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Federal Program Finances Home Improvements

Home improvements funded with no money down; credit score doesn't matter

May 26, 2016

By RON HURTIBISE Sun Sentinel - Tribune News Service

Hundreds of home improvements have been funded in South Florida through an innovative program that requires no cash up front, and credit scores aren't used to determine eligibility.

It's called the Property Assessed Clean Energy Program -- or PACE -- and property owners can finance energy efficient and hurricane-hardening improvements for up to 20 years.

Loans are repaid as an assessment on the borrower's property tax bill.

Eligible improvements include roof replacement, new air conditioning units, solar panels, solar pool heating, insulation, low-flow plumbing systems, impact windows and hurricane strapping, awnings and more.

Officials of Ygrene Florida, a California-based company that has quickly become South Florida's top PACE Program administrator, say interest has grown sharply since a state Supreme Court ruling last fall cleared the way for local governments to authorize the property tax assessments.

Since Ygrene launched in Florida in 2013, the company has funded 2,004 projects and has 828 more under construction -- a combined value of more than $70 million, according to Joe Spector, vice president of operations.

"The program has skyrocketed," Spector said. Just a few months ago, Ygrene was receiving 300 to 400 applications per month from Broward and Miami-Dade counties, where it concentrated its early operations. "This month, we're going to hit 1,200."

Spector said the company recently signed a lease for a new office near Miami International Airport and plans to hire 30 to 40 additional employees over the next year. Currently it employs 23.

In Miami-Dade County, 23 cities have authorized Ygrene's PACE program. In Broward, nine cities currently participate: Dania Beach, Fort Lauderdale, Hallandale Beach, Hollywood, Lauderdale Lakes, Margate, Pembroke Pines and Pompano Beach.

Some of the cities, as well as several in Palm Beach County and other counties, have approved two other companies to offer PACE program loans to their residents: Florida Green Finance Authority and Florida PACE Funding Agency.

In September, Margate's city commission approved all three companies in the belief that "competition in the market is always a good thing," said Aaron Tauber, the city's sustainability director. Tauber said he encourages homeowners interested in the program to contact all three companies because each offer slightly different terms.

Ygrene is seeking approval from the Broward County Commission on June 7 to operate countywide, Spector said. If the company is approved, residents of all Broward cities would be OK'd to apply for loans through the program.

Samantha Danchuk, assistant director for the county's Division of Environmental Planning and Community Resilience, said the program "is in line with the county's goals and policy to increase energy efficiency, promote renewable energy and reduce greenhouse gas emissions by reducing energy use."

In Hollywood, 229 improvement projects have been completed -- meaning work has been done and contractors paid, Spector said.

That's one of the program's main selling points -- it's a "turnkey" operation. Homeowners don't have to pay a deposit to a contractor, and Ygrene doesn't pay the contractor until the work is complete. Ygrene ensures contractors are licensed, permits are pulled and work is inspected, he said.

The program might not be for everyone, said Jim Flood, regional manager for Supreme Lending in Plantation. Homeowners with equity and strong credit can qualify for home equity loans or can refinance their home loan -- and take money out for improvements -- at interest rates of 4 percent or less, Flood said.

Ygrene's rates range from 6.5 percent for a five-year loan to 7.5 percent for a 20-year loan, Spector said, adding that those are fixed rates available to all customers who otherwise qualify for Ygrene's program. In addition, a borrower's credit score doesn't affect the rate and isn't used to determine eligibility, he said.

In fact, Ygrene's average project is a home valued at $420,000 in which the owner has an average equity of 50 percent -- hardly indicative of people with poor credit, he said.

The PACE administrators promote the fact that, as a property tax assessment, repayment of the loan can be transferred to future buyers of homes where loans have been taken. But federal lending backers, including FHA, Freddie Mac and Fannie Mae, have refused to underwrite homes with PACE assessments.

Loans can be repaid in full as a condition of a home sale, Spector pointed out. And often the improvements funded by the loan offset the cost of repaying the loan at sale time, he said. Plus, energy savings and insurance discounts may exceed the annual loan cost, Spector said.

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Copyright (c) 2016, Sun Sentinel, Fort Lauderdale, Fla.

Distributed by Tribune News Service.

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