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MORENO VALLEY: Homebuyer files lawsuit over HERO-financed transaction

MORENO VALLEY: Homebuyer files lawsuit over HERO-financed transaction

MORENO VALLEY: Homebuyer files lawsuit over HERO-financed transaction

image0-MORENO VALLEY: Homebuyer files lawsuit over HERO-financed transaction


For Realtors:

• Check homes closely for energy-related or water-saving upgrades, like drought-tolerant landscaping, solar panels, new windows and doors.

• Ask clients if the upgrades were funded with PACE or HERO-type assessments linked to property taxes, and advise them of the prospect that they may have to pay this off under certain mortgage or refinancing scenarios.

• Check title reports carefully for signs of the assessments, which act as a first lein against the property. They may show up in the tax section with such listings as Mello Roos, and not in the unpaid lien portion of the report.

• Review sales offers carefully to learn about a buyers’ prospective funding.

For Sellers:

• Understand your role to disclose the improvements and how they are funded.

• Be prepared to be asked to pay the balance on the improvement, if the home is refinanced or sold; in some cases, the sellers have been asked to trim their sale price when an undisclosed assessment surfaces at escrow.

Source: Inland region Realtor trade associations

When Esther Kemmerer agreed to pay $ 345,000 for a clear title on a house in Moreno Valley in April 2013, she claims she got more than a property with energy-efficient amenities.

Kemmerer got embroiled in a civil lawsuit accusing the seller and others who handled the all-cash sale of failing to disclose and pay off a $ 28,675 property tax assessment for HERO-financed windows and doors that could grow to $ 59,431 over 20 years.

The case could be the tip of an iceberg, Inland Southern California real estate professionals say.

“We anticipated at some point this would happen,” said Paul Herrera, government affairs director for Inland Valleys, California Desert and Inland Gateway associations of Realtors. “We’ve seen threats where this will happen in the middle of a transaction. It’s not a surprise.”

PREVIOUSLY REPORTED: Realtors offer word of warning about HERO Program

“It points out the seriousness of the conflicts that are starting to show up in the marketplace,” he said.

Herrera said he’s been told of transactions agents and sellers who have had to pony up cash to make the Home Energy Renovation Opportunity, or HERO, Program balance on the property go away. “They’re threatened with a lawsuit if the lien is not resolved,” he said.

The HERO program is one entity in the Property Assessed Clean Energy, or PACE, program, which began in California in 2001, and has since spread to 31 states. The HERO program was created in the Inland region through the Western Riverside Council of Governments, or WRCOG, in December 2011 and was intended to give homeowners an affordable way to finance energy-efficient products, lower their utility bills and increase the value of their home.

Costs are written into the property tax bills as an added assessment. Payments can stretch out for up to 20 years. The HERO loan is recorded on the property as a lien in the first position.

Because the tax lien is in the No. 1 position, it takes priority in lending situations. Few lenders accept a secondary position – so, in many cases, the HERO assessment has to be paid off or the price of the home has to be lowered to close a sale or refinance a mortgage. The Federal Housing Finance Agency prohibits Fannie Mae and Freddie Mac from buying mortgages or notes with PACE-type liens.

John Paul McNeill, chief executive with Renovate America, the San Diego firm retained by WRCOG to administer the HERO program, said Wednesday, March 4, he believes the program is positive and has helped fund over 23,000 residential projects across hundreds of communities in California.

Renovate America has financed more than $ 500 million worth of projects and created thousands of jobs, he said. McNeill said he was unaware of the lawsuit, and his company became aware of Realtors’ concerns only a few months ago.

“For me, the (HERO) assessments are 100 percent disclosed,” he said.

Barbara Spoonhour, the WRCOG administrator of the HERO program, said the HERO assessment is supposed to show up when a title search is done. However, Herrera said it showed up in a place no one expected, so underlying documents had to be requested to get a true picture of what was going on.

“It got missed by veterans, agents, brokers, lenders – folks in escrow,” he said. “It’s also appearing on a tax bill, and not everyone was generating every portion of the tax bill for these reports.”

Press Enterprise : Real Estate