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Ca Solar Lease Then Lease Removed

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PushinValue

Junior Member
Joined
Nov 28, 2011
Professional Status
Certified Residential Appraiser
State
California
FNMA refi 1004

Owner states the system is leased/power purchase agreement.

I state in the report the solar system is leased and not considered part of the appraisal


Lender uploads a notarized letter stating solar city has no lien or interest in the system/property... It is dated 3 days before the effective date.

They instruct me to remove the commentary the system is no longer leased...

My understanding this is a practice where they temporarily remove the lien so financing can be put in place.


They now want a comp with "owned solar"...

How would you proceed?
 

Wm. Hattaway

Senior Member
Joined
Mar 18, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Reminds me of home owners who remove the security bars over the windows for the appraisal inspection and then put them back up after we leave.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
FNMA refi 1004

Owner states the system is leased/power purchase agreement.

I state in the report the solar system is leased and not considered part of the appraisal


Lender uploads a notarized letter stating solar city has no lien or interest in the system/property... It is dated 3 days before the effective date.

They instruct me to remove the commentary the system is no longer leased...

My understanding this is a practice where they temporarily remove the lien so financing can be put in place.


They now want a comp with "owned solar"...

How would you proceed?


I'd be surprised if Solar City (or the leasing company that is servicing the lease) would be actively involved in mortgage fraud.
I'm not saying it is impossible... but I think it is highly unlikely.

Having said that, I think you have three choices:
1. Accept the documentation the lender has provided as reliable (they will be cited in the report as providing the documentation; complete the assignment.
2. Request additional verification. I would think this could be real easy to get. Randolph suggests obtaining an original copy of the contract; I'm not sure this would be definitive.
What would be definitive is the subject's title report; the lien, if it has been satisfied, should show as such on a current title report. When I've had questions similar to ones like this (regarding title & liens}, as a rule the original "preliminary title report" the client still has would show the lien; this report was ordered early in the process and before the 3-day-prior date of your inspection. A current title (or prelim) would have a later date and show that the lien has been satisfied. That would be proof enough for me.
3. Decide that you are uncomfortable with the whole thing, and stop the assignment at this point.

I'd opt for #2 but I'd consider #1 (that consideration is based on the relationship I have with my mortgage-lending clients. You may not have that same type of relationship).

As an aside, I just did an appraisal for a home that had an owned PV system. I didn't have any comps to include. I did a NPV analysis of the forecasted savings over the holding period, and used that as a basis to consider the contributory value of the system in the reconciliation (in other words, I did not make a grid adjustment or have a similar PV comparable; I just showed what the math supported as a NPV for such a system given my assumptions, and used that as a basis to conclude a point-value higher than I otherwise might. So if you don't have any PV comps, that may be an option you want to consider).

Good luck!
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
I have an appraisal on Wednesday where the homeowner tells me he has both leased solar panels and owned solar panels on his roof. I will ask for the purchase contract to show ownerships to be incorporated in my appraisal. I am sure the lease is recorded but the fact the homeowner has solar panels that are not leased won't show in the record.
 

PushinValue

Junior Member
Joined
Nov 28, 2011
Professional Status
Certified Residential Appraiser
State
California
AMC response, if anyone was wondering...

"You are correct in your assumption. I spoke with the Lender and they stated that the reason they are asking you to remove the language of the lease is so the Investor will not require a subordination agreement. Apparently the lease will be re-instated after the loan has closed. You cannot make this requested change to the appraisal report. The solar panels cannot be ignored and are displayed in the photos and it is incumbent upon you to note whether they are leased or owned. You have completed all that you are required to per USPAP and this request from the Lender cannot be completed. I am removing this from the Underwriting Condition queue. Thank you for bring this to my attention"
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
AMC response, if anyone was wondering...

"You are correct in your assumption. I spoke with the Lender and they stated that the reason they are asking you to remove the language of the lease is so the Investor will not require a subordination agreement. Apparently the lease will be re-instated after the loan has closed. You cannot make this requested change to the appraisal report. The solar panels cannot be ignored and are displayed in the photos and it is incumbent upon you to note whether they are leased or owned. You have completed all that you are required to per USPAP and this request from the Lender cannot be completed. I am removing this from the Underwriting Condition queue. Thank you for bring this to my attention"


Good for the AMC.
However, IMO, the lender is facilitating mortgage fraud.
The lender has provided a notarized statement indicating the system is no longer leased as-of the effective date with the express intent of misleading the appraiser and downstream investors. Once the appraisal was completed (and perhaps the loan closed), the lender expected the lien to be re-attached. And, apparently, the lender has owned-up to this fraud when asked by the AMC about it.
If this isn't mortgage fraud, I don't know what is (and that is an accusation I don't make lightly).

If an appraiser or an AMC were involved in willingly procuring a fraudulent appraisal with the express intent of misleading intended users about the existence of a lien, I (and I think most others) would suggest you file a compliant.
If the lender is doing this, I (I don't know about anyone else) advise you to file a compliant. Fraud is fraud, and this scheme is being facilitated by the lender itself.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Lets see if anything happens about filing a complaint. Wonder if the AMC has a duty to report same or file a complaint same?
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
The lender is just playing a game and 95% of homeowners have a loan because almost nobody pays cash. I have encountered solar companies that will not Subordinate and the poor homeowner either pays the lien off through his-her refinance or no loan. On purchases we are seeing more sales in which buyers are not willing to take over a $30,000 to $60,000 Hero loan and don't want to assume a lease either. I was involved in one a few months ago and the seller had a large Hero Loan at 10% interest amortized over 10 years. The Hero program includes the loan in the property taxes. In this case the taxes including the hero loan went from about $2,500 a year to over $9,000 a year. The buyer figured that even if the electric bill was 0 by the time it was paid off the panels would be 10 years old and the panels are shot after 15 years. The sad part was the home was only 1,500 Sq.Ft. and already had dual pane windows and new insulation and this was clearly an oversell.

In Summary: I would not make any statements or help facilitate the lenders game.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
^^^ If/when such a scheme comes to light the only party who will get punished will be the appraiser who acted in good faith but made the mistake of trusting without verifying.
 
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