WASHINGTON — Members of Congress have asked the Federal Housing Finance Agency to consider allowing a pilot program for Property Assessed Clean Energy bonds that would allow for the gathering of data on how the programs affect home loans, a point of concern for the regulator.
The FHFA — which regulates Fannie Mae and Freddie Mac and effectively brought PACE programs around the nation to a halt earlier this month — has yet to respond to the proposal for a 30-month, 300,000-home pilot, and agency officials declined to comment on it yesterday.
The suggestion came during a Tuesday meeting with lawmakers and officials from the FHFA, the Department of Housing and Urban Development, the Department of Energy, and the Obama administration.
The pilot program would allow the existing PACE programs to continue bond financing of a limited number of homeowners’ energy-efficient upgrades and retrofits, with the bonds to be paid back over several years via a special assessment on the homeowner’s property taxes, according to a spokesperson for Rep. Steve Israel, D-N.Y.
It also would allow for the gathering of information about how those assessments affect mortgages.
The meeting came roughly one week after Israel called for FHFA acting director Edward DeMarco to either find a way to work with PACE stakeholders and communities or step down from his post.
“The FHFA must come to the table and work with the communities, officials, and industry leaders that have implemented these successful programs and find a solution so that PACE programs can continue and move forward,” he said in a statement. “Thus far the FHFA has been unwilling to work with us, and if the acting director of the FHFA won’t help us seek solutions then he needs to resign.”
DeMarco responded in a July 14 statement saying the agency plans to “defend vigorously its actions.”
The programs, which have been approved by 21 states and the District of Columbia, have been hailed by advocates as a way to create jobs while encouraging renewable energy projects.
But the FHFA, as well as Fannie and Freddie, are refusing to accept mortgages with PACE projects tied to them, arguing the programs would make those mortgages too risky.
The FHFA directed the government-sponsored enterprises earlier this month to tighten their underwriting standards for mortgages tied to PACE programs, warning of “significant safety and soundness concerns.”
The regulator’s main concern is about how the programs are structured. If a homeowner fails to make its mortgage payments, then any funds available are first used to pay off property taxes rather than the mortgage.
In another effort to support the programs, Israel and 29 other lawmakers have introduced the PACE Assessment Protection Act, which would require GSEs to adopt underwriting standards that would accommodate the programs. The bill also would prohibit them from discriminating against communities pursuing PACE programs.
California has turned to litigation. Attorney General and Democratic gubernatorial candidate Jerry Brown filed suit against the FHFA, Fannie Mae and Freddie Mac earlier this month, asking a district court to issue an order restraining or enjoining them from refusing to accept mortgages tied to PACE projects.
Babylon, N.Y., also has announced plans to sue the same groups for their rejection of PACE programs. Town officials could not be reached for comment about the status of those plans.