The Devil's in the Details - a Follow-up

Last week I wrote a blog about the PACE program.  Today I was fortunate to hear a speaker that represents one of the companies that offer this type of program.  The company is known as Ygrene (Energy spelled backwards).  I

For those of you who are not familiar with this program, it offers a loan to do energy improvements to your home.  The difference is that the loan is paid back via your property taxes.  In other words, the loan does not stay with the borrower, but with the property.

I thought you might like to learn a bit more about the program that is offered by Ygrene.

• The term of the loan can be either 10 years or 20 years.
• The interest rate is 6.5% or 7.5% respective to the above terms.
• There must be a 15% equity in the home
• The borrower must be current on his/her property taxes and mortgages for the past 3 years.
• The borrower must not have had a bankruptcy in the past 3 years.
• The borrower may borrow up to 10% of the properties market value.
• There is a 3% prepayment penalty if the loan does not go full term.
• There is approximately $750 in loan fees to be paid.
• The borrower may be owner or non-owner occupied.
• The contractor that the borrower uses must be on their certified contractor list.
• 50%-60% of the loans of this type will have to be paid off when the property transfers

So, there you have it.  Hopefully if you were considering a PACE loan, this will help you decide how to proceed.

PACE Loans...the Good, the Bad and the Ugly

The PACE Program (Property Assessed Clean Energy) was first developed in Berkeley, California in 2008.  It's intent was to help Berkeley achieve the Bay Area's climate goals.  Since 2008, 30 states and the District of Columbia have passed laws to allow for PACE financing programs.
The program hit a substantial roadblock when Federal Housing Finance Agency along with Fannie Mae and Freddie Mac declined to back mortgages with PACE liens on them.  The reasoning was that these types of loans become senior liens over any other liens on the property.
The intent of these types of loans is admirable.  They have been created to finance energy savings improvements in homes without the significant outlay of money by a homeowner.  They could have insulation installed, solar panels installed, dual pane windows and more and have it billed through their annual tax bills over longer length of time (typically around 20 years).
The issue is when a property transfers, how are these loans disclosed?  Depending on the timing, these new tax liens may or may not show up on the assessors records that the title companies rely on.  If the property was purchased as a "flip" and the contractor takes out this type of loan for improvements, the property could turn so quickly that the bill for the tax period that would show the lien hasn't occurred yet.  The only way to ensure that this type of lien is or is not on the tax bill is to ask the seller. 
Another issue is when a "flip" occurs, the contractor get an increase in value due to the improvements made.  If the lien is not paid off at the time of transfer, the contractors gets the full benefit of the increased equity by the buyer paying for the value of the improvements...then the buyer pays for it again in the tax bills.
This will be an interesting issue to follow in the coming years.  I understand that it is being done successfully in many areas of the country...and I would like to ask how they are overcoming these significant issues. 
- See more at: http://activerain.com/blogsview/4240370/pace-programs-getting-a-fooothold-in-california-buyers-beware#sthash.9dc08cF7.dpuf