Take that, mortgage giants! California Attorney General (and gubernatorial candidate) Jerry Brown has filed a lawsuit against Fannie Mae and Freddie Mac for blocking clean power financing programs known as Property Assessed Clean Energy (PACE).
Under PACE programs, local governments make loans to home owners to install a clean energy system (often rooftop solar panels), and the homeowner can repay the loan over 20 years via a property tax assessment that stays with the house even if it’s sold. The idea behind PACE was developed back in 2007 by Cisco DeVries, who at the time was the Berkeley, Calif., mayor’s chief of staff. The city of Berkeley was the first to support the program.
Despite the fact that PACE programs have widespread support, Fannie Mae and Freddie Mac said earlier this year that they wouldn’t accept loans that have taken advantage of PACE. The mortgage firms said that tax payers would shoulder the burden of defaulted loans that have used PACE and the Federal Housing Finance Agency then came out in support of that finding.
But PACE programs have been embraced by the federal government, have been allocated stimulus funds, have been implemented in close to half of U.S. states and are reported to create $1 billion in new clean power projects and up to 20,600 construction jobs.
As we reported earlier this week, the mortgage giants’ ruling, and the mixed messages, have resulted in startups closing shop and cities halting their PACE programs. A statement from Brown’s office said, “As the nation struggles through the worst recession in modern times, California is taking action in federal court to stop the regulatory strangulation of the state’s grass-roots program that is spreading across the country.”
The lawsuit asks the court to require Fannie Mae and Freddie Mac to recognize California law and support PACE programs in California. Brown’s letter to Acting Director of the Federal Housing Finance Agency, Edward DeMarco, is worth a read. It states:
“[T]he California Attorney General’s Office at the end of last year began a discussion with FHFA staff about PACE in California. During these discussions, your staff assured this Office that we would continue to work together on issues related to PACE. Relying in part on this assurance, California has invested substantial resources in PACE programs, consistent with the White House’s “Recovery Through Retrofit” policy document and with the express support of the Department of Energy.”
Many people are expecting that PACE will recover over the long haul from the set back, and if it does, Brown’s lawsuit will be the start. As Alex Robinson, the CEO of PACE software startup GreenDoor (which closed shop after Freddie and Fannie ruled against PACE) said to me earlier this week, “PACE enjoys widespread political support and has a decent chance of eventually emerging from this period of uncertainty.”
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