Powerful Solar Financing Program For Homeowners Gets Reprieve – Forbes.
Justin Gerdes, Contributor Independent journalist specializing in energy and the environment
Last week, two events gave notice that rumors of the death of PACE financing, one of the most promising policies available to fund energy retrofits, have been greatly exaggerated.
On January 20, a federal district court in California ordered the Federal Housing Finance Agency (FHFA) to initiate a “full-blown” rulemaking process on PACE financing. Yesterday, the notice of the proposed rulemaking was published in the Federal Register. The week before, on January 19, San Diego-based Figtree Energy Resource Company announced a deal involving a first-of-its-kind, multi-city commercial PACE bond.
First, some back story.
Rarely have energy policy wonks been so excited. In October 2007, that City of Berkeley announced its intention to create what it called a Sustainable Energy Financing District. Based on an idea credited to Cisco DeVries, then chief of staff to Mayor Tom Bates, the scheme appeared to offer a breathtakingly simple and elegant solution to a seemingly intractable problem: the steep upfront cost of clean energy and efficiency projects.
PACE financing offers homeowners a way to install energy upgrades, such as rooftop solar panels, without the steep upfront costs. Credit: groSolar/DOE
PACE (Property Assessed Clean Energy) programs, as DeVries’ brainchild are now known, proliferated; today, legislation enabling the programs has been passed in 27 states. PACE financing enables property owners to take out a loan, usually via city- or state-organized bonds, to pay for solar panels, insulation, energy-efficient HVAC systems, or other improvements. Loans are repaid, typically over 20 years, through an annual supplemental property tax assessment.
DeVries’ beautiful solution, however, soon hit a snag. In July 2010, FHFA ordered Fannie Mae and Freddie Mac not to underwrite mortgages for homes with PACE loans. FHFA was concerned that in most states with PACE programs the liens resulting from the PACE program loans have priority over mortgages – the PACE lender would be paid ahead of the bank, or Fannie or Freddie, in the case of foreclosure. Read More
Comment: Scary to read about a huge glitch in great financing opportunity. Ann Arbor has implemented the PACE program but only for commercial/business buildings so this is not going to affect this area much but hopefully this can be straightened out federally so the program can be extended to homeowners in Ann Arbor as well. – Val