Energy efficiency upgrades and renewable energy arrays for homes and businesses pay for themselves over time through savings on the utility bill. But the big obstacle for many is finding the upfront cash. PACE (Property Assessed Clean Energy) programs overcame that barrier by allowing local governments to pay for this work and have property owners repay them via additional assessments on their property tax bills. Big win-win: communities get more energy efficient and clean energy neighborhoods, limiting pollution and creating good local jobs, while homeowners get access to low-interest financing.
But the federal agency that underwrites over half of the mortgages in the U.S. freaked out in 2010 over the program. The Federal Housing Finance Agency (FHFA) put a stop to its rapid growth across the United States by telling property owners that they might jeopardize their mortgage if they take out a PACE lien. Basically the FHFA didn’t like the idea of local governments having lien priority on these payments in the event of a foreclosure, despite the numerous protections and safeguards included in the program. Since then, some PACE programs have continued, notably in Sonoma County and Riverside. California even created a statewide loan-loss reserve to protect federal interests, but it didn’t satisfy the feds.
Greentech Media now has a hopeful article on how PACE programs are rebounding from the federal hysteria:
It’s not illegal for homeowners backed by Fannie or Freddie to participate in the program. They are simply required to pay off the loan first if they move or refinance their mortgage. That may deter some homeowners from considering a PACE loan, but a lot of them are still making the decision to finance a retrofit through PACE.
Stacey Lawson, the CEO of Ygrene, another large PACE administrator, said in a previous interview that it all comes down to communicating the implications of taking on the loan: “There’s been a lot of fear, uncertainty and misinformation in the marketplace around the risk to homeowners. But it’s really just a simple business decision they have to make.”
Turns our PACE program administrators and homeowners are forging on, undeterred by the federal threats. This is good news for the climate fight and for the economy. And once the federal government reverses its stance (we can hope), the program should proliferate and become a top source for financing clean energy building improvements.
