![The Purcells used HERO financing to install drought tolerant landscaping and drip irrigation at their Palmdale home. HERO estimates they will save more than 3 million gallons of water over the lifetime of the landscaping project, netting them an estimated $31,960 savings on their water bills. [contributed]](https://www.theavtimes.com/wp-content/uploads/2016/04/Shane-and-Karie-Purcell-front-yard.jpg)
PACE financing enables people to make water and energy efficiency improvements to their home and pay for them over time through their property tax bills.
“Palmdale homeowners, like the Purcells, can benefit from taking action now to make their homes more water and energy efficient and in the process save money on their utility bills,” said Palmdale Mayor Jim Ledford. “These projects not only help address the drought and are good for the environment, but also create jobs and boost our local economy.”
The Purcells stopped watering their lawn in 2014 in response to the drought and the high cost of water. The family used HERO financing to install drought tolerant landscaping and drip irrigation. HERO estimates they will save more than 3 million gallons of water over the lifetime of the landscaping project, netting them an estimated $31,960 savings on their water bills.
“We took on this project because we wanted to save money on our water bills as the cost of water goes up,” said Karie Purcell. “We were also getting tired of looking at our brown lawn. We wanted to do something in the yard that would be attractive but use a lot less water than grass.”
The city of Palmdale launched its partnership with HERO [Home Energy Renovation Opportunity] in May of 2014. Since then, 347 homeowners have used $7.5 million in HERO financing to improve the energy or water efficiency of their homes or to install solar power systems. Over the useful life of the products, the HERO PACE projects installed in Palmdale will save nearly 53 million gallons of water, reduce energy use by 43 kWh and lower emissions by 11.7 tons. In addition, this home improvement activity has spurred the creation of 64 local jobs, saved homeowners nearly $11.5 million on their utility bills and had a total local economic impact of $13 million.
HERO financing can be used for energy-efficiency projects, including whole-home heating and cooling (HVAC) systems, energy-saving windows and doors, and roofing and insulation; and renewable energy systems, such as solar power panel installations. Eligible water efficiency products include high-efficiency toilets, faucets and showerheads; drip irrigation systems; rainwater catchment systems; gray water systems; and artificial turf and other drought-tolerant landscaping.
The HERO Program has been available to Palmdale residents since May of 2014. To learn more about HERO, visit www.heroprogram.com.
[Information via news release from the city of Palmdale.]
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Brad Yzermans says
One of the biggest problems with the HERO program or other PACE (Property Assessed Clean Energy) financing is a buyer using Fannie Mae or Freddie Mac financing cannot assume the sellers HERO lien.
Why? Because the HERO lien, where payment is collected through the property taxes, has verbiage that states their lien in 1st position…because it’s tied to the property tax. Fannie Mae/Freddie Mac and other lending agencies do not want to be in 2nd lien position.
GOOD NEWS ==> Fannie Mae just announced a new loan program, called HomeStyle Energy, that will not only allow homeowners to finance the purchase of new solar and other energy & water efficient upgrades and improvements when buying, homeowners can REFINANCE and pay off the HERO lien and reduce their property tax bill and overall housing payment using the HomeStyle Energy loan and it won’t be considered a cash out refinance….can even go up to 95% LTV!
Homeowners can also use the HomeStyle Energy mortgage program to purchase new solar and other energy efficient improvements when refinancing.
You can read more about how the HomeStyle Energy loan can help homeowners pay off HERO loans or help buyers finance new energy efficient improvements here ==> http://homeloanartist.com/homestyle-energy-mortgage/
Deena says
Hi All – I work with the HERO Program as the Director of Operations and wanted to clear a few things up. I appreciate those who have taken the time to provide feedback. Regarding the first-lien position of all PACE programs, we offer several solutions including subordination, should any issues come up. My HERO Property Advisors team is here to work with homeowners and real estate agents on property transactions to ensure a seamless process for selling/refinancing. We’ve facilitated many transfers, and encourage anyone who knows a homeowner trying to sell or refinance a HERO home, to please contact us from the start. I also wanted to clarify that because every home and homeowner is unique, interest varies depending on several factors. If anyone has further questions, please do not hesitate to reach out to my team at 1-855-225-4376. We would love to connect with you to address your concerns. For answers to frequently asked questions, head here: https://www.heroprogram.com/FAQ Thank you! Deena.
Homeowner says
Every loan I have ever taken has had some sort of lein or condition of re-payment. This will work for many people and may not work for others. The people I know who have used HERO are very pleased.
friendly realtor says
It’s not the condition of re-payment (any borrower in a loan agrees to re-pay, else it’s considered default) it’s the subordination and recording of a lien that takes priority over a mortgage is all.
So instead of a traditional “Loan” you now have a higher tax base for your property, it’s like having a new bond assessment that only pertains to your house.
It obviously can benefit certain people, however it DOES impact a sale, no doubt about it, if it doesn’t get paid at the sale Freddie/Fannie/FHA/VA will not lend a new loan, the buyer then has the option to get a subprime or higher than priem rate mortgage that will allow it to be a junior lien to the HERO/PACE tax lien……not many banks do that at an attractive interest rate.
Look before you leap. In one of my experiences with PACE/HERO they put a 24 solar panel system on a house for 56k and I know many other homeowners with OWNED systems that were financed/purchased for 24k about 1k per panel w/cost of install and permits. 56k ate up a lot of proceeds of that sale for the sellers is all.
Just something to chew over.
friendly realtor says
Investigate the crap out of the terms for this program consumers.
As a Realtor who has dealt with the encumbrance of this type, consider these fun facts that HERO/PACE does not exactly clarify to a consumer.
1) The HERO loan is recorded against the property as a tax lien.
2) The tax lien is in the first position, meaning that if a homeowner goes into default, HERO gets paid before any other creditors, including the lender(s) that hold the mortgage.
3) That the first position is so important that the Federal Housing Finance Agency prohibits Fannie Mae and Freddie Mac (conventional loans) and FHA from purchasing mortgages or notes with these types of liens on the property – either as refinances or purchases. That leaves buyers with few choices for the types of loans available where there is a HERO lien on the property.
4) For those who get on the program, if they don’t call their mortgage services right away, they will have a deficit in their impound account for paying their property taxes.
5) HERO loans don’t always show up on the first tax bill; it often shows up in the second tax cycle, so homeowners find themselves in a situation of having to pay more (up to double) the first year to true up the impound account.
6) Homeowners with HERO financing assume that these loans are assumable, but they’re NOT. For the most part, banks won’t lend on a property unless the HERO debt is settled prior to closing.
7) The financing is very expensive. A one-time administration fee of 6.95% is used, in part, for a reserve to ward against tax-lien default and the yearly interest rate is about 11%.
Sounds like a gas right? Wanna finance 10-25k in improvements that have terrible terms?
Debbie says
Thanks for all of these facts. This is incredibly important information. I had been considering HERO to go full solar with battery backup. It actually makes sense to lien the property, but some of the other conditions you listed convinced me that I need to look for another source of financing. Thanks so much for posting this valuable information.
Tell The Truth says
Holy COW!!! Thank you for this info. I wonder how many ppl have fallen for this without knowing these details. LOL, I started filling out the paper work on line then read your post. Thanks for stopping me…
friendly realtor says
Your welcome guys :)
I got a little incensed that on the HERO/PACE website does not clarify much…
Look before you leap as always.
These are quite the knot to untie.