Fannie and Freddie attack clean-energy plan

[G_j]

http://www.grist.org/article/2010-06-23-fannie-and-freddie-attack-PACE-property-assessed-clean-energy/

Fannie and Freddie attack clean-energy plan

by Jonathan Hiskes

23 Jun 2010 4:26 PM

Few new ideas brighten the faces of clean-energy advocates as much as Property Assessed Clean Energy, or PACE, the Berkeley-born financing tool that's spreading quickly throughout the country. The three-year-old model has put rooftop solar panels, high-efficiency furnaces, and other home improvements within reach of thousands of American homeowners, and there's hope it could reach many more, creating jobs along the way.

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The Obama administration has endorsed PACE with $100 million in stimulus-act funding. Twenty-two states have passed legislation allowing and encouraging municipalities to start PACE programs. San Francisco, Sonoma and Placer counties in California, and Boulder County in Colorado have all recently launched programs, and Los Angeles and San Diego are set to begin ones later this year.

But they've all come to a sudden halt after Fannie Mae and Freddie Mac, the government-sponsored mortgage-finance corporations, sent a cryptic letter to lenders on May 5 warning them away from PACE programs.

At issue is what gets paid first if a borrower defaults -- the mortgage or the clean-energy assessment? Tax assessments have senior lien status to mortgages, meaning they must be paid off first. Such assessments are typically used to fund public projects such as sewers, sidewalks, and schools. Fannie and Freddie, which guarantee more than half of the nation's $11 trillion in mortgages, contend that home energy improvements shouldn't get priority over mortgages.