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Posts Tagged ‘Fannie Mae’

Fannie/Freddie: Homeowners must pay off PACE solar loans

Posted in energy, energy efficiency, environment, green policy, renewable energy, solar energy, tagged , , , , on September 1, 2010| Leave a Comment »

photo: Sonoma County

In The New York Times on Tuesday, I wrote about the latest nail in the coffin of Property Assessed Clean Energy, or PACE, programs:

Many homeowners who participated in a program that let them repay the cost of solar panels and other energy improvements through an annual surcharge on their property taxes must pay off the loans before they can refinance their mortgages, two government-chartered mortgage companies said Tuesday.

The guidance came from Fannie Mae and Freddie Mac as efforts to resolve a dispute over the program — called Property Assessed Clean Energy, or PACE — have failed.

Approved by 22 states, the programs let municipalities sell bonds to finance improvements in energy efficiency. Homeowners typically pay back the loans over 20 years through an annual property tax assessment. As is the case with other property tax assessments, a lien is placed on the home that has priority over the mortgage if the homeowner defaults.

In July, the Federal Housing Finance Agency, which oversees Fannie and Freddie, effectively derailed the program when it issued guidance to lenders stating that the liens violated the agency’s underwriting standards. Fannie and Freddie buy and sell most of the nation’s home mortgages.

That guidance led to the halt of most PACE programs and left in limbo those homeowners who had already taken out energy improvement loans.

On Tuesday, Fannie and Freddie issued guidance to lenders stating that borrowers with sufficient equity in their homes must pay off the loans before refinancing. Those homeowners without enough equity to take cash out of their home to pay off the lien can refinance with the loan in place.

“Fannie Mae will not purchase mortgage loans secured by properties with an outstanding PACE obligation unless the terms of the PACE program do not permit priority over first mortgage liens,” according to the guidance.

The program’s proponents have argued that it overcomes obstacles to installing expensive solar panels and making other energy efficiency improvements that reduce greenhouse-gas emissions while creating jobs.

In response to the Federal Housing Finance Agency’s actions, the California attorney general’s office filed a lawsuit in July against Fannie and Freddie, as did the Sierra Club. Meanwhile, legislation has been introduced in Congress to allow the program to go forward.

“It’s absolutely clear now that the F.H.F.A. is not at all interested in working out a solution that would allow PACE to proceed — the agency appears intent only on obstructing the program,” Janill L. Richards, a California supervising deputy attorney general, wrote in an e-mail.

You can read the rest of the story here.

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California sues Fannie/Freddie over PACE solar loans

Posted in alternative energy, energy, environment, green policy, renewable energy, solar energy, tagged , , , , , , on July 14, 2010| 1 Comment »

In The New York Times on Wednesday, I wrote that California Attorney General Jerry Brown has filed a lawsuit against Fannie Mae and Freddie Mac over the mortgage giants’ quashing of the PACE solar loan program:

The California attorney general’s office on Wednesday sued Fannie Mae and Freddie Mac over actions by the mortgage finance companies that have derailed a popular financing program that allows homeowners to pay for energy efficiency improvements through a surcharge on their property taxes.

This month, the Federal Housing Finance Agency, which oversees Fannie and Freddie, issued guidelines to lenders that restricted the ability of homeowners to participate in the financing programs, called Property Assessed Clean Energy, or PACE. Twenty-two states have authorized the programs, which have drawn $150 million in stimulus funding support from the Obama administration.

When a city or state pays for energy efficiency upgrades through the program, a lien is placed on the home. The liens, like other property tax assessments, take priority over the mortgage if the homeowner defaults. The housing agency instructed lenders that they could not accept such PACE liens.

In recent months, some banks have declined to refinance mortgages for homes that carry the liens.

In the lawsuit, filed in United States District Court in Oakland, Calif., Jerry Brown, the California attorney general and Democratic candidate for governor, asked that the court declare that participation in PACE programs does not violate the standards of Fannie and Freddie, which are government chartered. The suit also asks that an injunction be issued to prevent them from taking action against homeowners whose properties have PACE liens.

The Federal Housing Finance Agency was also named as a defendant.

The suit alleges that the housing agency’s actions violated California law, which authorizes PACE programs, and are “severely hampering California’s efforts to assist thousands of California homeowners to reduce their energy and water use, help drive the state’s green economy, and create significant numbers of skilled, stable and well-paying jobs.”

“The actions of these government-sponsored, shareholder-owned private corporations have placed California’s PACE programs – and the hundreds of millions of dollars in federal stimulus money supporting them – at immediate risk while benefiting their own pecuniary interests,” the suit states.

You can read the rest of the story here.

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Treasury Department piles on PACE solar loan restrictions

Posted in alternative energy, green financing, green policy, renewable energy, solar energy, tagged , , , , , , , , on July 7, 2010| Leave a Comment »

photo: Sungevity

I wrote this post for Grist, where it first appeared.

On Tuesday, the Federal Housing Finance Agency effectively shut down an innovative green financing program called Property Assessed Clean Energy, or PACE, by restricting the ability of homeowners to take out loans to install solar panels and make other energy efficiency improvements.

Now the United States Treasury Department has piled on. A new Treasury directive tells the nation’s banks how to enforce the FHFA rules. The move could pose new problems for homeowners who have PACE loans, and complicate efforts to get the program back on track.

Homeowners repay PACE loans through an annual assessment on their property taxes. On Tuesday, the Treasury Department told banks that if a homeowner has a home equity line of credit, the amount of money available should be lowered to account for the loan liability. The Treasury also said homeowners could be required to put their PACE payments in an escrow account.

After Fannie Mae and Freddie Mac, the government chartered mortgage finance giants, raised concerns about PACE in May, some lenders declined to refinance mortgages that carried PACE liens.

Owners of commercial properties who hold PACE loans may need to put up additional collateral to back up the loan, according to the Treasury Department letter.

Cisco DeVries, president of Renewable Funding, an Oakland, Calif., company that designs and administers PACE programs for local governments, said he wants to make sure PACE loans for commercial owners won’t be curtailed.

“We believe PACE commercial can go ahead as it has always required lender consent when a commercial mortgage is in place,” he wrote in an email. “We just want to make sure we don’t run into an unexpected problem as we move forward.”

Some municipalities sell bonds to finance energy-efficiency loans for homeowners. But they may find that harder to do under the Treasury Department directive, which warned banks to move cautiously when underwriting such bonds.

I reported in the The New York Times on Tuesday that the Federal Housing Finance Agency had rejected the Obama administration’s offer of a two-year guarantee against any PACE-related mortgage losses Fannie or Freddie might suffer.

Now in a move that PACE proponents say adds insult to injury, the Treasury Department is advising banks to get local governments to insure them against any losses from the program if homeowners default on their mortgages.

Among those not amused by the FHFA action was California Gov. Arnold Schwarzenegger.

“The FHFA’s bureaucratic breakdown threatens one of California’s most promising new engines of job creation in this struggling economy,” Schwarzenegger said in a statement. “FHFA’s action threatens thousands of new sustainable jobs in California, especially in the hard-hit construction industry, while denying homeowners the opportunity to reduce monthly energy costs and add equity to their homes.”

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Federal agency brings hammer down on PACE solar loans

Posted in alternative energy, energy, environment, green policy, renewable energy, solar energy, tagged , , , , , on July 6, 2010| Leave a Comment »

In The New York Times on Tuesday, I write about the latest developments in the Fannie Mae/Freddie Mac – PACE solar loan saga:

The federal agency that oversees two government-chartered mortgage finance companies imposed new restrictions Tuesday on homeowners’ ability to take advantage of a program that allows them to repay the cost of installing solar panels and other energy improvements through an annual surcharge on their property taxes.

The new guidelines could also make it more difficult for homeowners to obtain mortgages even if they don’t participate in the programs, called Property Assessed Clean Energy, or PACE, but happen to live in an area where they are offered.

“For all intents and purposes, until cooler heads prevail or Congress acts, it’s very difficult to envision PACE going forward,” said Cisco DeVries, president of Renewable Funding, a company in Oakland, Calif., that creates and administers the programs for local governments.

In issuing the guidance to Fannie Mae and Freddie Mac, which buy and resell most mortgages, the Federal Housing Finance Agency was critical of the energy efficiency programs that have been authorized by 22 states and that have drawn $150 million in stimulus funding support from the Obama administration.

When a municipality pays for energy efficiency upgrades through the program, a lien is placed on the home. The liens, like other property tax assessments, take priority over the mortgage if the homeowner defaults.

But the housing agency on Tuesday characterized PACE liens as different from other special assessments that cities routinely use to finance sewers, sidewalks and other civic improvements.

“They present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation,” the agency wrote.

The Federal Housing Finance Agency said efforts were continuing to develop underwriting standards for energy efficiency programs.

“However, first liens that disrupt a fragile housing finance market and longstanding lending priorities, the absence of robust underwriting standards to protect homeowners and the lack of energy retrofit standards to assist homeowners, appraisers, inspectors and lenders determine the value of retrofit products combine to raise safety and soundness concerns,” the agency stated.

You can read the rest of the story here.

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Loan giants decide to block PACE solar loan program

Posted in alternative energy, energy, environment, green policy, renewable energy, solar energy, tagged , , , on July 4, 2010| Leave a Comment »

In Sunday’s New York Times, I have an update on the controversy surrounding Fannie Mae and Freddie Mac’s blocking of the PACE solar loan program:

Two government-chartered mortgage finance companies are unlikely to accept loans on homes that are part of a special program that lets homeowners repay the cost of energy improvements through a surcharge on their property tax bills, according to Energy Department officials.

The Obama administration has allocated $150 million in stimulus money to support the financing technique, called Property Assessed Clean Energy, or PACE, and 22 states have authorized such programs. In a separate stimulus effort, President Obama on Saturday announced nearly $2 billion in loan guarantees for solar energy production.

Through the PACE program, loans to install solar panels and make other energy improvements would be repaid through 20-year special assessments on property tax bills and secured through a lien.

On May 5, Fannie Mae and Freddie Mac, which buy and resell most home mortgages, notified lenders that such liens could not take priority over a mortgage but did not offer guidance on how to handle such loans. The uncertainty has frozen many PACE programs and led some energy companies to furlough workers.

On Friday, Cathy Zoi, an assistant secretary at the Energy Department, called officials in Boulder County, Colo., to inform them that the administration had been unable to persuade the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, to accept mortgages with PACE liens.

The liens, like other property tax assessments, would be paid first if a homeowner defaults.

“She said in light of the circumstances we should look at other ways of financing energy efficiency with the stimulus money,” said Ben Pearlman, a commissioner in Boulder County.

“We’re very concerned,” Mr. Pearlman said. “It’s a powerful program and a powerful idea. We need to find an easy way for people to make those investments.”

Those homeowners who already carry energy liens on their property may find it difficult to refinance their mortgages. In Sonoma County, Calif., some lenders have declined to issue new loans for homes with such liens unless the assessment is paid off.

Ms. Zoi also called Cisco DeVries, president of Renewable Funding, a company in Oakland, Calif., that devises and administers PACE programs for local governments. “She indicated that the agencies had decided not to accept the liens and the administration needed to begin contingency planning on what to do with stimulus funding allocated for PACE,” Mr. DeVries said.

Dan Leistikow, the Energy Department’s director for public affairs, confirmed the calls. “We expect to get more written guidance from the regulators this week,” he said on Saturday.

You can read the rest of the story here.

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Fannie and Freddie derail PACE solar financing program

Posted in alternative energy, environment, green policy, solar energy, tagged , , , , on June 30, 2010| Leave a Comment »

photo: Sonoma County

In Thursday’s New York Times, I write about how government-chartered mortgage giants Fannie Mae and Freddie Mac are derailing an innovative program called Property Assessed Clean Energy. PACE programs finance the installation of solar panels and energy efficiency upgrades and let homeowners repay the loans through a 20-year surcharge on their property tax bills.

SAN FRANCISCO — The Obama administration is devoting $150 million in stimulus money for programs that help homeowners install solar panels and other energy improvements, which they pay for over time on their property tax bills.

At the same time, the two government-chartered agencies that buy and resell most home mortgages are threatening to derail the effort by warning that they might not accept loans for homes that take advantage of the special financing.

The mixed messages have alarmed state officials and prompted many local governments to freeze their programs, which have been hailed as an innovative way to help homeowners afford the retrofitting of a house with solar panels, which can cost $30,000 or more before incentives.

“The thing that is maddening is that this is having a real-life impact with companies laying off people and homeowners in limbo as all these projects are stalled,” said Clifford Rechtschaffen, a special assistant attorney general in California.

Under the financing programs, a local government borrows money through bonds or other means, and then uses it to make loans to homeowners to cover the upfront costs of solar installations or other energy improvements. Each owner repays the loan over 20 years through a special property tax assessment, which stays with the home even if it is sold.

The technique, known as Property Assessed Clean Energy, or PACE, was pioneered by Berkeley, Calif., in 2008, and 22 states have authorized such programs, which are intended to make it easier and cheaper for homeowners to invest in energy efficiency. So far, only a few thousand people have used them.

But the Energy Department wants to promote the programs — and give an economic boost to companies that install energy systems — through the $150 million in stimulus funds, which are intended to help communities cover setup and administrative costs.

Fannie Mae and Freddie Mac, the government entities that guarantee more than half of the residential mortgages in the United States, have different priorities. They are worried that taxpayers will end up as losers if a homeowner defaults on a mortgage on a home that uses such creative financing. Typically, property taxes must be paid first from any proceeds on a foreclosed home.

In letters sent to mortgage lenders on May 5, Fannie Mae and Freddie Mac stated that energy-efficiency liens could not take priority over a mortgage. “The purpose of this industry letter is to remind seller/servicers that an energy-related lien may not be senior to any mortgage delivered to Freddie Mac,” wrote Patricia J. McClung, a Freddie Mac executive.

However, the agencies did not offer guidance to mortgage lenders on how to handle properties that carry the energy liens. Backers of the programs fear that mortgage lenders, who depend on Fannie and Freddie to buy their home loans, will now start demanding that the entire lien be paid off before issuing a new loan.

That is what happened to Deke DeKay of Healdsburg, Calif., when he sold a house in nearby Geyserville in May. Mr. DeKay, who had purchased the foreclosed home as an investment, put in new insulation and heating and cooling systems, financed by $11,000 from Sonoma County’s program.

“We thought this would be an interesting way of upgrading the home’s energy efficiency without adding to the purchase price,” Mr. DeKay said. “Then right before the close of escrow, the bank discovered this stuff Fannie Mae and Freddie Mae put out and refused to approve the loan without the assessment being paid off first.”

Now Mr. DeKay is worried about his own home, which carries a $25,500 lien for a five-kilowatt solar array installed last year. “If we ever want to refinance the house, it will be impossible for us to do that,” he said.

You can read the rest of the story here.

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