The revelation that the top securitizer of PACE loans was masking borrowers’ financial difficulties is a black eye for the rating agencies involved. But in fairness, they have little data to go on in this asset class.

Kroll Bond Rating Agency and DBRS both rated the bonds backed by Property Assessed Clean Energy loans, which are funded by local governments and repaid via an assessment on a homeowner’s tax bill. Yet they were not necessarily in a position to know that the venture capital-backed Renovate America made payments on behalf of some overstretched borrowers, as The Wall Street Journal reported last week.

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