CPACE CPACE Stakeholders and Participants 1 — Questions and Answers
Question 1: Which party in a CPACE transaction holds the senior lien on the property for the assessment amount?
- The CPACE lender/capital provider
- The property owner's mortgage lender
- The local government municipality (Correct answer)
- The energy contractor
Correct answer: The local government municipality
The local government municipality holds the senior lien on the property because CPACE assessments are structured as a tax lien on the real estate.
Question 2: What is the role of a CPACE program administrator?
- To finance the project directly with their own capital
- To manage program guidelines, underwrite projects, and coordinate between stakeholders (Correct answer)
- To perform all construction and installation work
- To purchase the property after project completion
Correct answer: To manage program guidelines, underwrite projects, and coordinate between stakeholders
A CPACE program administrator manages program guidelines, underwrites projects, and coordinates among property owners, lenders, and capital providers.
Question 3: Why must existing mortgage lenders typically provide consent before a CPACE assessment is placed on a property?
- Because CPACE lenders pay the mortgage off at closing
- Because the CPACE assessment lien is senior to the existing mortgage (Correct answer)
- Because CPACE requires the mortgage to be refinanced
- Because CPACE reduces the property's market value
Correct answer: Because the CPACE assessment lien is senior to the existing mortgage
Existing mortgage lenders must consent because the CPACE lien is senior to their mortgage, which could affect their collateral position in a default.
Question 4: Which entity typically originates and structures a CPACE transaction before selling it to an institutional investor?
- The property owner
- A CPACE capital provider or originator (Correct answer)
- The state energy office
- The general contractor
Correct answer: A CPACE capital provider or originator
A CPACE capital provider or originator structures and underwrites the deal, often selling the resulting assessment bond to institutional investors.
Question 5: What is the primary responsibility of a CPACE servicer?
- Installing energy equipment on the property
- Collecting assessment payments and remitting funds to investors (Correct answer)
- Approving building permits for improvements
- Providing the initial capital for CPACE projects
Correct answer: Collecting assessment payments and remitting funds to investors
A CPACE servicer collects periodic assessment payments from property owners and remits the appropriate funds to capital providers or investors.
Question 6: Which type of professional is typically hired to verify that a CPACE project's energy savings projections are reasonable before funding?
- A real estate appraiser
- An independent energy engineer or consultant (Correct answer)
- A mortgage underwriter
- A tax attorney
Correct answer: An independent energy engineer or consultant
An independent energy engineer or consultant reviews and validates the energy savings projections to ensure the project meets CPACE technical requirements.
CPACE CPACE Stakeholders and Participants 1
Which party in a CPACE transaction holds the senior lien on the property for the assessment amount?