MD: Here at Money Delusions we know that money is not a “social tool”. Ithaca Hours and Baltimore BNotes are obvious instances of social money … that just plain doesn’t work. Every attempt to use it as such will be counterproductive. It is unfair to all concerned … especially traders. It enables interlopers to manipulate economies and to favor one class of trader over another.
With that in mind, let’s see what delusions this article contains and observe and predict the impact.
More Borrowers Are Defaulting on Their ‘Green’ PACE Loans
One of America’s fastest-growing loan types was designed to help homeowners make eco-friendly upgrades.
MD: Why would it be so fast growing? Offer these traders zero interest loans in a zero inflation environment and they will love you for it. This is just social manipulation through money … money “creation” in this instance. It is banished from any proper MOE process … through plain old common sense. We have to say “old” because there doesn’t seem to be any common sense in these newer times.
MD: What does it mean to attach a balance to a property tax bill? Using taxes to manipulate the economy is also a no-no … unfair especially to traders.
Loan defaults in a popular program meant to finance energy-saving home upgrades have increased substantially, despite lenders’ claims that few borrowers have missed payments.
MD: If money creators … i.e. traders making trading promises spanning time and space (and borrowing is just the money changer term to mischaracterize what is really going on) are not missing payments, they are obviously “not” defaulting!
The small, high-interest-rate loans were made as part of the Property Assessed Clean Energy program, or PACE, a nationwide initiative designed to help people afford solar panels, energy-efficient air-conditioners and other “green” appliances. PACE loans are among the fastest-growing types of loans in the U.S.
MD: Small loans? High interest loans? What’s up with that!!! In these overwhelming corrupt times, it appears traders will do virtually anything to escape the money creation controls of the money changers … even when they play right into the money changers hands as described here.
Private lenders in the PACE program have told Wall Street investors, as well as local and federal government officials, that borrower defaults are rare and that no homeowners have gone into foreclosure as a result of the program, according to investors and public officials.
MD: They write … in direct conflict with the title of their article?
But a Wall Street Journal analysis of tax data in 40 counties in California—by far the biggest market for PACE loans—shows that defaults have jumped over the last year. Roughly 1,100 borrowers have missed two consecutive payments this year through the tax year that ended June 30, compared with 245 over the previous year. That means they are in default, and could potentially have their homes auctioned off by local governments within five years.
MD: That says nothing if the number of traders involved has increased four-fold as well. In all their wisdom, have they increased interest collections accordingly to recover these defaulted trading promises?
The lenders, including Renovate America Inc., Ygrene Energy Fund and Renew Financial Inc., say the overall default rate of less than 2% provided by the Journal’s analysis is in line with the average percentage of people who miss property-tax payments.
MD: 2% of what?
A spokeswoman for Renovate America said the partial data gathered by the Journal is more negative than what the company is seeing.
MD: “The company” should be seeing instances of defaults instantly. And with a proper MOE process they would be making immediate interest collections of like amount from new traders with a similar propensity to default. It has a negative feedback, self stabilizing, bubble containing effect.
Rocco Fabiano, the chief executive of Ygrene, said in a statement that “Ygrene’s PACE delinquency rate remains far below that of average property tax delinquencies in California.” A spokesman for Renew Financial said property owners in its CaliforniaFIRST PACE program “have similar delinquency and default rates as all other property owners.”
MD: So this is a property tax?
In the PACE program, private companies make the loans and the balances are placed on a homeowner’s property tax bill. Local governments are responsible for collecting the payments and, in the event of a default, potentially seizing the home to recoup the loan amount.
MD: Right… government collecting using their unique tools of force (i.e. by taking the trader’s property … and usually turning it over to the money changers for a song). While private companies get the interest … right? Right out of the money changers playbook isn’t it!
The average PACE loan is about $25,000. But unpaid balances get bigger quickly; they accrue additional interest at the rate of 18% annually. Under California law, homes can be auctioned off in a tax sale in up to five years if the homeowners don’t pay the balance.
MD: 18% annual interest? That suggests that over the term of the average trading promise, nearly one in five will fail to make any repayment at all! Money changers? What’s not to love about that? Nothing like raising interest rates to get people to stop being deadbeats. Note, this is imposed on people who have already committed to their trading promise. Not to new ones making new trading promises. This is exactly the wrong way for an MOE process to operate!
“For us to be the heavy hand and make [borrowers] go through the tax sale process is onerous on us,” says Jon Christensen, the tax collector in Riverside County, where 227 PACE borrowers are in default.
MD: Who designed this system? They should be hanged. If we had a proper MOE process, this nonsense wouldn’t even get started … there would be no need for it!
Wall Street is hungry for bonds made from PACE loans. In July, asset managers and pension funds piled into a $205 million deal from the largest PACE lender, Renovate America. It was the company’s 11th securitization since its 2008 founding.
Investors are attracted to the bonds’ relatively high yield of about 4% and the loans’ priority structure. If a borrower defaults, PACE lenders are paid back before mortgage lenders. The deals have received high marks from rating agencies, which have said the program is too new to predict future defaults.
Still, some investors are getting nervous.
“If we can’t get more data, it’s going to limit our ability to take the risk,” says Dave Goodson, the head of securitized products at Voya Financial Inc., noting that monthly updates on the PACE bond deal he has invested in don’t include default rates. Mr. Goodson said he has shared his concern about lack of delinquency data in the PACE program to lenders.
MD: Take what risk? The money changers “never” take a risk.
Indeed, such performance data are hard to come by. It is up to local tax collectors to track default rates. “No one is even collecting all the data,” said John Rao, an attorney with the nonprofit National Consumer Law Center.
MD: Such performance data hard to come by? With a proper MOE process it is totally transparent. Anyone can view it … in real time!
The Journal analyzed data from the California Association of County Treasurers and Tax Collectors, which collected the information from local tax collectors and from counties. The association is advocating state legislation to increase consumer protections in the PACE program.
MD: Boy … talk about checking the barn door months after the horse has left!
The data, which only offer a limited view of overall PACE loan performance, show that the average default rate has climbed to 1.6% from 0.9% last year.
MD: If it is just 1.6%, how do they justify charging 18% interest. In a proper MOE process, interest collections are exactly equal to defaults experienced. They are made by new traders … not existing traders. It is a natural negative feedback system … resisting new traders when existing traders are experiencing problems. Throw the penalty on existing traders and you make their plight worse … plus you don’t restrict new traders that just inflates the bubble. How stupid can they be?
The default rate is lower than the average credit card default rate of roughly 3.5%, and higher than the first mortgage default rate of .6%, according to the S&P Dow Jones Indices.
But the PACE default rate doesn’t capture borrowers whose missed payments are covered by mortgage escrow accounts, which appears to be a common occurrence, according to borrowers, banks, real estate agents and attorneys.
MD: In other words, the instrumentation sucks … by design I’m sure.
Last year, California tax collectors reported that roughly 1.1% of homeowners missed property-tax payments, according to the tax collectors association.
MD: How can they miss property tax-payments when they are required by the government to escrow those payments? It can only be because the money changers are grabbing their tribute first.