Obama Administration Cannot Stop PACE Downfall

Sometimes, the best laid plans fall apart. It seems that may be the case for wildly popular PACE financing programs in cities and states across the nation. The programs, which allow homeowners to borrow municipal loans for renewable energy systems and pay them back through a voluntary property tax increase, are under attack from Fannie Mae and Freddie Mac, two quasi-governmental mortgage lenders and owners of over half the mortgages in the United States.

Fannie and Freddie, both regulated by the Federal Housing Finance Authority, have effectively killed PACE financing despite its broad popularity and near-universal acceptance as a means for financing renewable energy and energy efficiency upgrades. Last month, the lenders sent out letters to their customers forbidding entrance into PACE financing contracts with municipalities, citing that the agreement would add risk to mortgages because PACE loans would receive priority payback over the mortgages themselves.

A solar industry uproar ensued. Industry and advocacy groups laid intense pressure on the Obama administration, which already allocated $100 million in Recovery Act funds to aide PACE program development, to stop Fannie and Freddie in their tracks.

So the Obama administration, reports Grist, then tried to convince the FHFA to end Fannie Mae’s and Freddie Mac’s ban on PACE loans. But the federal government failed to do so. The corporations assert that the financing scheme is unacceptable, “regardless of how it is structured, accelerated or insured.”

With over half of American mortgages financed by the two corporations so famously beleaguered by the housing crisis, the lender letters and support from the FHFA are a real detriment to PACE programs, which by nearly all other accounts are the most safe and effective way to finance home energy systems, in part because loans are tied to the property (not the individual), and because they create revenue for cities and counties in desperate need of reliable income.

Without a sudden reversal by Fannie Mae and Freddie Mac or the FHFA, the only possible help for PACE advocates is from Congress. In fact, based on broad support thus far from local, regional and national politicians, it seems very likely that the federal legislature will pass enabling legislation — just as more than 20 states have already done in their own legislatures — overriding this corporate mandate. But that can take months or longer. Indeed, the Obama administration is advising recipients of stimulus funding once intended for PACE programs to look into other ways to use the money.

Source: Grist.org
Photo Credit: Hal Blog & GENI

Posted on July 6th in Solar Politics by Dan.