PACE Loans Starting To Look Like Pre-Crisis Subprime

They say that history does not repeat itself, but in the case of lending, it sure does seem to rhyme.

Forbes said Wednesday (Jan. 11) that a type of loan, titled the Property Assessed Clean Energy loan, or PACE for short, is among the relatively fastest-growing debt — a burgeoning market that may conjure up echoes of the subprime lending market, pre-crisis, of course.

Those loans are put in place by governments at the local level and are earmarked to help homeowners embrace energy efficiency with the adoption of solar panels and other technologies.

The loans themselves have, in total, garnered $3.4 billion for projects geared toward residential renovations. Forbes said that the loan tally, according to some projections, is slated to as much as double over the next year, citing The Wall Street Journal.

And here is where the echo of the pre-crisis subprime loan kicks in. Lenders tend to skirt really scrutinizing the credit profiles and creditworthiness of the would-be — and, ultimately, will-be — borrowers, and the loans typically do not have mandated down payments. Lax credit checks with no money down … now, where have we seen that before?