The Pre-PACE Program

Because of legislative setbacks and delays, PACE is still not available in New Jersey. And we’re not the only state where, for one reason or another, what once seemed very promising is still lagging behind. PACE legislation has now passed in 33 states and D.C. But truly successful implementation is limited to a handful of states, including California, Connecticut, and Florida, with scattered projects in Michigan, Ohio, Missouri, and Texas. And some nearby states, including Pennsylvania and Delaware, have yet to pass a PACE statute of any kind.

Because of these continuing roadblocks, we at New Jersey PACE have spent more than a year exploring some innovative alternatives.

Finally, we have a solution. One of the largest impact investing firms in the country has agreed to finance a demonstration program of an innovative new approach to funding PACE-type loans. It’s so new, in fact, that the name hasn’t even been settled yet. Originally called DREAM financing (for “Deed-registered Resiliency and Energy Affordable Measures” [or “Alternative Mortgage”]), it’s now also NICE (“New Intercreditor for Clean Energy”), and MERIT (“Mortgage for Energy and Resiliency Intercreditor Transaction”). Whatever you call it though — it’s about to make a big splash not just in New Jersey but just about everywhere in the country that’s still waiting for PACE.

Why? Because it doesn’t need state legislative approval or municipal or county ordinances; it’s available today. It works very much like PACE, except it’s based on a special type of mortgage that’s attached to the property, gives investors the same level of priority as PACE, and offers the same benefits. If there’s an existing mortgage on the property, the program requires an Intercreditor Agreement that gives the “pre-PACE lender” certain rights and privileges, while protecting the existing mortgage holder(s).

This goes one step beyond getting mortgage lender consent, which is now pretty much de rigueur for commercial PACE projects anyway. But fundamentally it involves the same trade-off, which is that the first mortgage lender gives priority to the current payments on the pre-PACE loans, while reserving all other rights and getting an enhanced asset as collateral for the principal mortgage. This is done through an Intercreditor Agreement. The mortgage lender also agrees to maintain and transfer this Agreement to any future lender.

And we’re now working with other lenders to make these options available to finance a wide range of clean energy and resiliency projects both in New Jersey and in the rest of the country. So we’re finally ready to start accepting applications.

The best way to submit a project is through our Pre-Application process — it’s free, and can be completed in under half an hour. If you’re a contractor or installer, we’d also like you to register with us, and tell us a bit about your company and your experience. If you’re a capital provider, you can fill out our Capital Provider Questionnaire, and we’ll contact you to discuss the program.

Most what you’ll find on this site regarding PACE, such as the eligibility criteria for properties and projects, the requirement for mortgage lender consent, and so on, will also apply to Pre-PACE financing. What won’t apply at this time are the sections that apply to municipalities and counties. But once PACE becomes available, some of the projects currently being financed may, at the option of the lender, be converted to PACE Assessments.