4 ms·

Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. If I'm reading it right, defaulting is basically equivale

Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. If I'm reading it right, defaulting is basically equivalent to being behind on your taxes. Does anyone know if this bundling to property tax payments also gives these loans repayment priority in a foreclosure? If it does, such loans could poison otherwise sound mortgages by superseding them to the remaining equity.

John23832 10y ago
I would assume so. I'd think that this would be treated the same as government backed student loans. Bankruptcy and foreclosure don't mean anything... the loans are here to stay. That just highlights another problem. Big money using the government as its muscle... but that's another rant for another time.
phkahler 10y ago
>> Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. Hey, it worked for student loans right? I have no idea how all this is going to play out, but it won't be pretty.
JumpCrisscross 10y ago
> Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil Also, because "PACE financing is structured as a tax assessment instead of a loan, the PACE programs do not have to provide to homeowners the same disclosures about the financing costs that traditional lenders must provide" [1]. > defaulting is basically equivalent to being behind on your taxes Beyond being collectable as a tax lien, such a default would complicate the property's underlying mortgage. This is because "the tax liens for PACE financing take priority over other lien-holders, and those lien-holders are not notified or given an opportunity to object." Furthermore, based on the article, it is unclear if some municipal or state governments are partially or fully guaranteeing their PACE liabilities. [1] https://en.wikipedia.org/wiki/PACE_financing https://en.wikipedia.org/wiki/PACE_financing
- sologoub 10y ago
  Wow, thank you for sharing this! The ability to sabotage mortgage underwriting is basically a timebomb. Apart from being potentially very bad for the financial health of the homeowner (which is subjective in case by case - Inglewood homeowner is definitely in trouble, but the Woodland Hills example seems to be fine with it), I can't see how this is at all fair to the few banks doing proper due diligence, like the local credit unions that hold many of their mortgages.
Bartweiss 10y ago
The line that struck me most powerfully was just tossed in offhand: Riverside's government collects 15% of its annual budget from PACE loans. The headline here was overhyped. The total volume of PACE loans isn't anything like the mortgage crisis, and total volume shapes secondary effects like bank failures and property value crashes. But if PACE is becoming a large portion of local government budgets, that causes its own problems. We've already seen the kind of abusive practices which arise when towns get their funding from speed traps. No one likes taxes, but tax revenue is generally a shared burden, and positively correlated with growth and population. When the incentives for financing are to operate against a smaller group of people, things go to hell really fast.

John23832 10y ago

I would assume so. I'd think that this would be treated the same as government backed student loans. Bankruptcy and foreclosure don't mean anything... the loans are here to stay. That just highlights another problem. Big money using the government as its muscle... but that's another rant for another time.

phkahler 10y ago

>> Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil. Hey, it worked for student loans right? I have no idea how all this is going to play out, but it won't be pretty.

JumpCrisscross 10y ago

> Making the tax agency also the debt collector for this type of loan is quite ingenious, but also evil Also, because "PACE financing is structured as a tax assessment instead of a loan, the PACE programs do not have to provide to homeowners the same disclosures about the financing costs that traditional lenders must provide" [1]. > defaulting is basically equivalent to being behind on your taxes Beyond being collectable as a tax lien, such a default would complicate the property's underlying mortgage. This is because "the tax liens for PACE financing take priority over other lien-holders, and those lien-holders are not notified or given an opportunity to object." Furthermore, based on the article, it is unclear if some municipal or state governments are partially or fully guaranteeing their PACE liabilities. [1] https://en.wikipedia.org/wiki/PACE_financing https://en.wikipedia.org/wiki/PACE_financing

sologoub 10y ago
Wow, thank you for sharing this! The ability to sabotage mortgage underwriting is basically a timebomb. Apart from being potentially very bad for the financial health of the homeowner (which is subjective in case by case - Inglewood homeowner is definitely in trouble, but the Woodland Hills example seems to be fine with it), I can't see how this is at all fair to the few banks doing proper due diligence, like the local credit unions that hold many of their mortgages.

Bartweiss 10y ago

The line that struck me most powerfully was just tossed in offhand: Riverside's government collects 15% of its annual budget from PACE loans. The headline here was overhyped. The total volume of PACE loans isn't anything like the mortgage crisis, and total volume shapes secondary effects like bank failures and property value crashes. But if PACE is becoming a large portion of local government budgets, that causes its own problems. We've already seen the kind of abusive practices which arise when towns get their funding from speed traps. No one likes taxes, but tax revenue is generally a shared burden, and positively correlated with growth and population. When the incentives for financing are to operate against a smaller group of people, things go to hell really fast.