Fannie, Freddie threaten PACE programs

The New York Times has a story on the contradiction between the Obama administration’s funding of Property Assessed Clean Energe programs and warnings by the government-chartered agencies that buy and sell most residential mortgages that they might refuse loans that take advantage of the programs.

The reluctance of Freddie Mac and Fannie Mae to deal in loans with that have PACE liens, no matter that the liens typically are a small fraction of property value, has caused local officials across the country to proceed cautiously, if at all, with nascent lending programs.

From the Times’ Todd Woody:

SAN FRANCISCO — The Obama administration is devoting $150 million in stimulus money for programs that help homeowners install solar panels and other energy improvements, which they pay for over time on their property tax bills.

At the same time, the two government-chartered agencies that buy and resell most home mortgages are threatening to derail the effort by warning that they might not accept loans for homes that take advantage of the special financing.

The mixed messages have alarmed state officials and prompted many local governments to freeze their programs, which have been hailed as an innovative way to help homeowners afford the retrofitting of a house with solar panels, which can cost $30,000 or more before incentives.

“The thing that is maddening is that this is having a real-life impact with companies laying off people and homeowners in limbo as all these projects are stalled,” said Clifford Rechtschaffen, a special assistant attorney general in California.

Under the financing programs, a local government borrows money through bonds or other means, and then uses it to make loans to homeowners to cover the upfront costs of solar installations or other energy improvements. Each owner repays the loan over 20 years through a special property tax assessment, which stays with the home even if it is sold.

The technique, known as Property Assessed Clean Energy, or PACE, was pioneered by Berkeley, Calif., in 2008, and 22 states have authorized such programs, which are intended to make it easier and cheaper for homeowners to invest in energy efficiency.

So far, only a few thousand people have used them.

But the Energy Department wants to promote the programs — and give an economic boost to companies that install energy systems — through the $150 million in stimulus funds, which are intended to help communities cover setup and administrative costs.

Fannie Mae and Freddie Mac, the government entities that guarantee more than half of the residential mortgages in the United States, have different priorities. They are worried that taxpayers will end up as losers if a homeowner defaults on a mortgage on a home that uses such creative financing. Typically, property taxes must be paid first from any proceeds on a foreclosed home.

Click here to read the whole story.

Tags: homepost