Before the mortgage industry beat back efforts by local jurisdictions to deploy Property Assessed Clean Energy home loans in 2009 in Maryland and other states, this voluntary vehicle for financing home energy efficiency upgrades (known as “PACE”) appealed to many Republicans, Democrats and Independents. But inadequately-informed lawmakers, a forceful lobbying campaign by mortgage lenders and Realtors, misdirected leaders at Fannie Mae and Freddie Mac AND angst over a repeat of the 2008 mortgage-backed securities scandal, spelled defeat.
Come now Republican Congresswoman and Tea Party ally Nan Hayworth of New York’s 19th District, along with California Congressmen Dan Lundgren, R-3rd, and Mike Thompson, D-1st, with a proposal to expressly authorize local communities throughout the U.S. to deploy or create their own PACE programs.
PACE-type loans, in concept, have been around for more than 100 years as a means to finance projects for the public good. The costs are tacked on to local property tax bills. PACE-enabling legislation has been adopted by 27 U.S. states although only a handful of local communities such as Berkeley, CA are using this tool. This legislation would give local lawmakers and managers more options. It would come in very handy as fiscal budgets get squeezed, leaving the decision to borrow to individual homeowners and businesses.
The real appeal of PACE loans is this: the obligation to repay rests with the property owner, no one else. So if a homeowner or businesses wanted to spend $5,000 on weatherization projects or $40,000 on a solar electric system, he would pay it down as part of his property tax bill every year. If the homeowner moves, the obligation stays put as well it should because that is where the benefit remains.
In May 2009, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, directed those agencies to stop buying any mortgages with PACE assessments. A controversial letter claimed that exposure to delinquent taxes and assessments are paid first when a home falls into foreclosure and that threatens the U.S. mortgage industry
David Gabrielson, a Democrat and member of the Bedford, NY, Town Board (in Hayworth’s district) who is also Executive Director of the PaceNow.org interest group, asserted “That’s bitterly ironic given the mortgage industry’s contribution to our current economic malaise and data from surviving programs that show actual senior lien exposure has been about $3 per home.” Read his op-ed in the August 8, 2011 editions of The Journal News in New York’s Lower Hudson Valley here.
There was no comment by the mortgage or real estate industries about the legislation as of this posting. Nor did the Mortgage Bankers Association or National Association of Realtors respond quickly to emails requesting comment.
The H.R. 2599 bill text spells out what clean energy improvements and energy conservation and energy efficiency improvements would qualify.
*Note: Hayworth was not endorsed by the Tea Party in the 2010 elections but many of her priorities match what Tea Party backers are pushing for.