PACE was an innovative tool for financing, providing a solution to declining home values in much of the nation by offering financing that the homeowner repaid as a tax assessment rather than a mortgage lien.
- PACE programs were active or soon to be implemented in California and 22 other states.
- However, the Federal Housing Finance Agency (FHFA) that regulates Freddie Mac and Fannie Mae declared that the PACE programs presented "significant safety and soundness concerns" to the housing finance industry on July 6, 2010. This declaration closed the door on PACE funding.
- Even though legislation and lawsuits are still pending against the FHFA, no funding is expected to be available before the end of the year from any PACE program.
Although PACE funding is now unavailable, homeowners still have many options. There are still many incentives and financing options offered by the government and private companies.
- For example, starting in September, California utilities participating in the Energy Upgrade California programare providing considerable rebates (up to $3,500) for a whole house retrofit, and many jurisdictions are providing additional rebates for energy efficiency upgrades.
- In addition, until December 31, 2010, the federal government offers an energy efficiency investment tax credit of $1,500 as well as the 30% tax credit for the installation of solar, wind and geothermal power generation.
These are great incentives for homeowners to move forward in obtaining energy upgrades and renewables with BPI-certified contractors before the expiration of these programs.
Homeowners can choose from a variety of accessible financing options to take advantage of these incentives. The best option is determined by several factors, such as homeowner equity in property, ability to document income, and of course their credit score.
Taking these factors into consideration, the programs that are best suited to each homeowner's situation can be selected from the following:
- First mortgage cash-out refinance at today's low rates. With 20% equity and documented income, both energy and mortgage costs can be reduced.
- Unsecured loan is great for those who cannot document income or with little equity; your contractor can arrange an easy loan up to $25,000.
- Line of Credit (HELOC) rates are very low, but it is a variable rate that will go up in the future.
- FHA Rehab loan (203Ks) provides up to $35K for rehab that is all combined in a new 30-year fixed. You only need 3.5% equity and 640 credit score. Great for purchase of REO homes or refinance. Combine it with the EEM for additional funding.
- Solar lease programs provide lower energy costs with no money down, yet no use of the tax credit.
- FHA Title One Rehab loan that serve as a second mortgage up to $25K and do not require appraisal.
In order to determine the homeowner's best financing option, refer to the financing flow chart at EcoEnergyLoans.com, or you may contact me through my profile information here on Green Home Guide.
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