Page 14 - Boca Club News - November '21

Page 14, Boca Club News
Legal:

Property Assessed Clean Energy Loans

By Michael J Posner, a partner in In addition, these loans are repaid through non-ad fees. Because the interest rate is partially determined by
Ward, Damon, Posner, Pheterson & valorem assessments on a home’s annual tax roll, in the the contractor chosen by the homeowner it is important
Bleau, P.L. a mid-sized real estate same manner as other non-ad valorem assessments such that you shop around to ensure that your contractor has a
and business-oriented law firm as waste collection. This means only a one-time annual sufficient relationship with the PACE program to get you
serving all of South Florida, with payment instead of having to make monthly payments like the best interest rate.
three offices in Palm Beach County. a typical home improvement loan. Also, since many people If you decide to go with a PACE loan, you will have a
They specialize in sales and loan escrow for taxes in their mortgage payments, this loan would lien placed on your property in favor of your PACE lender.
transactions. They can be reached be collected by the mortgage lender, which would then pay Assuming you have an existing first mortgage on your
at (561) 594-1452 or at mjposner@ the taxes on behalf of the homeowner. property, this lien will be, in effect, a second mortgage on
warddamon.com. These loans are frequently long-term, based on the your home. As long as you do not intend to sell or refinance
Like an annual ritual, my homeowner’s insurance expected economic life of the energy conservation or your property this lien will not have any effect on your
was being raised by nearly 20% despite no claims. So I renewable energy installation. For example, a common existing loan or the title to your property. However, if you
shopped around, and was able to save half of the increase system which is financed through the PACE program is wish to refinance your first mortgage to a lower rate or
by switching to a different insurance company. However, hurricane windows. Because these have an economic life different program, you will need to go to the PACE lender
there was a catch; I had to pass a four-point home inspection. of at least twenty years, the term of the PACE loan is also to request a subordination agreement. These lenders are not
This includes reviewing the roof, electric, plumbing and twenty years, which is frequently longer than either a term required to provide a subordination and may also charge you
structure. Just the previous year I had paid over $1,000 for loan, or even a home equity loan. This lowers the annual a fee to review the request before granting the subordination.
roof repairs to satisfy the previous insurance company’s cost, making the improvements more affordable for many Most homeowners sell their house within the first seven
inspection requirements. people. years of purchasing same. Many homeowners, when being
Many homeowners, especially those with older homes, One of the most popular lenders for these PACE loans sold on the PACE loan, were convinced that because the
may not pass a four-point inspection and may be unable is Ygrene (energy spelled backwards). On their homepage repayment was paid through property tax bills and not
to acquire reasonably priced homeowner’s insurance. In at ygrene.com they promote these loans by claiming “no through a traditional monthly loan payment that when they
addition, with the frequency and strength of hurricanes money out of pocket, no payments for up to a year or more, sold the property the new buyer would simply assume the
increasing, many older homes, which lack hurricane approval based primarily on Home Equity, no minimum obligation to continue to pay the PACE loan. However, that
protection, are now more vulnerable, which also increases credit score required, and get prequalified in minutes.” fact would only be true if the new buyer is paying cash for
the cost of insurance. What the homepage does not tell you is the interest rate the property and, after proper disclosure of the PACE loan,
To address this concern, the State of Florida enacted being charged on your loan and the fact that they will be the new buyer has agreed to assume the continued obligation
the Property Assessed Clean Energy (PACE) loan program placing a lien on your home which will affect your future to pay the loan.
(§163.08, Florida Statutes) which allows homeowners to ability to either refinance your existing mortgage or sell your If the new buyer is obtaining a mortgage to purchase
finance certain home improvements for energy conservation home. In fact, there have been many consumer complaints the property, the PACE loan will have to be satisfied in
and efficiency improvement; and renewable energy about these PACE loans in failing to disclose these key order to ensure that the new lender has a first position
improvement, based more on the homeowner’s equity in points, with the disclosure being buried in the fine print of mortgage on the property. This has become an issue for
their home and less on their credit or income. the contract. many homeowners who were not aware of this potential
Currently, PACE loans have an interest rate range of issue.
3.69% to 8.49%. This is substantially higher than current The PACE loan program can be a boon to many
home equity loans, but is, of course, lower than unsecured homeowners who otherwise would have to go into
loans and credit card debt. Depending on your income expensive debt to finance necessary improvements to their
and credit score, a PACE loan may have a very attractive home. However, it is important that homeowners review all
interest rate. In addition, PACE loans can have high upfront the materials and fully understand the risks along with the
closing fees, as well as re-occurring annual administrative benefits of these loans.

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