Financing Models Flashcards
7 cards from real CPACE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financing Models flashcards as text
What distinguishes a 'voluntary assessment' from a 'mandatory assessment' in the context of PACE programs?
Answer: Voluntary assessments require the property owner to opt in, whereas mandatory assessments apply automatically to qualifying properties
C-PACE programs universally use voluntary assessments, meaning property owners affirmatively choose to participate rather than being automatically enrolled.
A C-PACE financier prices a project at 7.5% fixed over 20 years. Which risk factor most directly drives the rate above benchmark Treasury yields?
Answer: Illiquidity premium and subordination to senior mortgage in foreclosure proceeds
PACE instruments are less liquid than Treasuries and face subordination uncertainty in foreclosure, justifying a spread above risk-free rates.
How does the 'super-priority' lien position of PACE assessments compare to that of property taxes in most states?
Answer: Property taxes hold true super-priority while PACE assessments are generally co-equal or subordinate to senior mortgage liens depending on state law
While PACE is often described as having lien priority, state laws vary widely, and in many states PACE is subordinate to the senior mortgage lien, unlike true property tax priority.
A commercial property owner in a state that requires mortgage lender consent for PACE financing fails to obtain that consent. What happens to the PACE application?
Answer: The application cannot proceed; lender consent is a legal prerequisite in that state
In states requiring lender consent, PACE financing legally cannot close without the existing mortgage holder's written approval, making consent a hard stop.
Which metric is most commonly used by C-PACE lenders to evaluate the economic merit of the proposed improvements?
Answer: Savings-to-investment ratio (SIR) comparing lifetime energy savings to project cost
SIR measures whether lifetime energy savings exceed the project cost, providing a straightforward test of whether the investment makes economic sense.
In a C-PACE financing with a 15-year term at a fixed rate, what happens to the outstanding PACE assessment if the property is sold in year 7?
Answer: The remaining assessment balance transfers to the new owner as part of the property conveyance
PACE assessments are property-based obligations that run with the land; upon sale the remaining balance transfers automatically to the incoming property owner.
What is a 'project completion guarantee' in C-PACE financing, and who typically provides it?
Answer: A contractual assurance by the contractor or a surety bond ensuring the improvement is finished as specified
Project completion guarantees protect the lender and property owner by ensuring the contractor finishes the work as agreed, typically backed by performance bonds or contractor warranties.