A few weeks back, I wrote about the Property Assessed Clean Energy (PACE) program, which is designed to allow homeowners to take out special loans in order to outfit their homes with solar panels or other energy efficient devices. The funds to pay for these loans would be raised through municipal bonds which would be paid back in the form of tax assessments over the course of 20 years. The tax assessments would be secured through property liens that would follow the property in the event of a sale. These liens would take a senior position over existing mortgage loans.
The program seems well intentioned enough, but hit a snag when government sponsored entities (GSEs) Fannie Mae and Freddie Mac said they would not purchase mortgages with PACE liens attached to them, effectively killing the PACE program. In a statement to the press, Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA) said: “In keeping with our safety and soundness obligations, the Federal Housing Finance Agency will defend vigorously its actions that aim to protect taxpayers, lenders, Fannie Mae and Freddie Mac. Homeowners should not be placed at risk by programs that alter lien priorities and fail to operate with sound underwriting guidelines and consumer protections. Mortgage holders should not be forced to absorb new credit risks after they have already purchased or guaranteed a mortgage.”
Now the state of California has filed a lawsuit against the GSEs and the FHFA because of their rejection of PACE. You can read the specific allegations of the lawsuit here. California Attorney General Jerry Brown said of the GSEs and the lawsuit: “Fannie Mae and Freddie Mac received enormous federal bailouts, but now they’re throwing up impermeable barriers to bank lending that creates jobs, stimulates the economy and boosts clean energy.”
It will be interesting to see what the outcome of the case is. As I hear of any updates to the story, I will post them here.
What do you think about the PACE program? Let us know in the comments section below.
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