Super Priority Lien: HERO Loans May Not Be So Heroic
You may have noticed that solar panels on homes are the rage. They are great for cutting down on your PG&E bill and even better — some say — for the environment.
But they may not be so great for homeowners who buy solar panels through either PACE or HERO loan programs.
Peggy Mead, of Paradise Association of Realtors, says that before homeowners apply for a loan from either of those entities, there may be some things they need to know.
Both PACE and HERO loans are offered by government entities to give property owners an easy way to finance conservation improvements and pay for them through an assessment on their property taxes.
“Solar is the hot one right now,” she said, “and any water or energy efficiencies can be done [through either of the programs].”
But while the two loan programs sound great and offer homeowners low interest loans, she says there’s an unintended consequence.
“The PACE or HERO lien then becomes a “super priority” lien on the property,” she said, “which means it’s paid first, of all private liens, including any deeds of trust for existing mortgages.”
That means it can be difficult to refinance or even resell your home later on.
Mead says what that “super lien” status does is take Fannie Mae and Freddie Mac out of the market as a financier for any possible buyer or refinancing. It also prevents buyers who use conventional financing from being able to purchase or refinance a home with the lien, because most conventional mortgages conform to Fannie and Freddie guidelines.