PACE: Last Week Tonight with John Oliver (HBO)

moving on 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 we are in the room okay open your eyes and see your new family room wow i'm gonna have to leave the room wow that's a shame 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 because why is that fireplace opaque 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 going to 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 here's how it works 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 they don't rent it the house belongs to them like your parents 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 it's like that it's their house don't worry though that will never be you you're not allowed to do that america decided a few years back that if you were 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 that's the thing that you get to do so if you're under 35 you can actually skip this story don't even worry about it go fight with a 15 year old on tick tock about the coolest way to park your hair your life is sad and that's okay pace though stands for property assessed clean energy and the idea originated in california as the brainchild of this guy cisco de vries the former chief of staff to the mayor of berkeley who describes himself as a capitalist hippie which absolutely tracks for a guy whose name sounds like he's about to gentrify jazz there are actually two pace programs one for commercial properties and one for residential ones and we're going to focus on the second one 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 three 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 i thought it was a wonderful thing it's just really a godsend one thing led to another once he saw the roof he says well looks like this wall then it was the floor well i think there's some damage there then a few months later jumped our mortgage payments 600 a month my life began to unravel at that very moment my thought is that we're going to run 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 roof unfortunately the story of pace is a cautionary tale about how good intentions were 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 and let's start with how pace works 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 like 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 because houses don't have money because they're houses 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 ads are from pace administrators those are private companies hired by cities to handle the logistics of the programme including providing financing and approving loans some of the biggest players are these companies the largest of which is called wygreen 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 white green representative explained during a local sponsored content segment why green i love this it's easy to remember because it's actually energy spelled backwards exactly most people don't figure that out but a couple reminders they usually get it yeah of course they get it because it's not a hard thing to get why green 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 and here is one of the first key issues while companies like wygreen may promote pace through ads and sponcon segments the majority of actual sales to customers are done by individual contractors who will 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 regrout your bathroom tile they're going to make a mess 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 going to dramatically reduce my light bills when my properties taxes came back in november i had i went from 600 uh property taxes to almost 10 000 property taxes which i could not pay 600 to 10 000 that is not good 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 going to cut her electricity bill by ten thousand dollars 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 exactly 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 one 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 one 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 this government problem could actually help you oh that is a government yeah when we showed up the sales pitch was over and they had some parting words you sucked by the way look i'd say i felt bad for 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 one 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 gets meals on wheels he doesn't use his kitchen he's a nice guy 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 one 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 the 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 oh oh for sake i'm sorry george i snapped my fingers without really thinking you know i'm busy right i do i do actually what are you up to right now george anything fun yeah fair enough 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 one 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 signs portion of it have them pick a signature assign 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 three dogs barking four kids yelling and we got through it and i fell in love with the e-sign program after that oh i bet you did 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 four children are screaming and three 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 their making music now then find that x's music on soundcloud then send that x's new songs to your group thread then watch as they mercilessly tear tevez's amateur edm tracks a new all of that can be accomplished under those chaotic circumstances but signing up for a massive lien 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 wygreen 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 one thing it can make it much harder to sell your house because no one wants to buy a house with a lien 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 realtors 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 lean 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 remember that california couple 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 a 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 i don't qualify people pace qualifies people well there's a lot of passing the buck here because no there's no passing the buck miss what you should do is talk to y green 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 one who handles all the paperwork you should really go talk to him the point is every player here is perpetuating a cycle of zero accountability the pace administrator is playing 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 why green which is energy backwards by the way it's very clever insist 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 why green 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 why green 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 one you wanted out of the tank when they put those lobsters in there in the 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 one 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 look at 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 going to 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 exactly 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 you know like an american 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 one 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 primed 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 so what can we do here 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 one and in florida and california specifically there are several programs that can 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 it absolutely is 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 and if they come to where you live you would be well advised to tell them to cuff foe it's actually off backwards most people don't figure that out but after a couple of reminders they usually get it you

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