Needing no money down, more people in South Florida are using a unique program to finance home improvements despite complaints when the bills come due.
Qualifying energy efficiency and storm-hardening projects include new roofs, air conditioning systems, water heaters, rooftop solar energy systems, hurricane-resistant impact windows and doors, and storm-hardened garage doors.
And credit scores don't matter. Homeowners with sufficient income and equity in their houses will typically qualify.
The program is called PACE, for Property Assessed Clean Energy financing.
Despite the ease of entry, many homeowners say they were caught by surprise when it came time to start paying for the improvements.
Interviews with customers and a review of social media posts reveal that many didn't fully understand their repayment obligations when they signed up. Some say their contractor deliberately misled them or omitted important information.
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Consumers who don't understand the program's unusual repayment terms face increased risk of taking on more debt than they can handle, proponents acknowledge. And that risk grows as the program expands in South Florida.
Last year was the fourth year that the special financing program has been available to South Florida homeowners, and more consumers opted in.
Ygrene Florida, the largest provider in the state, completed 8,412 projects in Broward, Palm Beach and Miami-Dade counties in 2018 - 171 more than in 2017, according to data provided by the company. Although three other providers declined to release their project totals, a South Florida Sun Sentinel tally of notices and agreements filed in the three counties' official records found all increased activities in the tricounty region.
The number of customers identified in records filed by RenewPACE increased from 629 in 2017 to 1,014 in 2018. Florida PACE filed records involving 401 homeowners in 2017 and 1,385 in 2018, while Renovate America entered the South Florida market in 2018 by recording agreements with 203 homeowners in Broward County, 63 in Palm Beach County, and 45 in Miami-Dade County.
Too good to be true
Mindy Ventimiglia, a Boynton Beach homeowner, said the program seemed too good to be true when she first learned about it. "And it was," she said.
Ventimiglia said she was told she wouldn't have to start making payments of $110 to $120 a month payments for her new air conditioning system for 17 months after the system was installed last spring. Instead, her property tax bill arrived in November with the first of 15 annual assessments of $1,824 - or about $150 a month - added to her normal tax bill.
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"I feel foolish," she said in an interview. "I'm an educated person. I check things out. I feel I asked the right questions, but the answers were not forthcoming."
Program providers disagree that consumers aren't fully informed about how they'll be required to repay the money they are borrowing. Reforms instituted in recent years require representatives to repeatedly review terms of repayment, and require borrowers to affirm their understanding of those terms, said Mike Lemyre, senior vice president of Ygrene Energy Fund.
Despite the protections, wires still get crossed, program officials acknoweldge.
Jennifer Jurado, chief resilience officer and director of the Environmental Planning and Community Resilience Division in Broward County, said county officials field several hundred phone calls a month from homeowners with questions about the program. They've also caught contractors claiming to be involved in the program when they weren't, and contractors who were affiliated with it deliberately misleading consumers.
In the program's first couple years in South Florida, consumers told of contractors claiming the financing was "free government money" or that PACE was a county government-run program, Jurado said.
Neither is true. Counties and cities authorized the program for their residents by agreeing to allow providers to set up repayment through assessments on their property tax bills, but they don't run the programs, Jurado said. But because they authorized the tax bill assessments, cities and counties oversee the programs and can require more stringent disclosure terms.
Jurado and her staff plan to ask Broward's County Commission to require that providers give borrowers a one-page fact sheet with payback obligations spelled out in large-size type, she said.
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"One of the greatest concerns we have is whether individuals understand the full cost of the program," she said.
Lemyre said it's sometimes not clear to borrowers that assessments for projects completed prior to June 30 will show up just a few months later on their next property tax bill. If the project is completed after June 30, the assessment won't show up until the following year's tax bill.
Ventimiglia's unhappy surprise at finding an earlier-than-expected assessment is not unusual, Jurado said. If the assessment shows up during the same year the project is completed, mortgage lenders may levy that charge in addition to having the borrower prepay the following year's assessment through month to month escrow payments. When that happens, the homeowner is charged double during a year that no payment was expected.
Borrowers who don't begin repaying the financing for more than a year and then seek to pay off the debt to remove the lien or sell their house can be surprised to find they owe several thousands of dollars in fees and interest.
Lemyre said that even though Ygrene no longer imposes a prepayment penalty, the interest that begins accruing as soon as a project is finished gets rolled into the principal debt. That's called "capitalized interest" and it's common for nearly all types of loans, including car loans and home loans, he said.
Is it worth it?
Overall though, the benefits of PACE's unique financing programs to homeowners and their communities outweigh the problems, Jurado said.
"If you look around, you can really see the advancement of solar energy," she said. "I've spoken with many solar providers who said there isn't a solar project (in the county) not financed through PACE."
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In addition, she said, most of the money borrowed through the program is used for new roofs and hurricane-resistant windows and doors - improving residents' ability to withstand storms and in many cases reducing their homeowner insurance costs.
Complaints about coercive marketing to elderly homeowners by contractors - which led to a crackdown in California on lending rules and sparked calls by consumer protection groups for federal oversight - haven't surfaced in Florida.
"We are following PACE closely," said Alice Vickers, director of the Florida Alliance for Consumer Protection. "We have not received complaints directly from consumers."
Jurado and Lemyre said they are unaware of any foreclosure in Florida resulting from a homeowner's inability to repay PACE financing.
Despite Ventimiglia's ill feelings about her repayment schedule, she acknowledged she couldn't have financed her new air conditioning system without the program.
Natacha Beasley, who used the program to finance a new roof, impact windows and hurricane-resistant door for her 42-year-old Hollywood home, said she felt misled because her contractor failed to tell her the program would result in a lien against the house. Now she and her husband must repay the debt before they can sell the house because few lenders will approve loans on homes with PACE liens.
Yet the improvements will make the house more attractive to a buyer, she said, and that made the program worth it.
Asked if she'd make the same choice again, she said, "I probably would."
Visit the Sun Sentinel (Fort Lauderdale, Fla.) at www.sun-sentinel.com