T0 PACE OR NOT TO PACE IN NORTH BAY VILLAGE

(PROPERTY ASSESSED CEAN ENERGY PROGRAM)

I am not convinced that this program is good for North Bay Village.  There are controversial issues that favor the lender and place the borrower at a disadvantage.

Let us start by the interest charged with a typical loan. The current rate for a 10 year loan is 6.55 % and a 20 year loan is 7.55%.  A $ 20,000.00 loan for 20 years pays roughly $ 160.00 per month, which equates to $ 1920.00 per year.  In a typical home valued at $ 250, 000.00 the yearly real estate taxes are roughly $ 4,800.00 increasing the home owner’s yearly responsibility to $ 6,700.00.  Additionally the first year charges could amount to $ 9,100.00 which includes administrative charges and the current year of the loan and the yearly tax assessment.

Secondly Fannie Mae and Freddie Mac which amount to 80% of all mortgages do not allow this type of loans because of the lien priority clause thus reducing the target population to 20 %.  If you add other qualifications such as not having more than one 30 day late mortgage payments within 3 years; the borrower must have minimum of 15 % equity and the loan amount cannot exceeds 10% equity. No bankruptcy 3 years; No tax delinquency 3 years. These pre-qualifications can potentially reduce the target population even further. ..How many single families home owners in North Bay Village do not have the credit rating to obtain a more favorable loan would take advantage of this program? Exactly, not too many!  Furthermore out of those that fit the criteria how many would be willing to make energy savings improvement to their homes and take advantage of the program; thus reducing the target population further.

The Village would need to endorse this program and the commission would need to approve participation thus associating itself with the lender.  There is a real possibility that with a bad loan, a foreclosure or any other negative result implicating the PACE program the village’s reputation could be further compromised.

Thirdly if the borrower decides to sell their house the buyer’s Mortgage Company may not be willing to sign off on the loan and potentially force the seller to satisfy the loan in order to consummate the deal. This would make the sale of the home more difficult and end up hurting the target population.  

Fourthly, in a tax default that typically has four years of real estate taxes plus penalties the addition of four years of loan arrears would make the amount larger and more difficult to collect. 

Commissioner Gonzalez and Vice Mayor Lim are extremely eager to approve PACE citing that we need to sign up now and take advantage of the offer to join the District that includes Biscayne Park, Surfside and Bay Harbor Islands. I say proceed with caution and wait to see how it works out with those municipalities.

If this program works like the lender promises, I am sure that there would be other districts or expansion of existing district that North Bay Village could join.  Once you endorse and approve the program is too late to undo.  There are too many other questions yet to be answered. Frankly, I am afraid that the target population could potentially borrow beyond their means and end up losing their homes once they realize that going green just went red for them! What is the rush?

Honestly opinionating!

NORTH BAY VILLAGE DESERVES BETTER!

Mario Garcia

May 1, 2014