Most Stupid Government Move of the Week: Treasury Department Hits PACE Homeowners

On Tuesday, the Federal Housing Finance Agency effectively shut down an innovative green financing program called Property Assessed Clean Energy, or PACE, by restricting the ability of homeowners to take out loans to install solar panels and make...

May 1, 2024 | Source: | by

Treasury Department hits PACE homeowners by Todd Woody published on Grist on July 7, 2010

Now the United States Treasury Department has piled on. A new Treasury directive tells the nation’s banks how to enforce the FHFA rules. The move could pose new problems for homeowners who have PACE loans, and complicate efforts to get the program back on track.

Homeowners repay PACE loans through an annual assessment on their property taxes. On Tuesday, the Treasury Department told banks that if a homeowner has a home equity line of credit, the amount of money available should be lowered to account for the loan liability. The Treasury also said homeowners could be required to put their PACE payments in an escrow account.

After Fannie Mae and Freddie Mac, the government chartered mortgage finance giants, raised concerns about PACE in May, some lenders declined to refinance mortgages that carried PACE liens.

Owners of commercial properties who hold PACE loans may need to put up additional collateral to back up the loan, according to the Treasury Department letter.

Cisco DeVries, president of Renewable Funding, an Oakland, Calif., company that designs and administers PACE programs for local governments, said he wants to make sure PACE loans for commercial owners won’t be curtailed.

“We believe PACE commercial can go ahead as it has always required lender consent when a commercial mortgage is in place,” he wrote in an email. “We just want to make sure we don’t run into an unexpected problem as we move forward.”

Some municipalities sell bonds to finance energy-efficiency loans for homeowners. But they may find that harder to do under the Treasury Department directive, which warned banks to move cautiously when underwriting such bonds.

“Fannie and Freddie to clean-energy program: Drop dead” by Jonathan Hiskes published on Grist on July 6, 2010

Grist has been covering Fannie Mae and Freddie Mac’s attack on Property Assessed Clean Energy (PACE), a promising tool that helps homeowners finance green improvements to their properties. Here’s the latest:

On Tuesday, Fannie Mae and Freddie Mac ended their radio silence nine weeks after sending cryptic letters warning lenders against permitting the use of Property Assessed Clean Energy (PACE) — but it wasn’t the follow-up PACE advocates were hoping for.

The government-chartered mortgage giants are sticking with their puzzling opposition to the finance tool, effectively killing PACE programs around the country, at least for the time being. A letter from the Federal Housing Finance Agency [PDF], the regulator and spokes-agency for Fannie and Freddie, claims PACE programs “present significant safety and soundness concerns that must be addressed by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.”

FHFA’s letter amounts to a middle finger to PACE, which has drawn excitement from clean-energy advocates, home-improvement contractors, and homeowners who want to use the system to pay for projects like rooftop solar arrays and retrofits that cut energy waste.

Bottom line: It’s now up to Congress to break through the impasse, as PACE creator Cisco DeVries suggested last Friday. Which means don’t hold your breath for a quick resolution. With energy and climate legislation, offshore-drilling reform, finance reform, unemployment benefits, and untold other important matters all awaiting action from our action-averse Senate, it’s a major bummer that PACE now has to wait in line. That said, Long Island Rep. Steve Israel (D) is already working on legislation to reanimate PACE.