Property Accessed Clean Energy (PACE) Loans
Property Assessed Clean Energy (PACE) is a financing mechanism that helps home and business owners finance energy efficiency and renewable energy projects for their property. One of the most notable characteristics of PACE programs is that the loan is attached to the property rather than an individual and the financing is repaid as an assessment on the property’s regular tax bill.
For consumers, PACE type programs have several problems. Because the financing is designed to stay with the property, eligibility is based primarily on property information rather than income and FICO scores. A homeowner’s ability to pay is currently based primarily on their mortgage and property tax payment history as well as the requirement that there are no recent bankruptcies. Most significantly, homeowners are financed for the home improvements without any assessment of whether the financing is affordable for the homeowner. Because the PACE financing is structured as a tax assessment instead of a loan, the PACE programs historically have not had to provide to homeowners the same disclosures about the financing costs that traditional lenders must provide. In some cases, without an assessment of affordability, homeowners depend on what the PACE program providers tell them when trying to figure out whether the financing is affordable. Homeowners have complained that PACE contractors are lying about the costs of financing as part of selling the program. These problems create a situation in which homeowners can suddenly owe far more in property taxes than they can afford to repay (increased escrow payments); this is especially true for retired and disabled homeowners on fixed incomes.
Some homeowners have reported that there were massive differences in the "lump" sum payment required at the first assessment as well as "nowhere near" the reported monthly costs to increase in escrow.
An August 2017 a Wall Street Journal article on the increased default rate of PACE loans states “The rise in defaults means some borrowers are at risk of losing their homes over relatively small loan amounts and that local governments find themselves in the awkward position of having to collect troubled debt for private companies.”
Another problem with PACE loans for both residential lenders and consumers is that the tax liens for PACE financing take priority over other lien-holders, and those lien-holders may not be notified or given an opportunity to object. Fannie Mae, Freddie Mac and FHA have refused to purchase or underwrite loans for properties with existing PACE-based tax assessments. On December 7, 2017, the Federal Housing Association (FHA) said, “We are not underwriting any loans with PACE assessments attached to them.”
The good news is that Fannie Mae has empowered me to help you refinance your PACE loan and get a lower interest rate.
Benefit of refinancing:
- No mortgage payments for two months (money stays in your pocket)
- Your current escrow balance will be returned to you in cash
- Any deferred mortgage payments (due to Hurricane Irma) can be rolled into the new mortgage potentially saving you thousands of dollars
- Lower interest rate
- Reduced escrow payment and lower monthly mortgage payment
- No hassles when you need to sell your home
Call me now, before it’s too late, at 305-495-6000 to receive FREE advice on how to get out from under the burden of your PACE loan. I’ve been in the business for over 22 years and will work with you to find the best option for your unique situation.
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