Several states provide rebates, subsidies, or tax credits for a homeowner who installs solar panels, wind turbines, or another source of clean power. Although these programs reduce the cost of the generator, the homeowner may still need to pay several hundred, or even several thousand dollars to purchase and install the clean energy system.
The property assisted clean energy program is a type of loan that allows the homeowner to buy solar panels or other equipment. What makes this loan unique is that it involves a partnership with the city or county government. The homeowner borrows money and pays it back using a special property tax assessment, which the homeowner pays to the local government.
Since the homeowner has agreed to a tax assessment, the loan payments are legally property tax payments. This is very significant if the homeowner later declares bankruptcy. Tax assessments have a higher priority in bankruptcy or loan restructuring than other types of loans, including a first or second mortgage with a bank.
The property assisted clean energy program gives the local tax collector priority over the bank that offers the mortgage, but many banks offer mortgages subsidized by Freddie Mae or Fannie Mac. The city or county will have the right to place a lien on the home, and will have the right to receive tax payment before these federal government sponsored entities.
Freddie Mae and Fannie Mac are not happy with the property assisted clean energy program because it prevents them from collecting money from a homeowner who is delinquent on a mortgage. These government sponsored agencies have been preventing homeowners from signing up with PACE as a condition to receive a mortgage backed by one of these organizations. Many homeowners with average or smaller value homes have Freddie Mae or Fannie Mac guaranteed mortgages, since the bank will charge a much higher interest rate if these agencies do not guarantee the loan.