In May the Florida Legislature passed HB 7179, which would establish the Property Assessed Clean Energy (PACE) program to allow local governments to finance renewable energy and storm-resistance improvements. It's a program championed by environmentalists, and was one of the few notable environmental achievements made by the Legislature this year, according to activists. Essentially it would allow local governments to adopt an ordinance or resolution that would allow them to provide upfront funds to cover the costs for the qualifying home energy efficient improvements.
But that program could be jeopardized by actions in Washington yesterday, where the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, suggested that those two huge mortgage companies should avoid participating in the program.
The Wall Street Journal reports today that could "torpedo" the program. Why does the FHFA not support the plan? Because according to the Journal, PACE liens are "senior to existing mortgage debt", which means it's easier for cities to sell bonds, but it means if the property goes into foreclosure, those PACE liens are paid off before the mortgage lender gets any money, setting off concerns.
"They're basically saying they'll redline communities that move forward with PACE financing," said Will Toor, a commissioner in Boulder County, Colo. The county funded 600 liens since starting its program last year, but suspended it in May and notified 168 property owners last week their applications couldn't be funded because of the program's uncertain future.
PACE backers say the program is no different from other property-tax assessments used to fund sewers and roads that are usually senior to existing debt.
This article appears in Jul 8-14, 2010.