Working For Jobs

by Jonathan Hiskes.

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.

New York Times (and Grist) contributor Todd Woody explains
the basics of FHFA’s new guidelines. Writes Woody:

When a municipality pays for energy efficiency upgrades
through the program, a lien is placed on the home. The liens, like other
property tax assessments, take priority over the mortgage if the homeowner
defaults.

But the housing agency on Tuesday characterized PACE liens
as different from other special assessments that cities routinely use to
finance sewers, sidewalks and other civic improvements.

Towns and counties use
some 37,000 tax assessment districts to pay for public improvements from
schools to mosquito-abatement programs. Yet Fannie, Freddie, and FHFA oppose
only PACE assessments.

Here’s the most
surprising part of FHFA’s letter:

First liens established by PACE loans are unlike routine
tax assessments and pose unusual and difficult risk management challenges for
lenders, servicers and mortgage securities investors. The size and duration of
PACE loans exceed typical local tax programs and do not have the traditional community benefits associated with taxing
initiatives. [emphasis mine]

The agency is arguing
that reducing greenhouse-gas emissions, saving homeowners money on utility
bills, and creating local jobs working on homes are not “traditional community
benefits.” It’s making another argument too: That it should get to decide what
projects have local-community benefits.

“It is a very, very
troubling precedent to have mortgage regulators assert their ability to decide
what taxes and assessments are acceptable and what are not,” DeVries said on
Tuesday.

It’s tantamount, he
said, to FHFA telling a local government, “‘A sewer system is not really as old
as you say it is,’ or, ‘You don’t really need to put those utilities
underground,’ or, in California, ‘You don’t really need to do seismic
strengthening on those buildings.’ This is a pretty standard tool used for a
lot of things.”

Most frustrating to
DeVries is that the mortgage corporations don’t seem interested in finding a
resolution.

“We have an opportunity
to test out a model in key communities around the country over the next two
years, with tremendous protections in place,” he said. “It could show that it
works, that the mortgage lender’s position is improved, that the property
owner’s ability to pay is improved, and that property values go up. Instead of
figuring out a way to let this go forward under a clear set of guidelines and
rules so we can learn about it—as we had all expected them to do—to stop
it now is outrageous.”

“The useful thing is
that I’m not the only who thinks this way. There are a lot of folks who are
working on this. So we’ll continue on.”

Related Links:

Fannie and Freddie won’t let this teacher green her home

EPA takes aim at power-plant pollution

If Bingaman is the climate bill’s best hope, where does that leave us?

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