Owned solar panels that are real property usually do not stop a HECM if title is clean. Leased panels with a UCC-1 fixture filing, or a PACE assessment, can. Mortgagee Letter 2017-18 bars a HECM while PACE still encumbers the property.
Jay Zayer, a Certified Reverse Mortgage Professional who originates in California and Arizona, reads the solar paper the same week as counseling, because a silent UCC-1 is how files die after the appraisal is paid.
A HECM is FHA-insured. It is not a solar-financing program.
When are owned solar panels just part of the house?
Here is a situation that comes up regularly: a 64-year-old in Palmdale paid cash for a rooftop array years ago. The installer was paid. There is no UCC-1. There is no Property Assessed Clean Energy (PACE) assessment on the tax bill. The panels are affixed and treated as real property. Title is otherwise clean. That array is usually just part of the dwelling the appraiser sees.
“Usually” is the honest word. The appraiser still has to support value. The roof still has to meet FHA property standards under 24 CFR 206.47. A leaking roof under a paid-off array is a repair problem, not a solar problem. See homes that need repairs.
Portable ground kits that are personal property, unpaid mechanic’s liens, and half-finished installs are not “owned and clean.” Those are title or repair flags. Do not tell underwriting the system is owned if a financing rider is still recorded.
HUD’s 7.000% column, as of 22 September 2026, still clusters most ages in the mid-30s to low-50s of MCA. The 2026 maximum claim amount is $1,249,125 (Mortgagee Letter 2025-22). Panels do not invent a higher factor. Run proceeds after any solar payoff is known.
What must happen to a solar lease or a UCC-1 before title clears?
24 CFR 206.45 requires an eligible property with marketable title. A solar lease often comes with a Uniform Commercial Code fixture filing (UCC-1) that tells the world the lessor has an interest in the equipment attached to the house. A first-lien HECM cannot ignore that filing.
The lessor must release the UCC, or subordinate it in a form the lender and title company accept, or the equipment must be removed under a written agreement that leaves the roof sound. A verbal “the solar company is fine with it” is not a release.
I work with multiple lenders. Their solar overlays are not identical. Some will not close with any fixture filing. Some will close after a recorded subordination. I will not promise a Palmdale lease will clear because a Mesa file did.
Here is the Arizona contrast: a 76-year-old in Mesa with a leased array and a UCC-1 that the lessor will not touch. The house can appraise well. The HECM still stops. Paying $125–$175 for counseling while that lessor is silent wastes the 180-day certificate. Call the solar company before you book the counselor.
A lease that requires the homeowner to buy out the system is a cash or proceeds question. That buyout is not HUD extra capacity. It comes from the principal limit or from your pocket, the same way a first-mortgage payoff does. See existing mortgages for how prior liens eat leftover cash.
California’s seven-day counseling wait (Civil Code section 1923.2(k)) does not pause for a solar legal department. Start the lessor conversation when you start counseling.
Why does a PACE assessment stop a HECM until it is paid?
PACE is often how solar, HVAC, and other energy work was financed against the property-tax bill. Mortgagee Letter 2017-18 is blunt. A property that remains encumbered with PACE is not eligible for an FHA HECM. The PACE assessment must be paid off. That payoff is a mandatory obligation. It may be paid from HECM proceeds.
Mandatory obligations reduce leftover cash. They sit in the 24 CFR 206.25 stack with other required payoffs. If PACE plus the first mortgage plus costs exceed the principal limit, you bring cash or you do not close.
Walk the dollars without guessing a factor. Suppose the house is well under the 2026 cap, PACE is $38,000, and a small first mortgage is still open. Mortgagee Letter 2017-12 still prices initial MIP at 2.00% of maximum claim amount. Origination is still capped at $6,000 under 24 CFR 206.31(a)(1). Those costs do not vanish because the panels look green. Model the leftover after the PACE demand is in writing.
PACE is not an HOA bill. It is not a utility. It is a recorded assessment that ML 2017-18 treats as disqualifying until it is gone. A county tax bill that still shows PACE after you “thought it was paid” is a title fail.
What can go wrong: the homeowner paid the installer and never noticed PACE on the tax roll. Title finds it. Or the solar lease is called “owned” at the kitchen table and the UCC-1 appears in the prelim. Or the lessor wants a buyout larger than leftover proceeds.
A follow-up: if I pay PACE from HECM proceeds, does that count toward the first-year 60% disbursement cap? Mandatory obligations can be paid even when they push the initial disbursement above 60% of principal limit, subject to 24 CFR 206.25. Optional leftover cash still faces that first-year cap. Ask for the worksheet, not a slogan.
Who should not start a HECM while solar paper is still on title?
This path does not help a household whose PACE balance is larger than the leftover principal limit and who cannot bring cash. ML 2017-18 does not let PACE ride behind a new HECM. Jay will say the math fails rather than originate a shortfall.
It does not help a household whose solar lessor will not release or subordinate the UCC-1. Marketable title under 24 CFR 206.45 is not optional. I will not order a full appraisal to pressure a lessor who has already said no.
It does not help someone who wants to add PACE after a HECM closes. A new PACE assessment on a house that already has a HECM is a later-lien problem the servicer did not underwrite. Do not sign a new PACE contract because a door-to-door crew says it “just goes on the taxes.”
Owned, paid-for panels on a clean title are usually not the issue. The paper under the panels is. Get the title prelim, the tax bill, and the solar contract into one folder before anyone pays for counseling.