Tyler Savage on Wednesday, 21 July 2010 18:25
PACE: federal government suspends home energy efficiency projects
Homeowners expecting to begin energy efficiency projects are now delayed since an announcement by the Federal Housing Finance Agency (FHFA) suspended efforts by 23 states to implement the Property Assessed Clean Energy (PACE) program. PACE, a national program that requires state approval, was designed for local governments to allow energy efficiency projects to be financed through property taxes. In California, AB 811 enabled the creation of CaliforniaFIRST. In fact, PACE has roots here in the Bay Area as it was modeled after the BerkeleyFirst program.
The PACE program was designed as an incentive for homeowners as it would provide the necessary funding for energy saving projects upfront, making costly retrofits more affordable. The homeowner would then be responsible for making monthly payments towards the loan until completely paid off.
Fannie Mae and Freddie Mac raised concern over the program because if a home were to go into foreclosure the PACE loan would be repaid first. This possibly could mean a risk for financial institutions like Fannie and Freddie, even though the amount would be a very small portion of the total value of the home. The good news is that the PACE program does include safeguards to prevent lending to high-risk homeowners which makes foreclosures highly unlikely.
As a result of the FHFA decision, California Attorney General Jerry Brown filed a lawsuit claiming that the agency’s actions to prevent homeowners access to the PACE program is breaking California laws. In an attempt to find a compromise, the U.S. Treasury Department has handed down a mandate to banks to decrease homeowner’s line of equity to account for any financial risks posed by PACE.
The decision by the FHFA to prevent mortgage lenders from participating in the PACE program might send homeowners a confusing message. In October 2009, the White House released a policy framework for PACE and President Obama allocated $100 million through the American Recovery Act to support the program. Governor Schwarzenegger expressed his concern for FHFA’s decision by saying that “this decision not only puts at risk millions of dollars of Recovery Act funds but sends a message to local governments and private businesses that energy independence is not a priority.”
California Congressman Michael Thompson (D-CA1) introduced H.R. 5766, “The PACE Assessment Protection Act of 2010,” which if approved would require lenders to support PACE. Grassroots organizations like PACENOW are encouraging community members to reach out to congressional representatives to vote to support PACE. In the end, the future of PACE will either be in the hands of Congress or the courts.
