As Kirsten Grind’s reporting on Property Assessed Clean Energy (PACE) expanded in the Wall Street Journal, the mortgage banking lobby’s anti-PACE talking points were embraced.
A new analysis by CleanTechnica of Wall Street Journal reporter Kirsten Grind’s series of six articles on the popular, energy-efficiency home improvement finance program known as PACE (Property Assessed Clean Energy) raises significant questions of accuracy and balance. In Ms. Grind’s over 6,700 words of reporting and tweeting, she:
- Used anti-PACE arguments initiated by the mortgage banking industry 26 times.
- Presented no homeowners that are satisfied with PACE even though responses to basic public records requests show that homeowner praise is easy to find. (Note that PACE has financed improvements to more than 175,000 homes.)
- Ignored findings of an impartial Morningstar study that undercut tenets of her stories.
- Asserted that legislative momentum against PACE was “building” based on a bill introduced by a freshman senator that had only three co-sponsors, a bill that happened to be introduced on the same day her story ran.
What is PACE?
PACE provides homeowners upfront financing for energy efficiency, water conservation, renewable energy, and hurricane protection improvements that are paid back through higher property tax assessments. In other words, instead of having to pay for a clean energy, energy efficiency, water conservation, or hurricane protection project all at once or having to get a bank loan to cover it, the consumer can receive the money from an approved source and then pay it back over a period of time via higher property taxes.
More than 30 states have enacted PACE legislation and 19 states plus D.C. have active programs. Most are for commercial properties. Only three states — California, Florida, and Missouri — have residential PACE programs. But in just those three states, proponents claim that 35,000 jobs have been created and 175,000 homes have been upgraded.
Investigation of Campaign to Destroy Homeowner Access to PACE
Reporting by the watchdog blog Checks and Balances Project has revealed an aggressive lobbying and influence effort to block homeowner access to PACE. This drive was initiated by a potent combination of the realtors’ lobby and the mortgage banking lobby, which see PACE financing originators as a disruptive threat. Essentially, mortgage bankers want to originate all of the financing.
The first evidence we have identified is from a July 19, 2016, statement from the Mortgage Bankers Association (MBA) in which Senior Vice President Pete Mills states:
“Alternative means to finance energy efficient improvements already exist that don’t pose the same risks to consumers and taxpayers.”
The following month, MBA published a study, sent a letter to federal agencies, and issued this press release. Among the dubious arguments laid out by the MBA are these:
- “[T]he existing PACE dynamics heighten the risk of borrower delinquency.”
- “Borrowers may not fully understand the consequences of assuming an increased financial obligation on their tax bill.”
- “PACE loans are not typically accompanied by federal Consumer Financial Protection Bureau disclosures and protections associated with home mortgages, including the new Know Before You Owe disclosures, right of rescission protections or the Ability to Repay standards.”
We’ll get into this more below, but let’s just briefly recognize that any functioning adult can understand the simple premise of PACE financing — you get clean energy or energy efficiency project costs spread out over time via increases to future property taxes. There’s no reason they should think these projects are free.
Timeline of Kirsten Grind’s Reporting
Article #1: Jan. 10, 2017
Ms. Grind’s first article on PACE was titled, “America’s Fastest Growing Loan Category Has Eerie Echoes of Sub-Prime Crisis.” One day later, she posted her first PACE-related tweet.
A month later, a definitive research analysis from Morningstar — a respected source for many financial websites, publications, and investors — refuted Grind’s assertions. (Note: We add emphasis to the following three paragraphs.)
“Misconception #1: Not Using FICO is Worrisome
“Morningstar has not observed any major PACE originators pursuing originations to borrowers with weaker credit. Indeed, borrowers associated with GoodGreen 2016-1 Trust, rated by Morningstar in November, had a weighted average FICO score above 700.”
“Misconception #2: PACE Sharply Increases Risk to the Underlying Mortgage
“While a PACE assessment increases a borrower’s debt, Morningstar believes these financed improvements often increase a property’s resale value. Moreover, the cost savings from such enhancements can partially offset a homeowner’s debt burden. Property owners often achieve cost savings such as lower energy and water bills from PACE-financed improvements and savings from the tax-deductible interest portion of PACE payments.”
“Misconception #3: Industry Lacks Oversight
Analysis by Morningstar published in February 2017 states, “Morningstar believes that the PACE program’s oversight by government authorities and the evolving consumer-disclosure framework will increase transparency and consumer protection.”
In none of Grind’s subsequent articles or tweets has she mentioned the February 2017 Morningstar report. In fact, after the report, she has doubled down on the assertions in her first story that Morningstar undercut.
Article #2: March 8, 2017
But later that day, The Journal posted a correction to Grind’s story, stating that her original delinquency rate claims were inflated by 200+%. The correction stated:
“The delinquency rate for Renovate America’s lending business in parts of California for the 2014-15 tax year was 0.48%. An earlier version of this article included a graph that incorrectly indicated the rate was 1.52%.”
Article #3: April 5, 2017
Despite that correction, Grind had a new article the following month. It was titled, “Green Energy PACE Home Loans Catch Congress’s Ire.” Following that, she tweeted that “momentum is building” in the US Senate to “rein in” PACE.
This 1,100 plus-word story’s entire premise — that there was “momentum” in Congress to reign in PACE — was based solely on one bill introduced by freshman Senator Tom Cotton (R-Ark.) and her own articles. That the bill was introduced on the same day as Grind’s story strongly suggests advanced pitching and collaboration by the bill’s main lobbying backer, the mortgage banking lobby, or Senator Cotton’s office — or both.
Why would Sen. Cotton be so interested? Residential PACE isn’t available in his home state and affects none of his constituents. Who is he working for? Well, the Senator has received tremendous financial support from the real estate and mortgage banking industry.
- Cotton has accepted more than $490,000 from the real estate industry and $390,000 from commercial banks.
- In 2014, he was the 9th highest recipient of mortgage bank contributions and the 2nd highest recipient of contributions from commercial banks.
- Senator Cotton plus his two original co-sponsors, Marco Rubio of Florida and John Boozman also of Arkansas, have received over $6,000,000 (that’s $6 million) from the real estate industry, mortgage banks, and commercial banks.
Ms. Grind never noted the senators’ financial support from the mortgage banking and real estate lobbies in her “Catch Congress’s Ire” article or in any of her other articles or tweets. To date, there are only three co-sponsors for the bill and a single hearing was held in May 2017.
In comparison to her detailed 25 paragraphs that focused on Senator Cotton’s anti-PACE bill, Grind has written only two sentences about California’s progress to strengthen consumer protections for PACE financing programs. California’s residential PACE programs are the largest in the nation.
On top of this, there is PACE legislation in the US Senate, sponsored by Senator Mike Crapo (R-ID) and Senator Michael Bennet (D-CO), that looks similar to the California consumer protections. It has 23 co-sponsors and strong bipartisan support. She has not covered this legislation.
Article #4: August 15, 2017
Ms. Grind’s next article in the series was titled, “More Borrowers Are Defaulting on Their ‘Green’ PACE Loans.” Defaults, claimed Grind, were “rising sharply.”
In response, Rick Bishop, Executive Director of the Western Riverside Council of Governments (WRCOG), issued a statement 10 days later that sharply contradicted Grind’s reporting:
“[Ms. Grind’s] article reports that the raw number of PACE defaults increased from 245 to 1,100 from 2015-16 to 2016-17, but doesn’t even mention that the number of people who participated in PACE increased by more than 53,000 over that period, as reported by the California Alternative Energy and Transportation Financing Authority. That’s an important piece of information to omit because it misleads the reader into concluding that the increase in delinquencies is based on a static number of properties, instead of a pool of properties that increased significantly. We have found that property tax delinquency rates for PACE homes are actually lower than the average — and like all tax payments, initial rates have ‘cured’ or improved in subsequent months as more homeowners get current on their payments.” [emphasis added]
It’s not as if Grind had never heard of Rick Bishop. She quoted him in her Jan. 10 article when he said they were hearing “stories from people who feel like they’ve been misinformed in some fashion.” Then, she referred to WRCOG as a “government group [that] tries to resolve problems for borrowers.” In fact, WRCOG is the largest bond issuer for PACE financing in the country.
Recent analysis by the credit agency DBRS also shows that Grind’s reporting is undercut by empirical analysis. The report shows that PACE delinquencies are lower than tax delinquency levels for general aggregate property tax and single-family residential only property levels.
Neither Mr. Bishop nor CleanTechnica are the first to challenge inaccuracies and omissions in Ms. Grind’s writing. Pulitzer Prize–winning Washington Post business columnist Steve Pearlstein reviewed her book, The Lost Bank, and wrote:
“The book would have benefited from … more thorough and sophisticated effort to connect its story to what was going on elsewhere in the financial system.
“Grind is much more comfortable telling stories than drawing broad analytical conclusions about finance, corporate culture or public policy.”
Article #5: Sept. 26, 2017
Ms. Grind’s next article was “FBI, SEC Look Into Business Practices of Country’s Largest ‘Green’ Lender.” It concerns the largest provider of residential PACE financing. The head, lead, and photograph in the story all assert that the company is being investigated by the FBI. This story ran despite Grind having to acknowledge:
“The purpose of the FBI inquiry couldn’t be determined.”
It also ran despite being told by the company that:
“In conversations with federal law-enforcement authorities and prosecutors as recently as this past week, we have been repeatedly assured that Renovate America is not a subject or target of that or any federal investigation.”
Ms. Grind based this sensational story on a “document” that she was able to review.
Article #6: Oct. 3, 2017
Kirstin Grind’s most recent article on PACE, “Renovate America Names New CEO, Announces Outside Review Amid Regulatory Scrutiny,” was followed by a self-congratulatory “after our report” tweet:
CEO is demoted, co-founder out at largest 'green' lender Renovate America after our report on FBI/SEC scrutiny https://t.co/WBh18c3C3Q
— Kirsten Grind (@KirstenGrind) October 3, 2017
The same day as Ms. Grind’s article and tweets, California Governor Jerry Brown signed into law two PACE reform bills. The first, introduced on Feb. 17, 2017, by a California Assemblymember, was debated throughout the summer. It establishes the state Department of Business Oversight as regulator for PACE lenders and strengthens overall regulation, including an income requirement for homeowners and minimum training for contractors. The second bill, sponsored by state Senator Nancy Skinner (D-9), codifies additional reforms.
Although there are 9 PACE residential programs active in California with over $2 billion in financing, compared to one program in Missouri and three in Florida, Ms. Grind has ignored PACE legislation in the Golden State except for two sentences on April 5, and has completely ignored actual momentum on federal bipartisan PACE legislation that has 23 cosponsors.
The city of Bakersfield, California, was the center of anti-PACE efforts last summer. The flurry of anti-PACE activity prompted the Checks & Balances Project (C&BP) to file twin lawsuits on Aug. 10, 2017, against the City of Bakersfield and Kern County that alleged violations of California’s open meeting laws and backroom deals to kill the PACE financing program. The suit is the first filed in the wake of the California Supreme Court ruling won by C&BP’s public records law attorney, Karl Olsen. The case established that when politicians use their personal cell phones to conduct public business, the resulting records are covered by public records requests.
The lawsuits are the first to seek to enforce this ruling, to the benefit of public and media access to public records. It’s been covered in the Los Angeles Times, Bakersfield.com, and most of Bakersfield’s television news stations. But nothing from Kirsten Grind, not even a tweet.
Complete Twitter Stream
From Jan. 10, 2017, when Ms. Grind first retweeted an anti-PACE article, to her most recent tweet to date on the topic on Oct. 3, 2017, she has taken a uniformly negative tone toward the energy efficiency program. Here, she mocks a California lawmaker for “hilariously” asserting that there are few problems with PACE:
Hilariously, a CA lawmaker in this @latimesbiz story says there has been "few problems" with energy-efficient loans https://t.co/pKXzZDCawM
— Kirsten Grind (@KirstenGrind) June 5, 2017
You can view records of Ms. Grind’s PACE-related Twitter stream here.
Questions to Kirsten Grind Go Unanswered
To understand what we might be missing, we wanted to ask Ms. Grind the following questions:
- In 6,769 words in your articles and tweets, none of the homeowners you present are satisfied with PACE financing. However, a basic review of public records from the City of Bakersfield and Kern County has revealed plenty of emails and letters from satisfied PACE customers. What steps did you take to find opposing views?
- Were unhappy PACE customers provided to you by the mortgage banking or real estate lobbies, Roy LeLoach of DC Strategies, or other lobbyists opposing PACE?
- After your January 10th article, Morningstar issued a report the very next month that directly undercut three assertions in of your PACE coverage? You omitted mention of the report and instead have repeated the assertions in subsequent articles and tweets. Why?
- You downplayed the Western Riverside Council of Governments in your January article as a “‘government group [that] tries to resolve problems for borrowers.” In fact, it is the largest bond issuer for PACE financing in the country. Why did you mischaracterize them, and ignore their corrections to your reporting?
- In your reporting and tweets, you also ignore any mention of the public benefits from PACE, such as creation of numerous American jobs, greater home water and energy efficiency, hurricane protection, and expansion of solar energy. Why is that?
- Regarding your April 5th article on Senator Cotton’s PACE bill, do you still assert that “momentum is building” when, after 5 months, his bill has only 3 co-sponsors and has had only a single hearing?
- Why have you not even noted Sen. Cotton’s extensive financial support from the mortgage banking and other lobbies opposed to the PACE program? Is that not highly relevant to the bill and your reporting?
- How much do mortgage bankers and realtors advertise in the Wall Street Journal?
- Do you have a longstanding, personal relationship with Bakersfield realtor lobbyist Kim Schaefer? If so, what is the nature of that relationship?
I sent over questions 1–3 to Ms. Grind twice after briefly communicating via email about another PACE story. Unfortunately, Kirsten Grind did not answer those follow-up emails, so I did not proceed to sending over the remaining questions. WSJ editors also have not responded to an inquiry about questions 1–3.
Is Ms. Grind interested in covering the full PACE story? Or did she latch onto a negative and flawed storyline over one year ago and is now unwilling to follow the facts where they lead to correct the record?
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