Property Assessed Clean Energy (PACE) is a program which allow local government entities to offer sustainable energy project loans to eligible property owners. Through a voluntary assessment on their property tax bills; homeowners had the option to offset the upfront costs of energy-efficient and renewable energy installation. As a part of a clean energy stimulus which is fostered by the Obama administration; it is a powerful catalyst not only for home energy efficiency but for the economy as well. However, the PACE Program has fit a snafu with the The Federal Housing Finance Agency (FHFA) which manages two of the largest home loan lenders, Fannie Mae and Freddie Mac. In a statement by the FHFA,
“After careful review and over a year of working with federal and state government agencies, the Federal Housing Finance Agency (FHFA) has determined that certain energy retrofit lending programs present significant safety and soundness concerns that must be addressed.”
This decision by FHFA is a major stumbling block which “puts which all but puts a halt on PACE programs” according to Clean Techies. In May, Fannie Mae and Freddie Mac changed their policy on the treatment of property tax assessments made pursuant to Property Assessed Clean Energy (PACE) programs. Clean Techie writer, Walter Wang further summarizes, “Originally, Fannie Mae and Freddie Mac had decided to treat these assessments like any other assessment, but in May, decided to treat them as loans which may be placed in a position senior to the mortgage and thus violate the terms of the mortgage”.
There already has been a backlash against the FHFA, with state of California suing Fannie Mac and Freddie Mac over their policy. Jerry Brown, the Golden State’s one-time governor and current A.G., filed suit against federal mortgage giants Fannie Mae and Freddie Mac, as well as the Federal Housing Finance Agency. Calling the move a “regulatory strangulation of the state’s grass-roots program,” Brown is suing the agency and the lenders to allow PACE programs to proceed, as reported by the LA Times. New York town of Babylon’s decision to sue FHFA over PACE decision came a day earlier from California’s and it is likely others will follow suit. I think On Earth gives the best explanation why PACE Program is so important and why it needs to be preserved.
PACE loans solve the major roadblock that most people face in improving home energy efficiency: the high up-front costs. Participants borrow funds from their city or town’s PACE program, and use them to finance home energy efficiency improvements. Depending upon the local program, these retrofits can range from weatherization (thus PACE’s “cash for caulkers” nickname) to solar energy systems. Energy bills drop, homes become more comfortably warm or cool, greenhouse gas pollution is curbed, and well-paying green jobs proliferate.
Although other options exist to offset the financial burden of energy efficiency like leasing solar power; it is important to protect programs that advance sustainable future not only in terms of Environmental preservation but an economic one as well. FHFA should look at the long term benefits of programs such as PACE and other sustainability projects.
What do you think of the decision by FHFA, are you for it or against it? Does the state have the right to sue Freddie Mac and Fannie Mae over their policies?
Photo Source: Deviant Art; dingbat85