Federal agency brings hammer down on PACE solar loans
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.