A new trend is sweeping across Kern County, offering people upgrades to their homes with energy-efficient improvements. It goes by several names, but the most common in Bakersfield is HERO — Home Energy Renovation Opportunity.
Through the Property Assessed Clean Energy Program, or PACE, homeowners borrow money for the improvements as a property tax assessment that attaches to the property and appears on the homeowner’s property tax bill. The amount borrowed — the PACE loan — is structured as a super-priority lien on the property and it takes precedence over even the first mortgage upon refinancing or selling property.
The goal of this program is to help homeowners reduce their utility bills by upgrading their homes with energy and water-saving home improvements. Sounds great, right? Who wouldn’t want to see a decline in their energy bills while reducing their carbon footprint and helping the environment?
Unfortunately, unforeseen drawbacks to the program have surfaced. In many cases, homeowners have been misinformed as to the exact conditions of the program and have run into serious problems when selling or refinancing their homes. Most disturbing, when homeowners wish to sell their homes they are required to pay in full the HERO loan as well as other liens on the property. In many cases, homeowners find themselves in a negative position and unable to close the sale.
Further, Fannie May and Freddie Mac prohibit participation of these types of programs. In spite of this fact many homeowners are not informed about this restriction and by participating in the program put their loans at risk.
Bottom line is that HERO is an equity type program versus an ability to repay loan. This is a very dangerous road to follow for the homeowner. There is no evaluation in place that looks at the ability to repay. This is particularly true of homeowners on fixed incomes.
The last thing the City of Bakersfield should be is associated with is the foreclosure of a home due to the homeowner’s inability to repay the increased property tax payments.
High-interest rates have also plagued the program. There have seen instances where rates have been almost twice the amount of a traditional home equity loan. The high interest rates on these programs cause homeowners to pay more than their original agreed upon price, for improvements such as paint, artificial lawns, air conditioners and windows.
The PACE program was introduced to the citizens of Bakersfield with the intent to provide homeowners the opportunity to make energy-efficient home improvements at an affordable price. However, this has become a nightmare to some local residents. Home sellers of Bakersfield are finding themselves subject to financial burdens and many have faced foreclosures.