Pick up the PACE, Fannie and Freddie

By now, you’re probably familiar with Property Assessed Clean Energy (PACE) programs that help property owners cover the up-front expense of making energy efficiency improvements, which borrowers subsequently pay back through increased property taxes. Financially enabling home and business owners to improve their energy efficiency is brilliant. And as is the case for many good things, it looks like PACE programs are coming to an end.

The Federal Housing Finance Agency (FHFA) which regulates Fannie Mae and Freddie Mac is claiming that PACE loans raise “significant safety and soundness concerns.” PACE loans are assigned to properties, not property owners. Thus, when a homeowner sells his or her home, their outstanding balance is transferred to the new owner. This makes FHFA’s concerns seem within reason considering the recent foreclosure rates. Officials are legitimately worried about property owners defaulting on their PACE loans. 

However, Grist reported that according to an internal analysis (that factored in variables such as income and location) conducted for a major financial institution last year, homes that were up to federal Energy Star efficiency standards had default and delinquency rates 11 percent lower than other homes. According to the article, buildings account for 38 percent of the U.S. carbon dioxide pollution. Straight-forward tactics like energy retrofitting are great ways to lower this statistic. Energy retrofitting not only increases a building's energy efficiency, but also saves property owners money and creates jobs that cannot be outsourced. 

Leaders at every level of government are expressing support for PACE and the U.S. Department of Energy has reportedly offered to bend over backward to change FHFA’s mind, so far to no avail. What will it take for Fannie and Freddie to see the light? 

Reasons to support PACE programs may be difficult to quantify, but each property owner seeking a PACE loan for relief can open their wallet and point out thousands. 

-Contributed by Anne Norris. Follow her @anne_norris.