The two biggest mortgage lenders in the United States, Fannie Mae and Freddie Mac, have just put in the shade many homeowners plans to be environmentally and economically green. The homeowners have been participating in a plan called Property Assessed Clean Energy or PACE.
The program has been operational in 22 States and others were thinking of participating. It was a simple scheme that allowed homeowners who participated in the program to repay the costs of solar panels and other energy improvements through a surcharge on their home. PACT allowed municipalities to sell bonds in order to finance loans to improve energy efficiency. Homeowners would then pay back the loan through a 20 year annual property tax assessment.
As is normal with tax assessments procedures, a lien is automatically placed on the property that has priority over the mortgage whenever the homeowner defaults on the monthly payment.
The Federal Finance Housing Authority, the government body that oversees mortgage giants Freddie Mac and Fannie Mae, issued guidance to lenders in July that the program violated the underwriting standards of the agency.
Freddie and Fannie buy and sell most of the nations home mortgages so this effectively derailed the PACE program. This week the agencies said that efforts to resolve the disputes over the program had failed. This means that people enrolled in the PACE program must pay back the home energy loan before they will be allowed to refinance their mortgages.
Fannie Mae and Freddie Mac have stated that homeowners with enough equity built up in their homes to pay of the energy loan must do so before refinancing but that people without sufficient equity will be allowed to refinance with the loan in place. Supporters of the PACE program have pointed out the numerous benefits of allowing people to install solar panels and other energy improvements, including the reduction of greenhouse gasses and the creation of jobs.
Lawsuits have been filed against Fannie and Freddie by the State of California and the Sierra Club to block them from halting the program. Legislation has also been introduced in congress to allow the PACE program to continue.
