Why More Mortgage Lenders Are Getting Comfortable with C-PACE
5 Reasons C-PACE Is Gaining Ground with Mortgage Lenders
Your borrower brings you a transaction with an experienced sponsor, a sound business plan, and a mortgage that works within your lending parameters. But the rest of the capital stack still needs to come together.
Then Commercial Property Assessed Clean Energy (C-PACE) financing enters the conversation.
If you have not worked with C-PACE before, its special assessment structure may raise questions about lien priority, underwriting, remedies, and lender consent.
Those questions are becoming increasingly relevant. C-PACE has surpassed $13 billion in cumulative U.S. originations, while annual financing volume reached more than $3.6 billion in 2025, up 63% from the prior year.[i] Enabling legislation is now in place in 40 states plus Washington, D.C.[ii]
As C-PACE has become a more established capital stack component, you are more likely to encounter it in the transactions you evaluate. Understanding how it works within a capital stack that includes your mortgage can help you determine when the structure makes sense.
Here are five reasons C-PACE is becoming more relevant to mortgage lenders.
1. C-PACE can give you another way to make the overall financing work
Your mortgage can make sense on its own and still depend on the rest of the capital stack coming together.
Traditionally, the capital beyond the mortgage may come from sources such as mezzanine debt and borrower equity. But the amount or cost of that capital can affect whether the transaction ultimately works for your borrower. If the equity requirement is difficult for the borrower to meet, or another source of financing creates payment obligations that make the overall structure less workable, an attractive mortgage opportunity can become difficult to execute.
For eligible project costs, C-PACE financing gives you and your borrower another option to consider. Its long-term, fixed-rate structure can help address a portion of the capital need while allowing you to maintain the mortgage amount, equity requirements, and underwriting parameters you are comfortable with.
2. A delinquency does not accelerate the full C-PACE assessment
C-PACE is repaid through a special assessment on the property. The priority of that assessment is likely to be one of your first considerations.
But there is an important distinction between the currently due assessment installment and the entire outstanding C-PACE assessment.
Non-acceleration is a core feature of C-PACE program design. State C-PACE statutes specify that the assessment should remain non-accelerating in a foreclosure, tax lien sale, or forfeiture.
If your borrower misses a C-PACE payment, the full remaining assessment does not become immediately due. The delinquent installment must be brought current, while future installments remain on their existing schedule, subject to applicable program requirements.
That distinction is particularly important when you consider lien priority. The entire outstanding C-PACE assessment does not suddenly become due ahead of your mortgage following a delinquency.
As the mortgage lender, you will generally also have notice and cure rights and may require C-PACE payments to be escrowed.
3. The payment structure can matter to your underwriting
How the capital beyond your mortgage is structured can affect the overall transaction you are underwriting.
C-PACE generally provides long-term, fixed-rate financing for eligible project costs, with terms that can extend 20 to 30 years. Compared with shorter-term financing used to fill the capital stack, that longer repayment period can result in a more manageable annual payment.
For you, the relevant question is not simply whether your borrower can source the additional capital. It is what the resulting payment obligations mean for the transaction’s financial profile and your underwriting. C-PACE gives you another structure to evaluate on that basis.
4. Your consent gives you a meaningful role in the structure
C-PACE does not simply appear in your borrower’s capital stack after the fact.
When your mortgage is part of the capital stack, your consent is required before C-PACE financing can close. That gives you the opportunity to underwrite and evaluate the proposed C-PACE financing in the context of your mortgage and the overall capital stack, including aggregate leverage, assessment payments, lien structure, documentation, servicing arrangements, and applicable rights and remedies.
Early coordination matters. Introducing the C-PACE provider while the capital stack is still being structured gives you time to evaluate how the proposed C-PACE financing fits within the overall structure, address your institution’s requirements, and work through consent before closing.
In CastleGreen’s experience, addressing these considerations early can make the consent and closing process more efficient and give all parties a clearer understanding of the structure from the outset.
5. You have more market experience to draw from
As C-PACE has become a more established component of commercial real estate capital stacks, lenders and their counsel have a growing body of market experience to draw from when evaluating its structure.
Consent, documentation, servicing, and other transaction considerations remain important, but lenders increasingly have established frameworks for evaluating them. That can help move the conversation from understanding C-PACE at a conceptual level to determining whether a proposed structure works for the transaction in front of you.
For CastleGreen, engaging with mortgage lenders early is an important part of that process. The goal is to structure C-PACE financing that works within the broader capital stack and addresses the requirements of the parties involved.
C-PACE is becoming a more established part of the capital stack conversation
C-PACE will not be the right fit for every transaction. But as its use grows, understanding how its structure affects leverage, payment obligations, and lien priority can help you evaluate when it may make sense for a transaction you are financing.
If you’re reviewing a transaction or looking to better understand how C-PACE can fit within a capital stack that includes your mortgage financing, learn more about how CastleGreen works with mortgage lenders.
Endnotes
- Hill, Anne. “Another Good Year for C-PACE Financing.” Multi-Housing News, 11 Mar. 2026, https://www.multihousingnews.com/another-good-year-for-c-pace-financing/. Accessed 8 Oct. 2026.
- “C-PACE: The Unfamiliar Name That’s Now Serious Money in Commercial Property Financing.” CoStar News, Mar. 2026, www.costar.com/article/522945674/c-pace-the-unfamiliar-name-thats-now-serious-money-in-commercial-property-financing. Accessed 16 Sept. 2026.
