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Exactly what I'm talking about. Most people don't know this and get duped into thinking the solar panels are a personal loan. > Lender Notification and Consent

by bko 5y ago

Exactly what I'm talking about. Most people don't know this and get duped into thinking the solar panels are a personal loan. > Lender Notification and Consent: Existing property lenders must receive notification and give approval for C-PACE financing in most states. This is important because C-PACE loans displace other liens. Normally, R-PACE loans don’t require consent from the mortgage lender. [0] > One of the biggest risks of the PACE program is the risk for foreclosure. The contract for the funding will act as a lien on the property. If you fall behind on your payments, you risk losing their home or business to foreclosure. Even if you're current on your mortgage payments, the PACE program moves in front of it, and they can start foreclosure proceedings. [1] [0] https://assetsamerica.com/pace-financing/ https://assetsamerica.com/pace-financing/ [1] https://www.mortgagecalculator.org/helpful-advice/pace-program.php https://www.mortgagecalculator.org/helpful-advice/pace-progr...

sokoloff 5y ago
I’d certainly expect a commercial borrower (C-PACE) to understand what they’re signing much more than a residential (R-PACE) borrower.
- bko 5y ago
  Right. So commercial (C-PACE) require the original first lien to approve. However residential (R-PACE) don't require the original first lien's approval (the bank that gave them the mortgage). So if its a bad financial decision, the mortgage borrower can't interject. And residential PACE participants can be duped into taking a second lien on their property that they won't be able to discharge and will have to pay back in full if they want to sell their homes. You can go from a healthy loan to value to being underwater with the stroke of a pen.
  - sokoloff 5y ago
    And the R-PACE lender, being the junior lienholder, is the one at risk of losing money if the homeowner defaults and the house doesn’t sell for enough, which makes the system have a built-in limit. The primary lienholder doesn’t get a chance to object because there’s no reason for them to be able to object. Their economic position is not hindered by a junior loan and as a homeowner, I’d be incredibly annoyed if my mortgage holder had a right to butt in to and potentially block any secondary financing I wanted to do. C-PACE requires approval because the current senior lienholder has to agree to give up their senior position.
    - bko 5y ago
      The primary lien holder absolutely has a right object (practically not legally). Because its a lien senior to the original lien. So in case of a foreclosure, the PACE loans would be repaid first. No other loan can trump seniority of the primary lien. PACE is an exception by law For instance, if someone buys a home for 100k putting down 20k (standard 20% in the US). Then the owner takes out a PACE loan for 20k, the loan to value for the bank is now 100% (as opposed to original 80%). In case of foreclosure, the 20k PACE is paid down first or becomes the obligation of the buyer. And these panel depreciate, so its unlikely the panels are worth 20k after a few years. So in case its liquidated for 70k, the PACE gets paid off 20k, and the bank gets 50k. Without the loan, the bank would get their back 70k.
      - sokoloff 5y ago
        The R-PACE loan principal is not senior to the senior lienholder's position. Past due payments (only) are treated as tax obligations, meaning that only past due payments are senior to the first mortgage holder. In your example the original bank would likely get well over $65K of the $70K sales price, and the new buyer would be on the hook for the remaining (not yet due) PACE loan.
        bko 5y ago
        > The R-PACE loan principal is not senior to the senior lienholder's position. That's not correct. The loan is on the property not the person taking out the loan. And it is a senior claim to any other potential claim since its technically a tax obligation. >> Potential resistance by lenders/mortgage-holders whose claims to the property may be subordinated to the unpaid assessment amount should the property go into foreclosure. [0] >> For consumers, PACE type programs have several problems if programs are not properly designed and administrated. Because the financing is designed to stay with the property, eligibility is based primarily on property information rather than income and FICO scores ... A problem with PACE 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 [1] The buyer of a property would have to pay that loan down although, like you said, not immediately. That's because the loan is on the property, rather than the individual who took it out. [0] https://www.energy.gov/eere/slsc/property-assessed-clean-energy-programs https://www.energy.gov/eere/slsc/property-assessed-clean-ene... [1] https://en.wikipedia.org/wiki/PACE_financing https://en.wikipedia.org/wiki/PACE_financing

by bko 5y ago

sokoloff 5y ago

I’d certainly expect a commercial borrower (C-PACE) to understand what they’re signing much more than a residential (R-PACE) borrower.

bko 5y ago
Right. So commercial (C-PACE) require the original first lien to approve. However residential (R-PACE) don't require the original first lien's approval (the bank that gave them the mortgage). So if its a bad financial decision, the mortgage borrower can't interject. And residential PACE participants can be duped into taking a second lien on their property that they won't be able to discharge and will have to pay back in full if they want to sell their homes. You can go from a healthy loan to value to being underwater with the stroke of a pen.
- sokoloff 5y ago
  And the R-PACE lender, being the junior lienholder, is the one at risk of losing money if the homeowner defaults and the house doesn’t sell for enough, which makes the system have a built-in limit. The primary lienholder doesn’t get a chance to object because there’s no reason for them to be able to object. Their economic position is not hindered by a junior loan and as a homeowner, I’d be incredibly annoyed if my mortgage holder had a right to butt in to and potentially block any secondary financing I wanted to do. C-PACE requires approval because the current senior lienholder has to agree to give up their senior position.
  - bko 5y ago
    The primary lien holder absolutely has a right object (practically not legally). Because its a lien senior to the original lien. So in case of a foreclosure, the PACE loans would be repaid first. No other loan can trump seniority of the primary lien. PACE is an exception by law For instance, if someone buys a home for 100k putting down 20k (standard 20% in the US). Then the owner takes out a PACE loan for 20k, the loan to value for the bank is now 100% (as opposed to original 80%). In case of foreclosure, the 20k PACE is paid down first or becomes the obligation of the buyer. And these panel depreciate, so its unlikely the panels are worth 20k after a few years. So in case its liquidated for 70k, the PACE gets paid off 20k, and the bank gets 50k. Without the loan, the bank would get their back 70k.
    - sokoloff 5y ago
      The R-PACE loan principal is not senior to the senior lienholder's position. Past due payments (only) are treated as tax obligations, meaning that only past due payments are senior to the first mortgage holder. In your example the original bank would likely get well over $65K of the $70K sales price, and the new buyer would be on the hook for the remaining (not yet due) PACE loan.
      - bko 5y ago
        > The R-PACE loan principal is not senior to the senior lienholder's position. That's not correct. The loan is on the property not the person taking out the loan. And it is a senior claim to any other potential claim since its technically a tax obligation. >> Potential resistance by lenders/mortgage-holders whose claims to the property may be subordinated to the unpaid assessment amount should the property go into foreclosure. [0] >> For consumers, PACE type programs have several problems if programs are not properly designed and administrated. Because the financing is designed to stay with the property, eligibility is based primarily on property information rather than income and FICO scores ... A problem with PACE 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 [1] The buyer of a property would have to pay that loan down although, like you said, not immediately. That's because the loan is on the property, rather than the individual who took it out. [0] https://www.energy.gov/eere/slsc/property-assessed-clean-energy-programs https://www.energy.gov/eere/slsc/property-assessed-clean-ene... [1] https://en.wikipedia.org/wiki/PACE_financing https://en.wikipedia.org/wiki/PACE_financing