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.