November 5, 2013
Government is the enforcer of your payments.
There is a relatively new lender in San Bernardino County (and a few
other counties) and it goes by name of HERO, an acronym for Home Energy Renovation Opportunity.
It is claimed to be "the largest energy efficient financing program in the nation."
Compared to bank financing, this is an easier to qualify program to acquire energy
and water saving improvements for your home or business.
Under the program, a borrower can acquire energy saving appliances such as
heating and air conditioning, new windows, roofing, insulation, and solar electrical generation.
Over 150,000 energy and water conservation products are available under HERO financing.
Not everyone will qualify as a home or commercial structure owner.
The house, modular/mobile unit or commercial property cannot be financially "under water."
The owner must have at least 10 percent equity; if the owner has more, then up to 15 percent of
the property's value can be financed under the program.
A background, consumer history check will be done and the borrower must be
current in recent mortgage payments, property taxes current with none late in the last 12 months,
no bankruptcies in the last year, and some other basic requirements.
The HERO plan is available for homes and businesses in Newberry
Springs. The program in San Bernardino County is being processed through SANBAG
(San Bernardino Associated Goverments) and is a voluntary contractual assessment program that
was establishment under state law in 2009. The San Bernardino County Board of Supervisors
entered into the program and joint exercise of powers authority on March 6, 2013.
The program was officially opened to the public last week.
If one meets the requirements, the application is relatively
simple. Term of the payments can be arranged at 5 years, 10 years, 15 years, or 20
years. Interest rates will vary depending upon the term, but generally range from about 5.5
percent for 5 years, to 9.25 percent for 20 years. A prepayment of up to 5 percent may
be applicable upon the principle.
Why are these loans easier to acquire? Because San Bernardino
County has stepped in as a participant to be the collection arm. Borrowers do
not make monthly payments; rather, the principle and interest are attached to one's property
taxes. The lender holds little risk. If a borrower runs into a hardship and can't
afford the high addition to the property tax bill, SANBAG is required to quickly remove the
delinquent installments from the property tax roll and immediately initiate judicial foreclosure.
Reportedly, this can be all completed, with the property sold, in less than one year.
Normally, delinquent property tax rolls will go a few years before a tax sale is initiated.
The county has ventured into this SANBAG scheme thinking that this is good
for the county's economy. People who wouldn't otherwise be able to acquire home improvement
loans can get money that create jobs. Homes are improved and that in turn helps to increase
residential property values and related taxes for the county. Also, public officials can
claim that inner tingle that they are doing something 'Green' to make the Obama Administration
and the United Nations happy.
The problem with the program, however, lies in a repeat scenerio of
what has driven this country into its current 6-year recession... easier access to borrowed money.
With contractors under this program pushing over 150,000 easy to acquire products upon preapproved
homeowners, many homeowners may quickly find themselves overburdened with their twice-a-year property
The interest rates on the low risk lender loans, appear a bit steep; and
like a regular loan, the borrower is soaked with a number of bumped-up fees; including, in part,
(1) Application fee; (2) Title and recording costs; (3) Permitting costs (if applicable);
(4) Ongoing administration costs; (5) Onsite validation fees; (6) Multiple disbursement fees;
(7) Capitalized interest; (8) SANBAG may add unknown additional fees as it deems fit to pay for
costs of collecting assessment; and, (9) Deposit to a debt service reserve fund.
The program has been successfully pitched by Revonate America, Inc. to
SANBAG which has acquired access to $200-million in available bond funds from SAMAS Capital to
finance the program on SANBAG's turf.
HERO can definitely be helpful to some homeowners; for others it
can mean the quick loss of the roof over their heads. The question some people are asking is
whether SANBAG and the County of San Bernardino should be involved in such a program; is this
a proper role and expenditure of tax dollars for these governmental entities.
For the HERO website, click here.
For background information on HERO, click here.