Solar Panel FAQ

When the solar panels are financed as a fixture to the real estate and the UCC-1 financing statement is recorded against title as a lien against the Mortgaged Premises, the UPB of the solar loan should be used in the calculation of the TLTV. If the UPB is not provided by the solar company or lender, the original loan amount should be used in the TLTV calculation.

Question: We believe the UCC-1 may have been completed incorrectly. For example, we have a property with financed solar panels with a UCC-1 fixture filing that shows in section 13 that the statement should be filed in the real estate records and shows in section 14 that it will be filed as a fixture filing. As section 13 and 14 are both marked (and title shows this as a lien) should we subordinate the lien?

Answer: The Seller should consult with its legal counsel to determine the appropriate action by determining if the filing affects our lien position in the given jurisdiction.

Question: The original solar panel power purchase agreement (PPA), lease or financing agreement does not contain the “in the event of foreclosure …” language that is required under Single-Family Seller/Servicer Guide (Guide) Section 5601.4(b). However, the solar panel company has agreed to send a letter updating the terms of the agreement to include those terms. Is this acceptable?

Answer: Yes. However, the letter must constitute a legal amendment to the original agreement so that Freddie Mac can enforce it if the property does go to foreclosure. At a minimum, the letter must reference the original agreement and be signed by the solar company and the borrower. The original letter must be kept by the Seller in the mortgage file with the copy of the solar panel agreement. The Seller must consult with its legal counsel to ensure that all the legal requirements for an amendment to the original solar panel agreement are met.

Question: There is a UCC-1 that has been recorded in the land records and claims to have a security interest in not just the solar panel equipment, but the entire real estate. The policy states that it needs to be subordinated, released, or amended but the borrower is unable to get in touch with the solar panel financing/leasing company. A title company sells an endorsement to the title insurance policy that expressly insures against claims made by the solar panel company such as the California Solar Endorsement from the California Land Title Association. Under these circumstances, may the borrower purchase the endorsement and leave the UCC-1 “as-is”?

Answer: The best course of action is to obtain the subordination or release to clear title to the real estate. However, if any of these options are not available but an endorsement to the lender’s title policy (such as the “California Solar Endorsement”) is available, then purchasing the endorsement is an acceptable way to comply with the Guide. The applicable solar panel agreement must still comply with all other provisions of Guide Section 5601.4(b).

Question: The borrower has a lease agreement with a solar panel company wherein the solar panel company simply leases the space on the borrower’s roof. It is not a PPA or an agreement where the borrower leases the solar panels. The borrower is simply paid rent and the solar company continues to own the equipment and the energy generated by it. How is this governed by Guide Section 5601.4?

Answer: This is not governed by Guide Section 5601.4(b) because the borrower does not have any interest in the solar panels. This should be treated like any other circumstance where the borrower is renting a part of the real estate to a third-party. Guide Section 4702.4 provides guidance on acceptable exceptions to the title insurance policy or attorney’s opinion of title.

It depends upon the jurisdiction. The UCC-1 is supposed to be used to create a lien against specific, identified assets, such as solar panel equipment, and not the entirety of the real estate premises. Box 4 of the UCC-1 form labeled “Collateral” should describe the assets separate and apart from the real estate where they are located

If a particular jurisdiction regards a UCC-1 filing as a general lien against all of the real estate, then the Seller must release or subordinate the UCC-1 as required by Guide Section 5601.4(b). The Seller must work with its legal counsel to determine the law applicable to the jurisdiction at issue.

Question: If a solar panel company has recorded an overbroad UCC-1 claiming an interest in title to the real estate, the Guide requires that it be addressed in order to ensure the first lien position of the Freddie Mac mortgage. If the solar panel company wants to amend the filing using a form UCC-3 “Financing Statement Amendment” form to make it clear the UCC-1 only covers the solar panel equipment, is that acceptable?

Answer: Yes. If the solar panel company files an amendment to the offending UCC-1 restricting it to just the solar panel equipment, then the amended UCC-1 does not need to be released or subordinated.