SONOMA COUNTY ENERGY INDEPENDENCE BOONDOGGLE
GOT SCEIP'ED?
Yes, we all did. As of right now, Fannie Mae and Freddie Mac, the largest mortgage holders in the United States, have reduced by 10% the amount they will lend on any property in Sonoma County. Why did they do that? Because of the County's SCEIP (Sonoma County Energy Independence) program. This program enables property owners to borrow money against their mortgaged property for energy upgrades that will add to their property taxes. The problem is that property taxes get paid off ahead of mortgages in the event of a sale or foreclosure and pose a serious risk to lenders. Lenders have reduced the credit of all Sonoma County borrowers because borrowers could take out one of these loans at any time.
What would this look like? Let's say you own your house. You have a mortgage for, say, $400,000. But unfortunately your house is only worth $375,000. So you are 'underwater'. Let's say you want to put $50,000 in solar panels on your roof. If you went to a bank with this idea you wouldn't be able to get a loan because your house is already worth less than you owe. A bank wouldn't take the risk that you would stop paying on that $50,000 loan and they would have nothing to foreclose on. In steps Sonoma County Energy Independence Program. They say they will arrange for you to get your loan through a private lender at 7% interest. You don't have to worry that you can't afford it, they say, because the loan will go on your property taxes and you'll pay on it twice a year when you pay your property tax bill. Problem? If you sell your house for, let's say, the $375,000 that it's worth, your bank is now behind that private lender who lent you the $50,000. That's right, because property taxes get paid first when you sell a property, the bank now loses that $50,000. Before the SCEIP setup, you would have gotten a second mortgage for the $50,000 and would have paid that off AFTER your first mortgage was paid to the bank. So banks are not wanting to take such a high risk that you could just get a loan that should be in second position but will actually be ahead of your primary loan.
As a result of this program lenders now are reducing the amount that they will lend on ALL property in Sonoma County by ten percent. That means that if you are selling your property you will have to lower what you'll take for it or the buyer will have to come up with a higher down payment. If you're trying to refinance you'll qualify for 10% less than you would have before the SCEIP program went into effect.
The County has now sued Fannie and Freddie saying that these loans are really property assessments just like regular property taxes even though they are not. These loans are, however, just like other home improvement loans (second mortgages) but because the County is doing the lending, they add these loans onto your property taxes. The SCEIP program is essentially stalled at this point but the reduced credit limits for all Sonoma County borrowers are in effect and impacting you.
Another problem with the program is that anyone with a property can get one of these loans to do energy saving retrofits, even if they don't qualify for more debt. Won't this lead to even more foreclosures? Of course it will. This program encourages people to get in over their heads.
It's an outrage that our Supervisors in their zealous pursuit of this program didn't bother to vet it with our largest lenders. Now we are all being punished for their actions. Who knows how long it will be before the lawsuit is resolved. In the meantime, the County should cancel the program so that we all can get the full amount of credit to buy or refinance our homes.
From the ICLEI--International Council on Local Environmental Initiatives (UN Agenda 21) website:
Valerie Brown, Sonoma County Board of Supervisors Chairwoman, ICLEI USA Board Member, and President of NACo: “It is truly shortsighted of one federal agency to not understand the benefits of PACE programs, especially of the Sonoma County Energy Independence Program (SCEIP). Our program reflects investments in clean energy, local job creation and fiscal produce. We know hampering the consumer’s use of these voluntary assessments is a bad call. Our Board’s action will ensure people are fully informed of the options, risks and opportunities that exist when they work with SCEIP.”
Is Valerie Brown representing the people of Sonoma County or is she representing ICLEI, an international organization working with the UN?
What would this look like? Let's say you own your house. You have a mortgage for, say, $400,000. But unfortunately your house is only worth $375,000. So you are 'underwater'. Let's say you want to put $50,000 in solar panels on your roof. If you went to a bank with this idea you wouldn't be able to get a loan because your house is already worth less than you owe. A bank wouldn't take the risk that you would stop paying on that $50,000 loan and they would have nothing to foreclose on. In steps Sonoma County Energy Independence Program. They say they will arrange for you to get your loan through a private lender at 7% interest. You don't have to worry that you can't afford it, they say, because the loan will go on your property taxes and you'll pay on it twice a year when you pay your property tax bill. Problem? If you sell your house for, let's say, the $375,000 that it's worth, your bank is now behind that private lender who lent you the $50,000. That's right, because property taxes get paid first when you sell a property, the bank now loses that $50,000. Before the SCEIP setup, you would have gotten a second mortgage for the $50,000 and would have paid that off AFTER your first mortgage was paid to the bank. So banks are not wanting to take such a high risk that you could just get a loan that should be in second position but will actually be ahead of your primary loan.
As a result of this program lenders now are reducing the amount that they will lend on ALL property in Sonoma County by ten percent. That means that if you are selling your property you will have to lower what you'll take for it or the buyer will have to come up with a higher down payment. If you're trying to refinance you'll qualify for 10% less than you would have before the SCEIP program went into effect.
The County has now sued Fannie and Freddie saying that these loans are really property assessments just like regular property taxes even though they are not. These loans are, however, just like other home improvement loans (second mortgages) but because the County is doing the lending, they add these loans onto your property taxes. The SCEIP program is essentially stalled at this point but the reduced credit limits for all Sonoma County borrowers are in effect and impacting you.
Another problem with the program is that anyone with a property can get one of these loans to do energy saving retrofits, even if they don't qualify for more debt. Won't this lead to even more foreclosures? Of course it will. This program encourages people to get in over their heads.
It's an outrage that our Supervisors in their zealous pursuit of this program didn't bother to vet it with our largest lenders. Now we are all being punished for their actions. Who knows how long it will be before the lawsuit is resolved. In the meantime, the County should cancel the program so that we all can get the full amount of credit to buy or refinance our homes.
From the ICLEI--International Council on Local Environmental Initiatives (UN Agenda 21) website:
Valerie Brown, Sonoma County Board of Supervisors Chairwoman, ICLEI USA Board Member, and President of NACo: “It is truly shortsighted of one federal agency to not understand the benefits of PACE programs, especially of the Sonoma County Energy Independence Program (SCEIP). Our program reflects investments in clean energy, local job creation and fiscal produce. We know hampering the consumer’s use of these voluntary assessments is a bad call. Our Board’s action will ensure people are fully informed of the options, risks and opportunities that exist when they work with SCEIP.”
Is Valerie Brown representing the people of Sonoma County or is she representing ICLEI, an international organization working with the UN?
