The top Republican on a House Financial Services Committee panel on Wednesday applauded the decision by the Federal Housing Finance Agency to block PACE energy programs nationwide.
The capital markets panel was holding hearing on the future of housing finance, during which FHFA acting director Edward DeMarco told lawmakers that the agency does not plan to renew a small program recently started by a handful of state housing finance agencies.
Rep. Scott Garrett, R-N.J., hailed the FHFA’s decision to effectively shut down the Property Assessed Clean Energy programs, which allows localities to finance energy-efficient upgrades on residences with tax-exempt bonds. He called it the type of hard decision that needs to be made to reform the nation’s housing system.
Garrett is the ranking minority member of the subcommittee.
“I appreciate director DeMarco’s thoughtful decision to shut down the PACE program this summer,” he said. “This scheme was putting taxpayers at further risk while only really benefitting a few securities firms that were offering these products.”
At least 21 states and the District of Columbia had adopted PACE programs, but they all screeched to a halt in July after the FHFA prohibited Fannie Mae and Freddie Mac from purchasing mortgages with PACE loans tied to them because of “significant safety and soundness concerns.”
California responded to the blockade by filing a lawsuit against Fannie, Freddie, and the FHFA in a federal court in California.
That suit is still pending.
Meanwhile, DeMarco said this agency will not renew a handful of small programs initiated by state HFAs, under which they originate mortgages with little to no down payments.
The programs, dubbed “Affordable Advantage,” allow first-time homebuyers with good credit in Idaho, Massachusetts, Minnesota, and Wisconsin to obtain mortgages with essentially no down payment.
Given the subprime mortgage crisis that precipitated the financial meltdown and recession, DeMarco was asked by members of the subcommittee about the programs, to which he replied that they will be short-lived.
“When these particular programs with the HFAs expire, they will not be renewed,” he said, adding that they probably never should have been created in the first place.
“This one got away from us,” he said. “You won’t be hearing about additional programs such as this.”
Less than $10 million of mortgages have been originated under the programs, DeMarco said.
It is not clear whether any bonds were issued as part of them. HFA officials could not be reached for comment.
