Realtors in San Diego think an increasingly popular tool to finance solar power in homes presents a ticking time bomb.
Property Assessed Clean Energy, or PACE, programs make pricey energy efficiency projects – including solar panels and drought-friendly landscaping – possible for homeowners with bad credit. But they can also make moving or refinancing a home a lot more complicated.
PACE, which is administered by three companies in San Diego County, lets homeowners repay the cost of going solar through their property tax bills.
That means PACE loans, like taxes, must be paid off before mortgage collectors get what they’re owed if there’s a foreclosure.
That’s a problem for the Federal Housing Finance Agency, which acts as conservator to Fannie Mae and Freddie Mac, the nation’s two largest mortgage lenders. The agency barred Fannie Mae and Freddie Mac from lending to homebuyers or refinancing homes that are still paying off their PACE bills. The reason is simple: They want to be first in line when bills come due.
That’s forced some homeowners in places like western Riverside County, where one popular PACE program is more established, to pay tens of thousands of dollars to unburden themselves of PACE loans so they can sell their homes, and even scuttled some sales.
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Mike: There are plenty of options for those with good credit. PACE financing does not pull a credit report on the borrower. The only things required to borrow tens of thousands against your home is to a.) be current on your property taxes, and b.) owe 85% or less (LTV) on your mortgage. The interest rates are very high...8-10% and terms are 10, 15, or 20 years. The financing will pay for almost anything now...even a conventional roof. Payments are made twice per year with your property taxes (hence property-assessed, the PA in PACE.) The people selling the financing are claiming that all of the payment can be written off on your income tax...not just the interest portion.
begetzel: I disagree that it's a non-story. PACE financing is growing by leaps and bounds, and is in my opinion the next subprime equivalent bubble. These companies are being run by the same people who destroyed the economy in the subprime bubble. I personally would not buy a house with PACE financing attached to it. I would demand it be paid by the seller....why should I pay for their spending?!
PACE is a scam. The only way it could have ever passed is by having a LOT of grease applied to the politicians to slide this legislation in.
I'm confused. So you can pay for your solar panels outright. You can lease it from the installer at a fixed cost per month. You can take out a private loan (or home equity loan) from a bank and pay it back separately. There seems to be plenty of options. What is the advantage of PACE? How many years does it take to pay back? What is the interest rate? It's unclear why PACE exists in the first place.
This is a "non-story". The homeowner signs loan documents that support the solar installation and the mortgage lender (whether Fannie, Freddie, or a local bank) subordinates its first lien position in order for the transaction to record. Everyone goes into this with their eyes opened. If the mortgage lender does not subordinate, the deal does not happen. Borrowers and mortgage lenders should be smart enough to understand the possible ramifications of the transaction. There is nothing illegal, or even immoral, about these deals.
Interesting analysis of where solar is heading.
The third point of the article concerning rooftop solar should interest proponents