Lawmakers are fighting back after the federal housing agency thwarting an attractive funding mechanism for home energy retrofits and the jobs that come with them.
Rep. Mike Thompson, D-Calif., and 29 other members of Congress have introduced legislation that would prevent Fannie Mae and Freddie Mac from stifling state programs that allow localities to sell bonds to finance energy-efficient upgrades made by homeowners.
The legislation follows a suit California attorney general and Democratic gubernatorial candidate Jerry Brown filed against Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, arguing they are violating state law by blocking the programs.
The programs, dubbed property assessed clean energy, or PACE, programs, have come under fire from the mortgage titans and their regulator, the FHFA, which argue they make the underlying mortgages on participating homes too risky for the two government-sponsored enterprises.
22 states that have passed laws in support of property assessed clean energy financing (PACE). It's a little personal in Boulder because the county was the first in the nation to fully implement PACE in their program called the Climate Smart Loan Program. Boulder has seen $13 million, just for the residential program, flow through the economy with this financial instrument that helps a community burn less money by burning less fossil fuels.
The Federal Housing Finance Agency (FHFA) which regulates Fannie Mae and Freddie Mac which own or guarantee most of our nation's home mortgages, has determined that PACE programs "present significant safety and soundness concerns."
This was unexpected; when Fannie and Freddie issued ambiguous warnings about PACE weeks ago,
Country Commissioner Will Toor said the mortgage moguls would resolve this in support of PACE "because their position makes so little sense."
The housing giants' objection has been stubbornly focused on the senior status of the lien, meaning in the event of a home default the local land tax authority gets paid prior to the mortgage lender. In reality, in a default, only the delinquent amount of tax would be senior, being say, $1,000, rather than the whole retrofit assessment of say, $15,000. The remaining debt stays with the property.
"The FHFA memo is the classic solution looking for a problem " says Alice Madden of Colorado Governor Ritter's office, "One of the reasons PACE bonds get such high ratings is that the debt stay with the property; these are not personal loans and lenders are simply not at risk."
At the behest of the Department of Energy and its intent to leverage more PACE upgrades with stimulus funding, PACE programs have developed best practices such as: aiming for energy savings to exceed the amount of assessment, a retrofit cap which can be no more than 10 percent of property value, only delinquent amounts of the assessment get paid in foreclosure, and positive equity requirement amongst borrowers. These standards sure beat subprime mortgages that Fannie and Freddie gladly gobbled up on houses that spill energy in every direction. But the FHFA alleges, without analysis that PACE financing presents only downsides. Though the agency was lobbied with generous explanation (available through PACENOW.org) showing that new standards nearly assure cash benefits for borrower and lender, the FHFA has determined as if only downside risks are noteworthy.
Most likely, PACE projects would bolster lenders' profit margins by easing borrowers' monthly expenses and risk of default. And it's not just the lender, borrower, retrofitter and solar manufacturer shall benefit fromPACE. Over in wobbly Wall Street, sellers of municipal bonds also want in to this highly attractive bond market made safe by the senior lien status. Barclay's Capital has asserted that "there would be little to no meaningful bond buyer interest" in PACE liens without the senior status.
Lenders have routinely tolerated senior liens for property-assessed additions such as sidewalks, sewers and schools. But reducing a community's exposure to coal and natural gas prices? FHFA has deemed this to "not have the traditional community benefits associated with taxing initiatives."
They better be careful. These lenders got at least $160 billion in bailout for their excellence in "safety and soundness" during the subprime disaster that laid our nation low. And now as unelected bureaucrats they try to tell us, their taxpayer benefactors, what is what in community benefits?
Toor minces no words: "It's an outrageous assault on state and local authorities."
Monday, July 19, 2010
Battle Heats
Lawmakers are fighting back after the federal housing agency thwarting an attractive funding mechanism for home energy retrofits and the jobs that come with them.
Rep. Mike Thompson, D-Calif., and 29 other members of Congress have introduced legislation that would prevent Fannie Mae and Freddie Mac from stifling state programs that allow localities to sell bonds to finance energy-efficient upgrades made by homeowners.
The legislation follows a suit California attorney general and Democratic gubernatorial candidate Jerry Brown filed against Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, arguing they are violating state law by blocking the programs.
The programs, dubbed property assessed clean energy, or PACE, programs, have come under fire from the mortgage titans and their regulator, the FHFA, which argue they make the underlying mortgages on participating homes too risky for the two government-sponsored enterprises.
22 states that have passed laws in support of property assessed clean energy financing (PACE). It's a little personal in Boulder because the county was the first in the nation to fully implement PACE in their program called the Climate Smart Loan Program. Boulder has seen $13 million, just for the residential program, flow through the economy with this financial instrument that helps a community burn less money by burning less fossil fuels.
The Federal Housing Finance Agency (FHFA) which regulates Fannie Mae and Freddie Mac which own or guarantee most of our nation's home mortgages, has determined that PACE programs "present significant safety and soundness concerns."
This was unexpected; when Fannie and Freddie issued ambiguous warnings about PACE weeks ago,
Country Commissioner Will Toor said the mortgage moguls would resolve this in support of PACE "because their position makes so little sense."
The housing giants' objection has been stubbornly focused on the senior status of the lien, meaning in the event of a home default the local land tax authority gets paid prior to the mortgage lender. In reality, in a default, only the delinquent amount of tax would be senior, being say, $1,000, rather than the whole retrofit assessment of say, $15,000. The remaining debt stays with the property.
"The FHFA memo is the classic solution looking for a problem " says Alice Madden of Colorado Governor Ritter's office, "One of the reasons PACE bonds get such high ratings is that the debt stay with the property; these are not personal loans and lenders are simply not at risk."
At the behest of the Department of Energy and its intent to leverage more PACE upgrades with stimulus funding, PACE programs have developed best practices such as: aiming for energy savings to exceed the amount of assessment, a retrofit cap which can be no more than 10 percent of property value, only delinquent amounts of the assessment get paid in foreclosure, and positive equity requirement amongst borrowers. These standards sure beat subprime mortgages that Fannie and Freddie gladly gobbled up on houses that spill energy in every direction. But the FHFA alleges, without analysis that PACE financing presents only downsides. Though the agency was lobbied with generous explanation (available through PACENOW.org) showing that new standards nearly assure cash benefits for borrower and lender, the FHFA has determined as if only downside risks are noteworthy.
Most likely, PACE projects would bolster lenders' profit margins by easing borrowers' monthly expenses and risk of default. And it's not just the lender, borrower, retrofitter and solar manufacturer shall benefit fromPACE. Over in wobbly Wall Street, sellers of municipal bonds also want in to this highly attractive bond market made safe by the senior lien status. Barclay's Capital has asserted that "there would be little to no meaningful bond buyer interest" in PACE liens without the senior status.
Lenders have routinely tolerated senior liens for property-assessed additions such as sidewalks, sewers and schools. But reducing a community's exposure to coal and natural gas prices? FHFA has deemed this to "not have the traditional community benefits associated with taxing initiatives."
They better be careful. These lenders got at least $160 billion in bailout for their excellence in "safety and soundness" during the subprime disaster that laid our nation low. And now as unelected bureaucrats they try to tell us, their taxpayer benefactors, what is what in community benefits?
Toor minces no words: "It's an outrageous assault on state and local authorities."
_____________________________________________________________________
Rep. Mike Thompson, D-Calif., and 29 other members of Congress have introduced legislation that would prevent Fannie Mae and Freddie Mac from stifling state programs that allow localities to sell bonds to finance energy-efficient upgrades made by homeowners.
The legislation follows a suit California attorney general and Democratic gubernatorial candidate Jerry Brown filed against Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, arguing they are violating state law by blocking the programs.
The programs, dubbed property assessed clean energy, or PACE, programs, have come under fire from the mortgage titans and their regulator, the FHFA, which argue they make the underlying mortgages on participating homes too risky for the two government-sponsored enterprises.
22 states that have passed laws in support of property assessed clean energy financing (PACE). It's a little personal in Boulder because the county was the first in the nation to fully implement PACE in their program called the Climate Smart Loan Program. Boulder has seen $13 million, just for the residential program, flow through the economy with this financial instrument that helps a community burn less money by burning less fossil fuels.
The Federal Housing Finance Agency (FHFA) which regulates Fannie Mae and Freddie Mac which own or guarantee most of our nation's home mortgages, has determined that PACE programs "present significant safety and soundness concerns."
This was unexpected; when Fannie and Freddie issued ambiguous warnings about PACE weeks ago,
Country Commissioner Will Toor said the mortgage moguls would resolve this in support of PACE "because their position makes so little sense."
The housing giants' objection has been stubbornly focused on the senior status of the lien, meaning in the event of a home default the local land tax authority gets paid prior to the mortgage lender. In reality, in a default, only the delinquent amount of tax would be senior, being say, $1,000, rather than the whole retrofit assessment of say, $15,000. The remaining debt stays with the property.
"The FHFA memo is the classic solution looking for a problem " says Alice Madden of Colorado Governor Ritter's office, "One of the reasons PACE bonds get such high ratings is that the debt stay with the property; these are not personal loans and lenders are simply not at risk."
At the behest of the Department of Energy and its intent to leverage more PACE upgrades with stimulus funding, PACE programs have developed best practices such as: aiming for energy savings to exceed the amount of assessment, a retrofit cap which can be no more than 10 percent of property value, only delinquent amounts of the assessment get paid in foreclosure, and positive equity requirement amongst borrowers. These standards sure beat subprime mortgages that Fannie and Freddie gladly gobbled up on houses that spill energy in every direction. But the FHFA alleges, without analysis that PACE financing presents only downsides. Though the agency was lobbied with generous explanation (available through PACENOW.org) showing that new standards nearly assure cash benefits for borrower and lender, the FHFA has determined as if only downside risks are noteworthy.
Most likely, PACE projects would bolster lenders' profit margins by easing borrowers' monthly expenses and risk of default. And it's not just the lender, borrower, retrofitter and solar manufacturer shall benefit fromPACE. Over in wobbly Wall Street, sellers of municipal bonds also want in to this highly attractive bond market made safe by the senior lien status. Barclay's Capital has asserted that "there would be little to no meaningful bond buyer interest" in PACE liens without the senior status.
Lenders have routinely tolerated senior liens for property-assessed additions such as sidewalks, sewers and schools. But reducing a community's exposure to coal and natural gas prices? FHFA has deemed this to "not have the traditional community benefits associated with taxing initiatives."
They better be careful. These lenders got at least $160 billion in bailout for their excellence in "safety and soundness" during the subprime disaster that laid our nation low. And now as unelected bureaucrats they try to tell us, their taxpayer benefactors, what is what in community benefits?
Toor minces no words: "It's an outrageous assault on state and local authorities."
_____________________________________________________________________
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