California sues feds to keep PACE on track

California attorney general Jerry Brown has sued mortgage giants Fannie Mae, Freddie Mac and its overseer, the Federal  Housing Finance Agency, in federal court to stop the lenders from killing programs that allow property owners to borrow funds for energy efficiency and other improvements and repaying loans on property tax bills.

Fannie’s and Freddie’s opposition to so-called PACE (Property Assessed Clean Energy) programs has effectively shut down active and fledgling lending  schemes in 21 states and the District of Columbia. The lenders believe the first lien position of the loans, while often small in relation to overall loan value, pose an unacceptable risk in an already shaky credit market.

In the Northwest, Oregon has passed legislation enabling PACE financing for energy efficiency and renewable energy projects. Washington’s legislature this year failed to approve a proposal to test a PACE-like public financing system. Advocates are considering a new attempt at public energy conservation financing legislation.

The California suit comes after the Obama administration apparently failed to convince officials at Fannie and Freddie of the relatively low risk and high reward of increased lending for energy projects, which save homeowners cash on monthly utility bills that is freed up to repay the loans.

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