had the contract with.

Well, hold on there, because it's pretty bold to claim there's no passing the buck, only to immediately then pass the buck.

It harkens back to that famous sign in Harry Truman's office, the buck stops here, with Larry down the hall.

He's the 1 who handles all the paperwork.

The point is, every player here is perpetuating a cycle of 0 accountability.

The pace administrators blame the contractors, the contractors blame the administrators, and sometimes, the finger of blame gets pointed directly at the customers themselves.

Because here is where, legally, I have to tell you that Wygreen, which is energy backwards, by the way, it's very clever, insists that they have rigorous disclosure practices, exercise robust oversight over contractors, and have never personally foreclosed on a home.

They also insist that that couple received all the appropriate financing documents, and that they, not Wygreen, selected the contractors to work on their house.

Sort of implying that it was all their fault.

Which is pretty hard to take, given that Wygreen selects which contractors it allows into its program.

If your seafood restaurant sells tainted lobsters, they shouldn't get to shrug it off by saying, well, you picked the 1 you wanted out of the tank, when they put those lobsters in there in the fucking first place.

And companies are always going to insist that this is just a problem of a few bad Apple contractors, and that they are always improving their processes.

But I would argue, the flaws of this program are baked into how it operates.

And no 1 knows this better than tax collectors, because they are the ones who end up having to collect on the debts homeowners rack up.

And they can be the ones having to do the foreclosures.

Just listen to this Missouri tax collector begging his county to get rid of its PACE program just last month.

I can tell you what the facts are gonna be.

The more of these that you have, some percentage of the people will lose their houses.

And you can make the consumer protections better, and you can make them a little more rigorous.

But at the end of the day, some people will have their homes taken from them.

I think the bottom line is that there is no circumstance, in my opinion, in which it makes sense to offer the county's power to take your house in return for getting you money to buy a new air conditioner or a solar panel or whatever it may be.

Nobody in this country should be losing their home because of an air conditioner.

They should be losing their home because of unexpected medical bills.

And all of this may be about to come to a head if foreclosures begin to rise in the wake of the pandemic.

In fact, 1 Florida tax collector has even warned that Pace will become Florida's next mortgage crisis if we're not careful, which is chilling.

Because the conditions are prime for a disaster, but it seems like we're not doing anything to stop it.

It's like how we inexplicably let Harrison Ford continue to fly planes.

We all know what's going to happen somebody do something before it's too late.

Well, we could try some reforms like stopping door-to-door sales, but the truth is, as that guy said, people could still end up losing their homes.

The tougher question might be whether or not reform is even worth it.

Because for the record, PACE isn't even the only way that low-income homeowners can get help to finance green energy upgrades.

Nationally, there's the Low-Income Home Energy Assistance Program and the Federal Weatherization Assistance Program, or WAP, as it's known to absolutely no 1.

And in Florida and California specifically, there are several programs that can assist low-income households in energy funding.

The point here is, if you, your parents, or anyone you know is considering a PACE loan, you should definitely see if you or they are eligible for programs like these first.

And if you live in a county that is thinking of implementing a PACE program with for-profit administrators, do whatever you can to stop it.

Because the fact is, this business model is fundamentally flawed.

And I'm not saying that affordable clean energy isn't something we should be investing in.

But we shouldn't be putting vulnerable people in a position where they are risking their homes.

Sadly, this is yet another example where a well-meaning public program has been corrupted by the presence of private companies.

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