PACE financing programs are spreading like wildfire. Created by the city of Berkeley three years ago, the program offers municipal loans for energy efficiency upgrades. These loans are paid back via property taxes to promote home solar power. Within just a few years, some 23 states and the federal government have passed legislation removing any legal barriers to adopting the program, and hundreds of cities and counties have or are developing their own Property Assessed Clean Energy versions. Yet now in a somewhat odd twist, about half the mortgages in the country may be ineligible for PACE financing. The quasi-public mortgage lenders, Fannie Mae and Freddie Mac, which received a lot of unwanted attention and much-wanted aide during the fall of the housing market, have reportedly sent out “lender guidance letters” suggesting that homes financing through them are not allowed to participate in PACE financing. Eliminating half the nation’s homeowners from participating in a broadly supported, highly successful financing program would essentially derail that program. The first Berkeley pilot program (dubbed Berkeley FIRST) was geared primarily toward solar power and sold out in less than 10 minutes. According to Vote Solar, the advocacy group pressuring the lenders to clarify the letters in favor of PACE, about 160,000 new long-term jobs would be created through PACE programs. Probably even more would be created considering the rate at which states are passing promotional legislation. Indeed, at present momentum it’s likely that all 50 states and thousands of cities would have PACE programs or legislation in place. The programs are getting very broad support. The solar industry has reportedly gone into an uproar in response to these letters, which went out the first week of June.
PACE Mortgage Benefits for Homeowners
According to Fannie Mae and Freddie Mac, homeowners are not allowed to go into any debt that would add risk to their mortgage loan. However, according to Vote Solar, there are a number of provisions in federal PACE guidelines that essentially protect mortgage lenders. For example, law stipulates that PACE-financed upgrades must have a fairly quick return on investment, meaning the energy savings resulting from the upgrade should be more than the increase on property taxes incurred to pay for it. That, the argument goes, puts more money in the homeowner’s pockets, making them less likely to default on their mortgages and actually decreasing risk.
Then of course, there are the massive benefits of PACE on a broader economic scale. As mentioned, the program is expected to add hundreds of thousands of jobs nationwide, even by the most conservative estimates. There is also the question of Fannie Mae and Freddie Mac infringing on the rights of municipalities to levy taxes, especially given that the federal government and 23 states have passed legislation specifically giving municipalities that right.
Help Save PACE!
You can read more of the pro-PACE argument and, if you like, sign a petition at VoteSolar.org to the Federal Housing Finance Authority (FHFA), urging a meeting between federal entities and the nation’s two biggest home lenders, as well as a clarification of the rather cryptic lender letters.