Editor’s note: PACE programs are hugely supported by CleanTechnica, and we’ve written about them (and summarized the idea) several times over the years. Here’s another good summary (I think we’re due for one, in case you haven’t heard about the idea yet) as well as quite an interesting potential collision (or not) course between a PACE program and the Federal Housing Finance Agency. Thanks, John:
Does a Riverside County, CA, residential energy financing program put thousands of homeowners on a collision course with the Federal Housing Finance Agency (FHFA)?
In a proposed rule-making, the FHFA has suggested that Property Assessed Clean Energy (PACE) policies represent a threat to the safety and soundness of mortgages held by government-backed Fannie Mae and Freddie Mac. PACE is a unique financing strategy that allows homes and businesses to invest in significant energy efficiency and renewable energy upgrades and pay them back through a property tax assessment (for an explanation of PACE, see this PACE 101 slideshow). The fight with FHFA stems from these assessments being “first liens,” e.g. in the event of bankruptcy, they are paid back before the mortgage holder (FHFA’s Fannie or Freddie).
The FHFA’s initial ruling in 2010 brought most residential PACE programs to a screeching halt, because residential participants would be threatened with having to pay their entire mortgage – in full – at any time. Residential PACE programs in Boulder, CO, and Sonoma County, CA, as well as elsewhere were suspended after the FHFA ruling.
But Riverside County launched its Home Energy Renovation Opportunity (HERO) Financing Program in late 2011, almost a year after FHFA had thrown down the gauntlet. Since then, over 2,000 homeowners have signed up (acknowledging the FHFA threat in writing) and proceeded with tens of millions in home renovations improving efficiency, generating local energy, and creating jobs. These participants have already met thresholds for positive equity in their home, and been current on the mortgage and property tax payments.
By keeping the program alive and using strong guidelines for participating homeowners, Riverside County puts a serious question to Fannie and Freddie: are they willing to default or accelerate mortgages on thousands of homes, all with mortgage holders who are customers in good standing?
John Farrell directs the Energy Self-Reliant States and Communities program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His latest paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development. Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World. John Farrell can also be found on Twitter @johnffarrell, or at email@example.com.