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PACE and the Path ForwardAnnie Henderson | September 16, 2010
PACE: Simple, Effective Tool
Property ownerrepays bondthrough propertytax bill (up to 20 years)
Proceeds fromPACE bond or otherfinancing providedto property ownerto pay for energy project
Property ownersvoluntarily sign-upfor financing and install energyprojects
City or countycreates type of land-securedfinancing districtor similar legalmechanism
Key Benefits for Cities & Counties
Helps meetenergy andclimate goals
Promotes local jobs
Tax neutral andno exposure toGeneral Fund
Key Benefits for Property Owners
Saves moneyon utility bills
Repaymenttransfers tonew owner
Not based onpersonal credit
We are going to make it a lot easier to borrow money.We are doing this by encouraging communities to give you the option to pay the expense of retrofitting your home by paying it back on your property taxes.
National PACE Policy 4 States Have PACE Legislation Pending
24 States Have PACE Authority
FHFA/Fannie Mae PACE Activities
June 2009: FHFA guidance letter– Concerns regarding senior lien and homeowner risk
September 2009: Fannie Mae lender letter– Reviewing underwriting guidelines for PACE; Until guidelines are
issued, treat payments as a special assessment
May 2010: Fannie Mae lender letter– PACE “loans” and promise to issue additional guidance and work
with federal and state agencies, while “preserving the status of mortgage loans originated as first liens”
FHFA/Fannie Mae PACE Activities
July 2010: FHFA guidance letter– “Safety and soundness concerns”
– Violation of Uniform Security Instrument
– Reduce loan amount by potential PACE amount
August 2010: Fannie Mae lender letter– PACE “loans” prior to July 6th must be paid off at time of refinance
– “Fannie Mae will not purchase mortgage loans [with PACE debt] unless the terms of the PACE program do not permit priority over first mortgage liens.”
Impacts on PACE
Active and planned PACE programs on hold around the country
Commercial PACE programs face uncertainty
Path Forward
Negotiations
Litigation
Legislation
Negotiations
October 2009: White House led interagency working group– Result: White House Policy Framework for PACE
– Release of DOE/ARRA Funds for PACE programs
Spring 2010: Renewed discussions regarding PACE guidelines and pilots– Result: May 5th Fannie Mae/Freddie Mac letters and July 6th
FHFA/FDIC/OCC letters
July 2010: Congressionally led PACE discussions with FHFA and other regulators– Result: FHFA sent a letter to Members of Congress breaking off
talks.
Litigation
California Files Suit– People of the State of California vs. Federal Housing Finance Agency
(Filed July 14, 2010)
– “California seeks a prompt judicial declaration against Fannie Mae and Freddie Mac that, under California law:
(a) PACE programs operate by assessments, not loans, and such assessments are valid;
(b) liens that may result from PACE assessments, like those resulting from other types of assessments, have priority over mortgages; and
(c) participation in PACE programs is compatible with, and not in violation of, Fannie Mae’s and Freddie Mac’s standardized mortgage documents.”
Additional lawsuits filed by Babylon, Sonoma County and Sierra Club
Legislation
PACE Assessment Protection Act – HOUSE: HR 5766 (Thompson); 48 co-sponsors
– SENATE: S 3642 (Boxer); 5 co-sponsors
“To ensure that the underwriting standards of Fannie Mae and Freddie Mac facilitate the use of property assessed clean energy programs to finance the
installation of renewable energy and energy efficiency improvements”
Legislation would require Fannie Mae and Freddie Mac to issue PACE underwriting standards that are consistent with US DOE guidelines
Legislative StrategyFour key steps– Make a priority for Congress overall
– Oversight committee support
Senate Banking Committee (Sen. Dodd)
House Financial Services Committee (Rep. Frank)
– Republican co-sponsors in House and Senate
– Attach to appropriate vehicle to get done this year
How to help– Sample resolutions and other materials at: www.pacenow.org
– State/Local Governments
Adam Byrnes, adam@renewfund.com, 510-350-3733
Solutions for the Interim
CEC is proposing a clearinghouse of finance options that will include secured and unsecured products
Energy Upgrade California
The Program
• State-wide energy and water efficiency and renewable energy generation retrofit program for single- and multi-family residential and commercial buildings
• Collaboration between Energy Commission, Public Utilities Commission, utilities, local governments and private sector
• One-stop resource for information on building retrofit benefits, financing and incentives, finding a qualified contractor, workforce training and home energy ratings
• Coordinates federal, state, utility and local government retrofit program outreach, incentives and contractor and participant qualifications
• Creates a foundation for AB 758 and Home Star
Energy Upgrade California Financing Program
• Administered by California State-wide Community Development Authority
• Competitive solicitation will be offered for interested financial institutions offering residential and commercial retrofit loan products
• Low rates expected as the program will offer standard underwriting, comprehensive program roll-out (contractor qualification, quality assurance, etc.) and bundling of State-wide building stock
• Offered State-wide through Energy Upgrade California web-site application, subsidized with interest rate buy-down and loan loss reserve in leadership counties that commit local resources
EnergyUpgradeCalifornia.org
Contractor Training
Annie Henderson | annie@renewfund.com | (510) 451-7911
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