Real Estate News

Thursday, August 24, 2017

Energy-Saving Loans Are Turning Bad

Some of us in the real estate industry have been warning about these loans for several years...

"Energy-Saving Loans Are Turning Bad" by Kirsten Grind, published in the Wall Street Journal on August 16, 2017

Loan defaults in a popular program meant to finance energy-saving home upgrades have increased substantially, despite lenders’ claims that few borrowers have missed payments.

The small, high-interest-rate loans were made as part of the Property Assessed Clean Energy program, or PACE, a nationwide initiative designed to help people afford solar panels, energy-efficient air-conditioners and other “green” appliances. PACE loans are among the fastest-growing types of loans in the U.S.

The rise in defaults means some borrowers are at risk of losing their mhomes over relatively small loan amounts and that local governments find themselves in the awkward position of having to collect troubled debt for private companies.

Private lenders in the PACE program have told Wall Street investors, as well as local and federal government officials, that borrower defaults are rare and that no homeowners have gone into foreclosure as a result of the program, according to investors and public officials.

But a Wall Street Journal analysis of tax data in 40 counties in California-by far the biggest market for PACE loans-shows that defaults have jumped over the past year. Roughly 1,100 borrowers missed tw consecutive payments in the tax year that ended June 30, compared with 245 over the previous year. That means they are in default, and could potentially have their homes auctioned off by local governments within five years.

The lenders, including Renovate America Inc., Ygrene Energy Fund and Renew Financial Inc., say the overall default rate of less than 2% provided by the Journal’s analysis is in line with the rate for people who miss property tax payments.

A spokeswoman for Renovate America said the partial data gathered by the Journal is more negative than what the company is seeing. Rocco Fabiano, the chief executive of Ygrene, said in a statement that “Ygrene’s PACE delinquency rate remains far below that of average property tax delinquencies in California.” A spokesman for Renew Financial said property owners in its CaliforniaFIRST PACE program “have similar delinquency and default rates as all other property owners.”

In the PACE program, private companies make the loans and the balances are placed on a homeowner’s property tax bill. Local governments are responsible for collecting the payments and, in the event of a default, potentially seizing the home to recoup the loan amount.

The average PACE loan is about $25,000. But unpaid balances get bigger quickly; they accrue additional interest at the rate of 18% annually. Under California law, homes can be auctioned off in a tax sale within up to five years if the homeowners don’t pay the balance.

“For us to be the heavy hand and make {borrowers} go through the tax sale process is onerous on us,” says Jon Christensen, the tax collector in Riverside County, where 227 PACE borrowers are in default.

Wall Street is hungry for bonds made from PACE loans. In July, asset managers and pension funds piled into $205 million deal from the largest PACE lender, Renovate America. It was the company’s 11th securitization since its 2008 founding.

Investors are attracted to the bonds’ relatively high yield of about 4% and the loans’ priority structure. If a borrower defaults, PACE lenders are paid back before mortgage lenders. The deals have received high marks form credit-rating firms, which have said the program is too new to predict future defaults. 

Still, some investors are getting nervous.

“If we can’t get more data, it’s going to limit our ability to take the risk,” says Dave Goodson, the head of securitized products at Voya Financial Inc., noting that monthly updates on the PACE bond deal he has invested in don’t include default rates. 

Indeed, such performance data are hard to come by. It is up to local tax collectors to rack default rates. “No one is even collecting all the data,” said John Rao, an attorney with the nonprofit National Consumer Law Center.

The Journal analyzed data from the California Association of County Treasurers and Tax Collectors, which collected the information from local tax collectors and from counties. The association is advocating state legislation to increase consumer protections in the PACE program.

The data, which only offer a limited view of overall PACE loan performance, show that the average default rate has climbed to 1.6% from 0.85% in the previous tax year.

But the PACE default rate doesn’t capture borrowers whose missed payments are covered by mortgage escrow accounts, which appears to be a common occurrence, according to borrowers, banks, real estate agents and attorneys.

PACE loans totaling nearly $3.7 million are past due across the state, up from about $520,000 in the 2015-2016 tax year.

PACE lenders have made roughly $3.6 billion in PACE loans nationwide, making the total number of loans roughly 140,000.

Some borrowers say they were pushed into loans by plumbers and repairmen who serve as middlemen in the transactions, and that they were approved for loan amounts they couldn’t afford, the Journal has reported.

A bipartisan group of U.S. senators has introduced legislation to subject the loans to the same level of regulations as faced by mortgages.

Tuesday, January 3, 2017

Weathering The Drought

An informative Agricultural Report on the state of the drought in California.

Click here to download.

Monday, April 1, 2013

The Market Is Up!

The preliminary numbers for sales in the 1st Quarter for 2013 indicate the median sales price is up over 11% (year over year data), and the number of homes sold is up over 8%. That's 5 consecutive quarters of upward price improvement! Velocity (number of sales) is UP, and the Values (median prices) is following right behind. many factors as reported in the national press, lack of inventory, low interest rates, and recovering economic climate.

We are echoing what is happening in almost all areas of California. If you've been waiting to sell, now's the time


Wednesday, March 27, 2013

BOE Postpones Collection of Fire Prevention Fees

Sacramento – The California State Board of Equalization (BOE) has been contacted by CAL FIRE with a request to postpone fire prevention fee billings for Fiscal Year 2012-13.

The Chairman of the Board of Equalization, Jerome E. Horton, has been informed that the delay in the collection of these fees is a result of workload issues created by a high number of appeals and he hopes this postponement will give CAL FIRE more time to assure more accurate billing information.

The fire prevention fee funds are administered by CAL FIRE. Current state law requires the BOE to bill the owners of habitable structures located within the State Responsibility Area (SRA), and collect the fees.

However, on March 12, 2013, the Howard Jarvis Taxpayers Association filed a lawsuit against CAL FIRE and the Board of Equalization (BOE), challenging the constitutionality of the measure.

In a statement released Wednesday, Chairman Horton said, "Until the Courts decide the constitutionality of this legislation, it remains the law and the Board has no alternative but to follow the law which gives CAL FIRE the authority to direct the board to delay the collection of the fee," concluded Horton. “Time will determine whether these funds were necessary to help prevent and manage fires in certain areas and/or, whether the law is constitutional. If the law is found to be unconstitutional, we will not permit these fees to further burden feepayers."

The BOE is working closely with CAL FIRE to determine next steps. As more information becomes available, BOE will update its fire prevention fee media resources page.


Friday, February 15, 2013

2012 Fourth Quarter Review and 2013 Forecast

This New Year begins with equal parts of optimism and uncertainty. North County Real Estate has steadily improved in both pricing and velocity over the past few >years. This report reviews North County Real Estate in 2012 and peeks into 2013.

North County sales of residential single-family homes hit the 1000 unit mark for the second year in a row. The average sales price reached $288,000, which represents a 6.5% annual increase. Foreclosures and short sales still made up a significant portion of the market. More new construction was built and sold than in the previous six years. Demand is strong at the lower price points. Inventory has dropped a whopping 40% year to year. We believe more homes would be sold if the product was available. Low inventory will continue to be a big factor in 2013.

High-end million dollar properties doubled in sales on a year-to-year basis. The overhang in supply of high-end properties is finally starting to burn off. We still have a two-year supply of product but in the past we have had a four plus years overhang of supply. This market is pretty well defined in pricing.

Demand for tenant occupied commercial property and multi-family property remains robust. Investors are seeking stable cash flow and the possible increases in value that real estate offers over the long term. Tennant activity remains weak. Demand for raw commercial land is also weak. Tenant activity will increase if we have economic growth.

Five Paso Robles wineries were named in the top 100 wines of 2012 in the Wine Spectator. This aforementioned list is international in scope, which is remarkable, yet deserving, accomplishment for our region. Tasting room sales are good which certainly contributes to the strength of the hospitality business. Ciao Biambino! Inc, a leading international family travel publisher, named Paso Robles as one of the top 10 destinations for family trips in 2013. Tourism is strong.

Because of the strength in our wine industry, our community is expiercing a sharp increase in wine grape planting. The beginning of this increase in planting was driven by local major wineries securing a long-term source for their brands. Thousands of acres are currently being planted or replanted in San Luis Obispo County. Many more smaller wineries and investors are beginning to jockey for position in acquisition of vacant land for planting. Prime plantable land costs have reached, and in some cases surpassed, previous high watermarks. Agriculture is really strong today.

New home construction improved slightly in 2012 as finished lots sold t a much brisker pace. Demand for low priced lots is strong with supply at all time low levels. Higher end parcels, in Santa Ysabel Ranch, also picked up velocity near year-end. Out by Lake Nacimiento there is a fair amount of new home construction. Finished lots will be firm in pricing. Developers are aggressively seeking lots for sale to build today. The environment is still very price sensitive for spec product.

Our real estate market is devoid of fear. People are wanting to do deals. Structurally there are still many hurdles facing our market. Supply is low. Foreclosures and short sales will continue in 2013. Financing is hard and appraisers are sparing in valuations. The biggest issues it that we have an economy with no growth.

North County should fare better then many other areas in our Country and State. We have a wine industry that is internationally recognized as one of the best in the world! That aforementioned instury is not moving to Nevada or overseas. So we got that going for us, which is nice. The economy is not going to bail out anybody. As Bill Parcells would say “we are what we are today.” This is the market so figure it out. There is always opportunity in chaos and for the moment we live in turbulence. Many people are starting to figure it out. We are grateful to live in North County and we will compete!