Property Accessed Clean Energy (PACE) Loans
PACE Loan Administrators:
- Ygrene Works
- Renew Financial (RenewPace)
- Renovate America HERO
- Centerpointe Energy Solutions (AllianceNRG)
- Pace Funding Group
KNOW THE FACTS BEFORE YOU ACQUIRE A PACE LOAN
What is a PACE loan?
A Property Assessed Clean Energy (PACE) loan allows home and business owners to finance energy efficiency and renewable energy projects (like windows, roof, etc.) for their home or property. The most notable characteristics of the PACE loan is that it is attached to the property rather than an individual and the financing is repaid as an assessment on the property’s regular tax bill.
What cautions should I be aware of before acquiring a PACE Loan?
You might not be able to afford repayment of the loan. The eligibility for a PACE loan is based primarily on the property information rather than your income and FICO score (or your ability pay). Whereas, a mortgage is based on your ability to pay, no assessment is done for a PACE loan to determine whether you can afford the repayment of the loan.
You might not be getting all the facts to determine for yourself whether you can afford to pay the loan. 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.
Your property taxes could increase substantially making it difficult for you to make payments. Since the PACE loan is usually at a higher interest rate than your mortgage and for a shorter term, the impact on your annual tax payment can be substantial. 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.
Your mortgage lender could demand your existing mortgage be paid off in 30 days. Taking out a PACE loan, which holds first lien position on your property, may violate the terms of your existing mortgage. Check your mortgage documents that you signed at closing to make sure you won’t be in violation.
You may have difficulty selling your home. Because a PACE loan will hold a superior loan position as the first lien on your property, it must be paid off before a potential buyer can get a mortgage loan. On December 7, 2017, the Federal Housing Association (FHA) said, “We are not underwriting any loans with PACE assessments attached to them.” What does that mean? FHA, Fannie Mae and Freddie Mac have refused to underwrite loans on homes with a PACE loan attached to them.
You could lose your home if you’re unable to pay the PACE loan. An August 2017 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.”
What can I do to get rid of a PACE loan?
The good news is that Fannie Mae has empowered me to help you refinance your PACE loan and get a lower interest rate.
Benefits of refinancing:
- No mortgage payments for two months (money stays in your pocket)
- Your current escrow balance will be returned to you in cash
- Lower interest rate = lower monthly payments
- Reduced escrow payment and lower monthly mortgage payment
- No hassles when you need to sell your home
How can I get ahold of you?
Call me now, before it’s too late, at 954-366-9979 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 24 years and will work with you to find the best option for your unique situation.