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Solar-power financing could spell trouble

"I hate to see people lose their homes over something I was involved with.”

The owner of a North County solar-power company says he sees the next housing bubble bursting on the horizon. While it’s the hand that feeds much of his business now, he says it’s the same trick that financial institutions used almost a decade ago, which caused our recent recession and housing-market crisis.

“Homeowners will start losing their homes again with easy-to-qualify loans,” said the business owner, who asked not to be identified.

The HERO program — Home Energy Renovation Opportunity — has been touted statewide with direct-mail pieces and on radio and TV. Now approved in 48 California counties, the program is expanding to Missouri and Florida, with the state and federal governments' blessings.

A homeowner can qualify for upgrades in heating, air conditioning, energy-saving windows, roofs, drip irrigation systems, artificial turf, drought-tolerant landscaping, and solar installations — 50 types of projects.

“I know people that have received a whole kitchen and bathroom remodel in the name of water conservation,” said the business owner.

Homeowners with a little equity can get 100 percent financing with no money down, quick approvals, and no credit check. (I received a direct-mail piece offering me up to $49,500 in home improvements.) The program provides HERO-approved contractors to perform the services.

The problem, says the business owner, is the loans are repayable through one’s property taxes, for up to 20 years.

“Now, once again, people will find themselves with payments they can’t afford, this time with property taxes rather than last decade’s [home equity line of credit] stated income/signature second mortgages. When they can’t pay, they’ll start losing their homes."

Dennis Smith of Encinitas’ RE-MAX by the Sea real estate agency sees other problems with HERO. Because it’s on a property’s tax, a HERO loan will take first position in the debtor line-up, should a lien be imposed on the property for back-taxes owed to the county.

“Lenders probably won’t refinance if they could end up in second position,” said Smith. “It will also discourage the sale of the house, as a new buyer may not want to assume that additional debt.”

Smith says someone considering a HERO loan should determine if they can truly afford an increase in property-tax payments. (Based on the offering received in the mail, my property taxes could increase well over $2000 annually.)

The HERO program was allowed to be created under the federally approved Property Accessed Clean Energy Act. Governor Jerry Brown awarded his Environmental and Economic Leadership Award to HERO. According to a news release, since 2011, HERO has created 14,900 jobs, provided a total of $1.75 billon in home-efficiency upgrades, saved 11.2 billion kilowatts of electricity and 5.61 billions gallons of water.

“This is a big collusion between the construction industry, home-improvement manufacturers, and financial institutions. They schemed to get the support of the government to make it look like it's okay,” said the solar business owner.

“If you can’t afford to pay up front for home improvements, you shouldn’t be doing them,” he said. “If I wasn’t a HERO-approved solar company, it would hurt my business. But I hate to see people lose their homes over something I was involved with."

UPDATE 11/16, 7:30 a.m.

Greg Frost, a PR representative for Renovate America, objects to the North County solar-power company owner's opinion that the HERO program could result in a new housing crisis.

"[PACE] underwriting criteria are designed to avoid the kinds of disaster scenario [the writer] presents," writes Frost. "There have been ZERO foreclosures initiated by PACE providers across more than 100,000 assessments to date. Across the more than 80,000 California homes that have used HERO financing, there have been 28 foreclosures initiated by primary mortgage holder, not by HERO. The California Loan Loss Reserve Fund — set up for the PACE industry — has never been tapped."

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“His fingers kept twitching. His sweaty head was a little shaky. His lips were moving, but no words were coming out.”

The owner of a North County solar-power company says he sees the next housing bubble bursting on the horizon. While it’s the hand that feeds much of his business now, he says it’s the same trick that financial institutions used almost a decade ago, which caused our recent recession and housing-market crisis.

“Homeowners will start losing their homes again with easy-to-qualify loans,” said the business owner, who asked not to be identified.

The HERO program — Home Energy Renovation Opportunity — has been touted statewide with direct-mail pieces and on radio and TV. Now approved in 48 California counties, the program is expanding to Missouri and Florida, with the state and federal governments' blessings.

A homeowner can qualify for upgrades in heating, air conditioning, energy-saving windows, roofs, drip irrigation systems, artificial turf, drought-tolerant landscaping, and solar installations — 50 types of projects.

“I know people that have received a whole kitchen and bathroom remodel in the name of water conservation,” said the business owner.

Homeowners with a little equity can get 100 percent financing with no money down, quick approvals, and no credit check. (I received a direct-mail piece offering me up to $49,500 in home improvements.) The program provides HERO-approved contractors to perform the services.

The problem, says the business owner, is the loans are repayable through one’s property taxes, for up to 20 years.

“Now, once again, people will find themselves with payments they can’t afford, this time with property taxes rather than last decade’s [home equity line of credit] stated income/signature second mortgages. When they can’t pay, they’ll start losing their homes."

Dennis Smith of Encinitas’ RE-MAX by the Sea real estate agency sees other problems with HERO. Because it’s on a property’s tax, a HERO loan will take first position in the debtor line-up, should a lien be imposed on the property for back-taxes owed to the county.

“Lenders probably won’t refinance if they could end up in second position,” said Smith. “It will also discourage the sale of the house, as a new buyer may not want to assume that additional debt.”

Smith says someone considering a HERO loan should determine if they can truly afford an increase in property-tax payments. (Based on the offering received in the mail, my property taxes could increase well over $2000 annually.)

The HERO program was allowed to be created under the federally approved Property Accessed Clean Energy Act. Governor Jerry Brown awarded his Environmental and Economic Leadership Award to HERO. According to a news release, since 2011, HERO has created 14,900 jobs, provided a total of $1.75 billon in home-efficiency upgrades, saved 11.2 billion kilowatts of electricity and 5.61 billions gallons of water.

“This is a big collusion between the construction industry, home-improvement manufacturers, and financial institutions. They schemed to get the support of the government to make it look like it's okay,” said the solar business owner.

“If you can’t afford to pay up front for home improvements, you shouldn’t be doing them,” he said. “If I wasn’t a HERO-approved solar company, it would hurt my business. But I hate to see people lose their homes over something I was involved with."

UPDATE 11/16, 7:30 a.m.

Greg Frost, a PR representative for Renovate America, objects to the North County solar-power company owner's opinion that the HERO program could result in a new housing crisis.

"[PACE] underwriting criteria are designed to avoid the kinds of disaster scenario [the writer] presents," writes Frost. "There have been ZERO foreclosures initiated by PACE providers across more than 100,000 assessments to date. Across the more than 80,000 California homes that have used HERO financing, there have been 28 foreclosures initiated by primary mortgage holder, not by HERO. The California Loan Loss Reserve Fund — set up for the PACE industry — has never been tapped."

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Comments
4

The energy independence movement in solar is on! 84% of Americans favor cleaner forms of energy like solar over any other form of energy, and for good reason. The sun comes out for free each and every day. Rooftop solar gets you out of the marriage you're in with your utility company. The 30% Federal Tax Credit is there for all homeowners to use for host-owned solar systems - batteries are right around the corner - solar doesn't pollute the way coal plants pollute - Congress voted overwhelmingly to ensure most states in America have a mandaory Federal Clean Air Act to meet, otherwise utility companies get fined. And homeowners pay for those fines in the form of rate hikes. Florida is an optimal state to go solar in hence the "Sunshine" state.

Nov. 15, 2016

That last paragraph is spot on. Avoid financing any home improvement project. Doing so makes you consider if it is a good project to go through with as the money involved is coming out of your savings or investments.

Nov. 15, 2016

Quite true. People often see investments in home improvements as a way to increase their home's value, but in reality unless you're a skilled contractor with access to discount materials and the ability to provide your own labor, home value increases are measured in the percentage of the project cost (always less than 100) you'll recoup.

Nov. 15, 2016

We had a PV system installed about five years ago, financed with a HELOC, and have not regretted it. We have a very low interest rate, and the it's deductible. We had some other work done a couple of years ago by a HERO contractor, not really very energy related, and now our property taxes are doubled until it's paid off. We're now on their customer list and periodically we get inundated with marketing calls for great deals on new windows, which we do not want.

We went into this with our eyes open but would not do it again in the same circumstances.

Nov. 16, 2016

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