PACE Snapshot

Morningstar DBRS' semiannual research series, the Property Assessed Clean Energy (PACE) Snapshot, provides insights on general industry developments as well as collateral performance trends underlying our publicly rated residential PACE (R-PACE) securitizations. In addition, it highlights some of the latest trends in the commercial PACE (C-PACE) sector.

-- The year has gotten off to a roaring start, with PACE asset-backed securities (ABS) issuance through the first six months of this year already besting the full-year total posted in 2024. PACE securitization volume in the first half of 2025 totaled approximately $990.3 million, topping the roughly $931.5 million issued in all of 2024, according to Morningstar DBRS estimates.
-- In general, delinquencies across our rated R-PACE securitizations have continued to remain in the 1% to 5% range.
-- Construction projects remain a high percentage of C-PACE financing requests, rather than completed projects, as construction financing remains expensive and illusive. This has delayed C-PACE execution as senior loans struggled to close due the continued high-interest rate environment, resistance to allowing higher priority debt to sit ahead of the first mortgage, and C-PACE funding projects in earlier stages of development. In some cases, Morningstar DBRS is observing C-PACE requests that are equal or even greater to the senior or construction loan amount.

"C-PACE securitization issuance is on track to have one of its best years yet, with volume expected to easily exceed $1.0 billion by year-end, a milestone achieved only twice before in its decade-long history," said Stephanie Chin, SVP, Structured Finance Research, Morningstar DBRS.