California Homeownership and Property-Tax Guide
What Is the HERO (PACE) Loan Program in California?
The HERO program was a branded form of Property Assessed Clean Energy financing that paid for eligible home improvements through an assessment added to a California property's tax bill. HERO stands for Home Energy Renovation Opportunity. It was not a free government grant, and the California HERO program is no longer active for new financing. The California State Treasurer lists it as inactive as of January 16, 2021. Existing HERO assessments can still matter when an owner pays taxes, refinances, or sells a home.
What Are the Key Facts About HERO and PACE?
How Did the HERO PACE Program Work?
A participating homeowner selected an eligible improvement, worked through an approved program and contractor, signed an assessment contract, and repaid the financed amount through property-tax installments. Common project categories included solar equipment, heating and cooling, windows, roofing tied to energy performance, water-saving improvements, and other approved efficiency work. Eligibility and covered work depended on the program rules in effect when the contract was signed.
The unusual feature was the repayment structure. Instead of receiving a monthly statement like a personal loan, the owner paid an additional assessment collected with property taxes. That is why “PACE loan” is familiar consumer language, while “PACE assessment” is usually more precise. The obligation was connected to the real property, and a lien secured the assessment.
The federal Consumer Financial Protection Bureau says PACE financing increases the property-tax payment and is not paid or insured by the federal government. The California Department of Financial Protection and Innovation gives the same warning in plainer terms: PACE is not a free government program. The owner must repay principal, interest, and applicable costs through the tax assessment (DFPI, accessed September 2026).
Is the HERO Program Still Available in California?
No, not as a current source of new HERO financing. The State Treasurer's list places the California HERO Program among inactive PACE programs and gives January 16, 2021 as its inactive date. The same state list shows the LA HERO Program inactive as of April 2020, the Western Riverside County HERO Program inactive as of October 16, 2020, and the CSCDA HERO Program inactive as of May 28, 2020 (California State Treasurer, accessed September 2026).
“Inactive” does not erase a valid assessment recorded years earlier. A homeowner may still see installments on the tax bill, and a title search may still identify the related obligation. The State Treasurer continues to report environmental results from previously enrolled HERO financings, which confirms the difference between closed origination channels and outstanding legacy activity (California State Treasurer, data through December 2025).
PACE as a financing category is broader than HERO. Other PACE programs or administrators may operate under different names and local authorizations. A homeowner considering any current offering should verify the administrator on DFPI's license records, confirm that the local jurisdiction participates, and compare the complete cost with a home-equity product, renovation loan, solar loan, utility program, or cash bid. Do not assume a contractor's use of “PACE” means the old HERO program has returned.
How Can a HERO Assessment Affect a California Home Sale?
A HERO assessment can change a California sale even when every installment is current. The central problem is mortgage eligibility. The Federal Housing Finance Agency states that Fannie Mae and Freddie Mac policies prohibit purchasing a mortgage on a property with a first-lien PACE obligation attached. FHFA identifies two consequences: an owner may be unable to use a conventional agency refinance, and a buyer may be unable to finance the purchase with a Fannie Mae or Freddie Mac mortgage while the obligation remains (FHFA, December 2014).
FHA policy is also restrictive. HUD's current Single Family Housing Policy Handbook materials say a property that will remain encumbered by a PACE obligation after closing is not eligible for FHA mortgage insurance (HUD Handbook 4000.1, accessed September 2026). These policies make payoff before or at closing a common practical solution.
A contract may describe the assessment as transferable with the property, but transferability does not guarantee that a buyer's lender will accept it. A willing buyer could still have a loan denied because the lien does not meet the lender or investor's requirements. The CFPB warns that most lenders will not originate a new mortgage or refinance while an outstanding PACE assessment remains (CFPB, reviewed September 2024).
| Transaction | Likely issue | Practical next step |
|---|---|---|
| Conventional purchase | Agency eligibility may require the first-lien PACE obligation to be paid | Send the assessment and payoff information to the buyer's lender before contingencies are shortened |
| FHA purchase | The property cannot remain encumbered by PACE after closing under cited HUD policy | Confirm a payoff path and closing-document requirements |
| Refinance | The existing owner may be unable to complete the new agency loan with PACE outstanding | Ask the refinance lender whether proceeds may satisfy the assessment at closing |
| Cash purchase | No mortgage approval removes the lender gate, but the buyer still assumes economic and title risk if the obligation stays | Review the contract, lien priority, tax schedule, payoff, and purchase agreement with qualified advisers |
How Do You Find a HERO Assessment on a Property?
Start with documents, not memory. Owners sometimes remember the contractor or solar brand but not the name of the financing program. Others think the project was included in mortgage escrow because their monthly mortgage payment rose. The assessment can be found through several records.
- Read the complete property-tax bill. Look for a direct assessment, special assessment, PACE entry, HERO reference, or unfamiliar annual charge. Review both installments and any supplemental pages.
- Order a preliminary title report. Ask the title officer to identify recorded PACE documents and explain what must be cleared under the proposed title policy. A title officer can address title practice but should not be treated as the buyer's legal or tax adviser.
- Locate the original assessment contract. It should show the financed amount, term, payment schedule, fees, improvement description, and administrator information.
- Request a current written payoff demand. Do not estimate payoff by multiplying the annual assessment by remaining years. Interest, timing, fees, and contract terms can make that arithmetic wrong.
- Check mortgage escrow. If a servicer collects taxes, ask for an escrow analysis showing how the assessment changed the monthly housing payment.
- Verify licenses. DFPI tells consumers to verify the PACE administrator, and California's Contractors State License Board provides contractor-license records.
In Los Angeles County, do this work before listing if possible. A payoff discovered after the buyer's appraisal can force a last-minute negotiation over net proceeds. Early disclosure lets the seller set a realistic price, lets the buyer's lender decide eligibility, and gives escrow time to obtain a demand from the correct party.
Who Pays Off a HERO Assessment When the Home Sells?
The purchase agreement and negotiations determine who bears the economic cost, but the seller commonly pays the outstanding assessment from sale proceeds when the buyer's lender requires the lien cleared. Escrow then follows written payoff instructions and obtains the documentation needed for title.
A seller should distinguish three numbers: the annual property-tax installment, any delinquent amount, and the total payoff. They are not interchangeable. Paying the current tax installment may keep the account current without eliminating the future assessment. A lender that requires payoff generally needs the full obligation handled according to its closing conditions.
The payoff can also affect pricing. Imagine a seller accepts an offer and later learns that the net sheet omitted a substantial PACE balance. The seller may want to increase the price or ask the buyer to assume the assessment, but the buyer may be contractually protected and the lender may refuse assumption. A better process is to put the written payoff on the estimated net sheet before reviewing offers.
California sellers should also resist casual tax advice. Whether any interest or assessment component is deductible depends on federal and state tax rules and the owner's circumstances. DFPI's operative-law summary says a PACE administrator may not represent tax deductibility unless the statement is consistent with law (DFPI, AB 1284 and SB 242 summary). Ask a qualified tax professional to review the actual documents.
What Should a Buyer Check Before Purchasing a Home With HERO?
A California buyer needs an answer from the lender, not a general assurance from the listing side. Provide the preliminary title report, assessment contract, current tax bill, and payoff statement. Ask the lender in writing whether the PACE obligation must be paid before closing, may be paid through closing, or creates another eligibility condition.
Then investigate the improvement itself. Financing does not prove that the equipment works, was permitted, adds value equal to its original cost, or remains under warranty. For solar, determine whether the system is owned, separately financed, leased, or subject to a power-purchase agreement. HERO financing and a solar lease are different obligations, and a property can have more than one document affecting the system.
Review the improvement with the same discipline used for the house:
- Confirm permits and final inspection records where applicable.
- Obtain warranties and determine whether they transfer.
- Inspect roof penetrations, electrical work, HVAC installation, windows, drainage, or other relevant components.
- Compare utility bills cautiously because household size and behavior affect consumption.
- Ask an appraiser or real estate professional how the market treats the improvement, without assuming cost equals value.
- Confirm the post-closing tax and escrow payment with the lender and tax records.
The CFPB warns that sales claims about improvements paying for themselves may not be proven. Treat projected savings as a scenario that needs documentation, not as guaranteed income (CFPB, reviewed September 2024).
What Consumer Protections Apply to California PACE Financing?
California strengthened PACE regulation after reports of cost misrepresentation, unauthorized signatures, incomplete work approvals, and unaffordable tax increases. DFPI says it began licensing PACE program administrators and regulating the industry in 2019. The rules require oral confirmation of key terms before signing, financial documentation for an ability-to-pay determination, and review of financing relative to property value.
DFPI's summary of AB 1284 and SB 242 also identifies underwriting and conduct rules. Among them, property taxes and mortgage debt must be current under specified standards, administrators must evaluate the owner's reasonable ability to pay, and a contractor may not charge a higher project price merely because the owner uses PACE financing (DFPI, operative PACE laws).
Those protections do not make every contract affordable or every project satisfactory. DFPI advises homeowners to request the entire contract, verify licenses, ask for total lifetime cost, and calculate the property-tax increase. It also warns that electronic signing can make it harder to see the complete agreement and that a PACE contract can be difficult to void after signing.
| Document | What it answers | Who typically reviews it |
|---|---|---|
| Current tax bill | Annual assessment name and installment | Owner, buyer, escrow, lender |
| Recorded assessment and preliminary title report | Lien and title status | Title, lender, legal counsel when needed |
| Assessment contract | Original terms, project, payment schedule, transfer language | Owner, buyer, counsel, lender |
| Written payoff demand | Amount and instructions needed to clear the obligation | Escrow, title, lender |
| Permits, warranties, inspection records | Condition and status of the improvement | Buyer and relevant inspectors or contractors |
Frequently Asked Questions About HERO PACE Assessments
Is a HERO loan the same as a solar loan?
No. HERO was a PACE assessment program that could finance several eligible improvement categories, including some solar projects. A conventional solar loan is normally a separate credit obligation and may be secured differently. Review the contract and title report rather than relying on the equipment type.
Is HERO a free California government program?
No. A local public agency authorized the assessment structure, but the homeowner had to repay the financing through increased property taxes. DFPI specifically warns that PACE is not a free government program.
Can a buyer assume a HERO assessment?
The assessment documents may contemplate transfer with the property, but a buyer's mortgage lender may require full payoff. Fannie Mae, Freddie Mac, FHA, and individual lender rules can restrict financing on an encumbered property. Obtain a written lender determination before promising assumption.
Does paying the property-tax bill remove the HERO lien?
Paying the current installment keeps that installment from becoming delinquent, but it does not necessarily satisfy all future amounts. Request a current written payoff and the release or title evidence required for closing.
Can a HERO assessment cause foreclosure?
Nonpayment of property taxes and assessments can expose an owner to tax-default and sale procedures. The CFPB warns that failure to pay PACE charges can put the home at risk. Owners facing delinquency should contact the tax collector, servicer, administrator, and qualified legal or housing-counseling resources promptly.
How do I get a HERO payoff amount?
Use the administrator or current servicing contact shown on the assessment records, then request a dated written payoff demand. Escrow or title can help route the request during a sale. Do not treat the annual tax charge as the payoff balance.
Should a seller pay off HERO before listing?
Not always before listing, but the seller should identify the obligation and obtain a payoff early. In many financed sales it can be paid through escrow from proceeds. The timing should be coordinated with title, escrow, the existing administrator, and the buyer's lender.
Sources
- California State Treasurer, List of Enrolled PACE Programs, accessed September 2026.
- California State Treasurer, PACE Loss Reserve Program Activity, data through December 2025.
- California DFPI, Property Assessed Clean Energy: What Homeowners Need to Know, accessed September 2026.
- California DFPI, Summary of Operative Dates for PACE Laws, accessed September 2026.
- Consumer Financial Protection Bureau, What Is a PACE Loan?, reviewed September 2024.
- Consumer Financial Protection Bureau, PACE Risks Before Signing, reviewed September 2024.
- Federal Housing Finance Agency, Statement on Certain Super-Priority Liens, December 2014.
- HUD, FHA Single Family Housing Policy Handbook 4000.1, accessed September 2026.
This guide provides general real estate education, not legal, tax, lending, title, engineering, or contracting advice. Rules and transaction requirements can vary by property and lender.
